29 December 2010
As Professional tax is always state specific and the definitionof salary or wages may vary from state to state.
But on a general basis following is the definition :
Salary or Wages includes pay, dearness allowance and all other remunera tions including allowances received by any person on a regular basis whether payable in cash or kind and also includes perquisites and profits in lieu of salary as defined in Section 17 of the Income Tax Act, 1961 (No. 43 of 1961) but does not include bonus in any form and on any account, gratuity and pension]
On the basis , all the components of the salry structure defined by you are [paid to the employees are paid on a regular basis. Hence Professional tax shall be levied on The gross salry and not on Basic only.
As per section 16(iii) of Income tax act ,Professional tax on employment or tax on employment levied by state under article 276(2) of the Constitution is allowed as a deduction from the Salary income.
Profession tax should have been paid by the Employee then only he is eligible to get deduction of the same.If he has not paid the same then no deduction is allowed.
What is Salary: Income under heads of salary is defined as remuneration received by an individual for services rendered by him to undertake a contract whether it is expressed or implied. According to Income Tax Act there are following conditions where all such remuneration are chargeable to income tax: • When due from the former employer or present employer in the previous year, whether paid or not • When paid or allowed in the previous year, by or on behalf of a former employer or present employer, though not due or before it becomes due. • When arrears of salary is paid in the previous year by or on behalf of a former employer or present employer, if not charged to tax in the period to which it relates.
Under section 17 of the Income Tax Act, 1961 there are following incomes which comes under head of salary: • Salary (including advance salary) • Wages • Fees • Commissions • Pensions • Annuity • Perquisite • Gratuity • Annual Bonus • Income From Provident Fund • Leave Encashment • Allowance • Awards
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