Summary:The article introduces a simplified explanatory series on Income from Salaries under the New Income Tax Act, 2025, covering Sections 15 to 19. Section 15 lays down the charging provision, taxing salary due, paid, or arrears received during the tax year, irrespective of actual payment timing. Section 16 provides an inclusive definition of salary, covering wages, pension, gratuity, commissions, perquisites, leave encashment, advance salary, and taxable portions of provident fund accretions. Section 17 explains perquisites, i.e., non-cash employment benefits such as rent-free accommodation, employer-paid obligations, use of assets, and excess employer contributions, which may be taxable or exempt based on conditions. Section 18 brings certain non-routine receipts—like termination compensation and keyman insurance proceeds—within salary taxation. Section 19 allows specific deductions, including standard deduction, professional tax, and retirement-related benefits, subject to prescribed limits, to arrive at taxable salary.
Hello readers —-
After a long time—I have decided to start Simplified Income tax series related to important sections of income tax act 2025 –
Today I will discuss one important head that is Income from Salaries-
Income from Salaries covered under Section 15 to Section 19 in New Income Tax Act 2025-
- Section 15- Salaries
This section is redrafted version of Erstwhile section 15 of Income Tax Act 1961—
- The following income shall be chargeable under head salaries-
√ Any salary due from an employer in the tax year whether paid or not
√ Any salary paid or allowed to him in a tax year-
√ Arrears of salary paid or allowed in a tax year
- Section 16- Income from Salary – Erstwhile section 17(1) of ITA 1961
Section 16 defines what is included in the term “salary” for taxation under Sections 15–19. This is an inclusive definition — many components are covered:
Components treated as salary include:
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- Wages
- Annuity or pension
- Gratuity
- Fees and commissions
- Perquisites (non-cash benefits from employer)
- Profits in lieu of, or in addition to, salary
- Advance of salary
- Leave encashment / payment for leave not availed
- Accretion in recognized provident fund balance (taxable parts)
- Transferred balance in provident fund (to the extent chargeable)
- Section 17- Perquisites-
Section 17 defines “perquisites” — benefits or non-monetary compensation you receive because of employment. These are also included in salary income.
Examples of perquisites normally include:
√ Rent-free or concessional accommodation
√ Employer-paid obligations (e.g., loan payments)
√ Value of vehicle or other assets provided for personal use
√ Employer’s contribution to retirement funds beyond specified limits
√ Certain benefits (e.g., credit cards, club memberships, allowances)
- Perquisites may be taxable or exempt depending on conditions and prescribed thresholds in law/rules..
- Section 18 — Profits in Lieu of Salary-
Section 18 deals with payments in the nature of salary that are not regular salary but are still treated as salary for tax purposes. These include:
Compensation received due to termination or modification of employment terms.
Amounts received before joining or after leaving employment (linked to the job).
Employer or former employer payments (not part of employee’s own contribution) from provident or other funds.
Sum received under a keyman insurance policy or similar arrangement.
- Section 19 — Deductions from Salaries
Once your gross salary income is computed, Section 19 provides specific deductions against that income before arriving at taxable salary. Typical deductions include:
Standard Deduction
₹75,000 (or amount of salary, whichever is less) under specified conditions.
Otherwise, ₹50,000 (or salary amount, whichever is less).
- Tax on Employment
Amount paid by employee as tax on employment (constitutionally recognised) is allowed.
Gratuity & Retirement Benefits
Deductions for gratuity received subject to prescribed limits.
- Other deductions for retiring benefits such as commuted pension, retrenchment compensation, leave encashment — subject to limits
- Limits as stated above will be discussed in separate article…
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