Net Salary or Taxable Salary Calculation

Net Salary & Tax Calculation In India : Introduction

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Salary is chargeable to income tax on "due" basis or "receipt" basis whichever is earlier.

The term "Salaries" has been defined under Section 17(1) to include -

1. Wages

2. Any Gratuity

3. Any fees, commissions, perquisites or profits in lieu of or in addition to 'Wages'

4. Any advance of salary

5. Any payment received by an employee in respect of any period of leave not availed of by him

6. Recognised provident fund, to the following extent

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Scope of Charge for Salary

Salary Tax for Resident of India

Salary earned by a Resident of India for services rendered in or outside India are both taxable (whether received in India or not).

Salary Tax for Non-resident (NR) or Not Ordinarily Resident (NOR)

In the case of a non-resident or a not ordinarily resident, Salary received in India, whether for services rendered in India or outside India, is taxable in India.

Salary Income deemed to accrue or arise in India

Besides, the following whether received in India or not, is taxable in India, since they are deemed to accrue or arise in India: -

1. Salary earned for services rendered in India


2. Salary earned for rest period or leave period which is preceded and succeeded by services rendered in India and forming part of service contract of employment


3. Salary earned by a Citizen of India, for services rendered outside India, if paid by Government of India

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How to Calculate Net Salary or Taxable Salary?

Computation of Income under the head Salary is done as given below.

^** Amount exempt under section 10, to be reduced from the respective items.

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