Salary normally includes wages, annuity, pension, gratuity, commission, perquisites, etc. and any other payment received by an employee from the employer received during the year.
Allowances
Most allowances are taxable like City Compensatory allowance, tiffin allowance, fixed medical allowance and servant allowances; encashment of any concession is also taxable.
A) House Rent Allowance
Out of house rent allowance received during the year, least of the following three amounts will not be included in income: -
The amount equal to 50% of annual salary, for persons staying in Mumbai, Chennai, Calcutta or Delhi, but 40%, for others The actual amount of house rent allowance received The amount of rent actually paid in excess of 10% of annual salary Here, salary includes basic salary, dearness allowance, and commission on fixed percentage, but not other allowances.
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