🧾 Income from Salaries: Sections 15–17 – Complete Guide (New Tax Regime Included)

🏛️ Introduction

Salary income is one of the most common sources of taxable income in India. The Income Tax Act, 1961 defines and regulates this through Sections 15 to 17. With the introduction of the New Tax Regime under Section 115BAC, salaried individuals must now choose between the Old Regime with exemptions or the New Regime with lower rates but no exemptions.

📑 Section 15: Chargeability of Salary Income

Section 15 states when salary is taxable:

1. Due Basis – Salary becomes taxable when it becomes due, even if not paid.
2. Receipt Basis – Salary is also taxable when received in advance or arrears.
3. Includes:
   • Salary from current employer
   • Past employer (arrears or advance salary)
   • Leave encashment
   • Pension (excluding family pension)

✅ Example:

Mr. A receives ₹1,00,000 salary for March 2025 in April 2025. It will be taxable in FY 2024–25 if it was due in March 2025, regardless of actual payment date.

💼 Section 16: Deductions from Salary

The following deductions are allowed under the Old Tax Regime only:

1. Standard Deduction – ₹50,000
2. Entertainment Allowance – For government employees (Max ₹5,000)
3. Tax on Employment (Professional Tax) – Allowed as deduction

⛔ Not available under the New Tax Regime (Sec 115BAC) except Standard Deduction Rs.75000

🧾 Section 17: Meaning of Salary, Perquisites & Profits in Lieu

Section 17 explains the components of salary:

A. Salary Includes:

• Basic Pay
• Dearness Allowance (DA)
• Bonus & Commission
• Gratuity
• Advance salary
• Leave Encashment
• Arrears

B. Perquisites (Perks):

Taxable benefits provided by employer:

✅ Example:

If a company provides a car for both personal and official use, a portion is taxed as perquisite.

C. Profits in Lieu of Salary:

Amounts received instead of salary:

• Compensation on termination
• Payment from unrecognized PF
• Retrenchment compensation

🧮 How to Calculate Taxable Salary

📝 Old Tax Regime:

1. Gross Salary (Basic + DA + Perks + Bonus)
2. (-) Exemptions (like HRA, LTA, etc.)
3. (-) Deductions under Section 16
4. Result = Taxable Salary

📝 New Tax Regime (Sec 115BAC):

• Flat slabs with no exemptions/deductions except standard deduction of Rs.75000
• Only employer’s NPS contribution (Section 80CCD(2)) allowed

✅ Example:

Mr. B’s salary includes ₹7L basic, ₹1.2L HRA, ₹60K bonus. He lives in rented house in Delhi. Under Old Regime, HRA exemption applies. Under New Regime, it doesn’t.

🏠 Common Exemptions (Old Regime)

⚠️ Not available under New Tax Regime

🔁 New vs Old Tax Regime (Sec 115BAC)

🧮 TDS on Salary – Section 192

• Employer deducts tax monthly based on estimated annual salary.
• Form 16 is issued at year-end.
• Declaration via Form 12BB for claiming exemptions.

💡 Tax Planning Tips for Salaried Employees

✅ Choose the regime (Old or New) based on computation
✅ Structure salary to include exemptions (if opting for Old Regime)
✅ Invest in 80C, 80D, NPS (Old Regime only)
✅ Claim HRA if staying in rented house
✅ File Form 10-IE for selecting New Regime

📘 Real-Life Example

Mr. C earns ₹10,00,000 per annum with ₹2,00,000 HRA and pays ₹1,50,000 rent annually.

• Under Old Regime: HRA exemption available, 80C deduction allowed
• Under New Regime: HRA and 80C deductions not allowed, but lower slab rates apply

🚫 Common Mistakes to Avoid

❌ Claiming HRA without rent receipts
❌ Forgetting to submit 12BB to employer
❌ Selecting wrong tax regime
❌ Not considering perquisite valuation
❌ Ignoring Form 10-IE when required

✅ Conclusion

Understanding Sections 15 to 17 is crucial for every salaried taxpayer. The introduction of the New Tax Regime under Section 115BAC has made it essential to compare both regimes. With proper tax planning, exemptions (under Old Regime), and regime selection, salaried individuals can optimize their tax liability efficiently. Consult DisyTax

🧾 FAQs

❓ What is covered under salary income in Income Tax?

Income from employer such as basic pay, bonus, perquisites, and allowances.

❓ Is HRA exemption allowed in the New Tax Regime?

No, HRA is only exempt under the Old Tax Regime.

❓ What is the standard deduction in income tax for salaried?

₹50,000 – applicable only under Old Regime. Rs.75000 under new tax regime

❓ Are perquisites taxable in India?

Yes, many perks like rent-free accommodation or car facility are taxable.

❓ How do I switch between Old and New Tax Regime?

By filing Form 10-IE (mandatory for those with business income).