Salary Income — Perquisites, Allowances & Form 16
Salary is taxed on due or receipt basis, whichever is earlier. Standard deduction ₹50k (old) / ₹75k (new AY 25-26) applies. HRA (Section 10(13A)), LTA (Section 10(5)), leave encashment (Section 10(10AA)) and gratuity (Section 10(10)) are the main exemptions.
- Standard deduction ₹50k old / ₹75k new regime
- HRA: min of (rent − 10% salary, 50%/40% salary, actual HRA)
- LTA: twice in a block of 4 years (2022–25)
- Perquisites valued under Rule 3 (car, rent-free house, ESOP)
- Section 89: relief on arrears / advance salary
Definition
Salary Income
What is Salary Income?
Salary is taxed on due or receipt basis, whichever is earlier. Standard deduction ₹50k (old) / ₹75k (new AY 25-26) applies. HRA (Section 10(13A)), LTA (Section 10(5)), leave encashment (Section 10(10AA)) and gratuity (Section 10(10)) are the main exemptions.
Key rules to remember
- Standard deduction ₹50k old / ₹75k new regime
- HRA: min of (rent − 10% salary, 50%/40% salary, actual HRA)
- LTA: twice in a block of 4 years (2022–25)
- Perquisites valued under Rule 3 (car, rent-free house, ESOP)
- Section 89: relief on arrears / advance salary
Worked example
Bengaluru IT employee: ₹18L CTC, ₹3.6L HRA, ₹40k rent/mo. Rent = ₹4.8L, 10% salary = ₹1.8L, so HRA exempt = min(3L, 50% × 12L basic, 3.6L) = ₹3L. Standard deduction ₹75k. Taxable ₹14.25L.
Which ITR form applies
- ITR-1 (Sahaj) — Up to ₹50 lakh total income
- ITR-2 — No upper limit
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