Salary as per Section 17(1) and Salary as per Section 17(2)

 difference between Salary as per Section 17(1) and Salary as per Section 17(2).

These are both definitions in the Income-tax Act, 1961 but they cover different components of salary income.

1. Salary as per Section 17(1)

Scope: Basic definition of "salary" for tax purposes.

Includes:

  1. Wages

  2. Annuity or pension

  3. Gratuity

  4. Fees, commission, perquisites, or profits in lieu of salary

  5. Advance of salary

  6. Leave encashment

  7. Employer’s contribution to Recognised Provident Fund (above exempt limit)

  8. Transfer of an employer’s obligation to a third party

Nature: Mostly cash or direct monetary payments + certain retirement benefits.

Purpose: Used for computing “Income under the head Salaries” and for determining % of salary for various allowances & perquisite valuation.

2. Salary as per Section 17(2)

Scope: Specific to perquisites (benefits in addition to monetary salary).

Includes:

  1. Value of rent-free accommodation

  2. Concession in rent for accommodation

  3. Value of any benefit or amenity provided free or at concessional rate (specific to directors, persons with substantial interest, or employees with income > ₹50,000 excluding perquisites)

  4. Any sum paid by employer in respect of employee’s personal obligations

  5. Value of specified securities or sweat equity shares allotted at concessional price (FMV − price paid)

  6. Employer’s contribution to approved superannuation fund above ₹1,50,000

  7. Any other fringe benefit/amenity prescribed

Nature: Non-cash / in-kind benefits that are taxable as part of salary.

Purpose: Used for perquisite valuation and reporting in Form 12BA.

Key Difference Table

AspectSec. 17(1) – SalarySec. 17(2) – Perquisites
CoversMonetary salary, wages, retirement benefits, bonuses, commissions, certain allowancesNon-monetary benefits/amenities, ESOPs, employer-paid obligations
TypeCash components + some direct benefitsMostly in-kind benefits or reimbursements
ValuationActual amounts received or accruedAs per Rule 3 of IT Rules
ReportingPart of gross salary in Form 16Disclosed separately in Form 12BA
ExamplesBasic pay, DA, bonus, gratuity, pensionRent-free house, motor car facility, ESOP perquisite


💡 In short:

  • Sec. 17(1) = What you get in money (plus a few defined benefits).

  • Sec. 17(2) = What you get in kind or as a facility (valued and taxed).

Comments

Post a Comment

Popular posts from this blog

Capital Gains Tax on Sale

  1. Capital Gains Tax on Sale of House Property vs. Land Criteria House Property (Building & Land) Vacant Land (Plot of Land) Holding Period for LTCG More than 24 months (Long-Term) More than 24 months (Long-Term) Holding Period for STCG ≤ 24 months (Short-Term) ≤ 24 months (Short-Term) STCG Tax Rate As per Slab Rate As per Slab Rate LTCG Tax Rate 20% with Indexation 20% with Indexation Indexation Benefit ✅ Available ✅ Available Exemptions Available Section 54 (Reinvestment in house) & Section 54EC (Bonds) Only Section 54F (Reinvestment in house) & Section 54EC (Bonds)   🔹 Key Difference in Exemptions House Property: Eligible for Section 54 , allowing reinvestment in another re...
Read more

What Is Incriminating Material in Income Tax Law?

  What Is Incriminating Material in Income Tax Law? Incriminating material refers to any document, record, statement, digital evidence, or seized item during a search or survey that directly indicates undisclosed income, transactions, or assets of the taxpayer, and can justify an addition in assessment or reassessment. 📚 Judicially Recognized Definition “Incriminating material” is any evidence unearthed during a search which: Relates to a specific assessment year , and Reveals income not disclosed in the original return or books of account 📂 Examples of Incriminating Material Type Examples 💵 Cash / Jewellery Unexplained cash or jewellery without proper source 📝 Documents Unaccounted invoices, promissory notes, loan ledgers 🖥️ Digital evidence Files/emails showing black money, hawala, or bogus transactions 📒 Books of account Parallel books of accounts 📄 Agreements Benami transactions, property undervaluation 💼 Diaries / slips Unrecorded business transac...
Read more

EEE Savings Scheme typically refers to tax-saving investment options that offer exemptions at three stages

Image
  In India, the EEE Savings Scheme typically refers to tax-saving investment options that offer exemptions at three stages: 1. Exemption at Investment Stage (Section 80C): Contributions to eligible schemes are deductible from taxable income. 2. Exemption from Interest or Dividend (Section 10): Interest or dividend earned on these investments is exempt from tax. 3. Exemption at Maturity or Withdrawal (Section 10): Maturity proceeds or withdrawals from these schemes are tax-free. Some popular EEE Savings Schemes in India: 1. Public Provident Fund (PPF): A long-term savings scheme with a lock-in period of 15 years. 2. National Savings Certificate (NSC): A fixed-income investment with a lock-in period of 5 or 10 years. 3. Life Insurance Corporation (LIC) Policies: Certain LIC policies, such as the LIC Jeevan Lakshya Plan, offer tax benefits. 4. Equity-Linked Savings Scheme (ELSS): A mutual fund scheme with a lock-in period of 3 years. 5. Unit-Linked Insurance Plan (ULIP): A life insura...
Read more