Topics: Tax, Taxation in the United States, Contract Pages: 3 (618 words) Published: January 12, 2013
Salary! isn’t it every ones favorite? Its paid once in month & in 5 days or less fully expensed out. We wait eagerly for whole month to receive the same. We work hard & with full efforts to earn this. When it is credited in bank a/c or received check or cash on pay day, see that smile on your face and specially your family.

So it's your right to know why employer is deducting TDS (tax) while making payment.

Employee is aggrieved when less salary is received & higher TDS is deducted by employer.

And employer is also confused how much TDS to be deducted and how to make maximum payout.

Employee is doing all sort of investment to minimize tax burden then also very year he ends in paying higher tax as compared to last year.

So lets go one by one and understand in easy layman way as well as let me clarify some technical nitty gritty to all my readers.

What is Salary?

Salary is the remuneration received by or accruing to an individual, periodically, for service rendered as a result of an express or implied contract. In short it is your right of remuneration against your full one month efforts.

The existence of employer-employee relationship is the sine-qua-non for taxing a particular receipt under the head “salaries.”

Does all payout by organization to people working for them is Salary?

No, the payment made to professional in their professional capacity is payment of “Professional / Technical fees”. the salary received by a partner from his partnership firm carrying on a business is not chargeable as “Salaries” but as “Profits & Gains from Business or Profession”. Similarly, salary received by a person as MP or MLA is taxable as “Income from other sources”.

Section 17(1) of the Income tax Act gives an inclusive and not exhaustive definition of “Salaries” including therein:

Wages, Annuity or pension, Gratuity, Fees or Commission, perquisites or profits in lieu of...
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