Income Tax Act, 1961
Section 17. “SALARY”, “PERQUISITE” AND “PROFITS IN LIEU OF SALARY” DEFINED.
For the purposes of sections 15 and 16 and of this section, –
(1) “Salary” includes –
(i) Wages;
(ii) Any annuity or pension;
(iii) Any gratuity;
(iv) Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;
(v) Any advance of salary;
(va) Any payment received by an employee in respect of any period of leave not availed of by him; 388 ]
(vi) The annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule; and
(vii) The aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof;
(2) “Perquisite” includes –
(i) The value of rent-free accommodation provided to the assessee by his employer;
(ii) The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer;
(iii) The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases :-
(a) By a company to an employee who is a director thereof;
(b) By a company to an employee being a person who has a substantial interest in the company;
(c) By any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income under the head “Salaries” (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds twenty-four thousand rupees.
Explanation : For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause.
(iiia) The value of any specified security allotted or transferred, directly or indirectly, by any person free of cost or at concessional rate, to an individual who is or has been in employment of that person :
Provided that in a case where allotment or transfer of specified securities is made in pursuance of an option exercised by an individual, the value of the specified securities shall be taxable in the previous year in which such option is exercised by such individual.
Explanation – For the purposes of this clause, – (a) “Cost” means the amount actually paid for acquiring specified securities and where no money has been paid, the cost shall be taken as nil;
(b) “Specified security” means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and includes employees’ stock option and sweat equity shares;
(c) “Sweat equity shares” means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; and
(d) “Value” means the difference between the fair market value and the cost for acquiring specified securities.
(iv) Any sum paid by the employer in respect of any obligation which but for such payment, would have been payable by the assessee;
(v) Any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), to effect an assurance on the life of the assessee or to effect a contract for an annuity;
Provided that nothing in this clause shall apply to, – (i) The value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;
(ii) Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family –
(a) In any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;
(b) In respect of the prescribed diseases or ailments in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines :
Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital;
(iii) Any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government for the purposes of clause (ib) of sub-section (1) of section 36;
(iv) Any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government for the purposes of section 80D;
(v) Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family [other than the treatment referred to in clauses (i) and
(ii)]; so, however, that such sum does not exceed five thousand rupees, in the previous year, in the case of the employee and further five thousand rupees in the case of his family;
(vi) Any expenditure incurred by the employer on – (1) medical treatment of the employee, or any member of the family of such employee, outside India;
(2) Travel and stay abroad of the employee or any member of the family of such employee for medical treatment;
(3) Travel and stay abroad of one attendant who accompanies the patient in connection with such treatment, subject to the condition that –
(A) The expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and
(B) The expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees;
(vii) Any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause.
Explanation : For the purposes of clause (2), – (i) “Hospital” includes a dispensary or a clinic or a nursing home;
(ii) “Family”, in relation to an individual, shall have the same meaning as in clause (5) of section 10; and
(iii) “Gross total income” shall have the same meaning as in clause (5) of section 80B;
(3) “Profits in lieu of salary” includes –
(i) The amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment the modification of the terms and conditions relating thereto;
(ii) Any payment other than any payment referred to in clause (10), clause (10A), clause (10B), clause (11), clause (12), clause (13) or clause (13A) of section (10), due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation : For the purposes of this sub-clause, the expression “Keyman insurance policy” shall have the meaning assigned to it in clause (10D) of section 10.
Related Judgements
P. J. EAPEN v. COMMISSIONER OF INCOME-TAX.
COMMISSIONER OF INCOME-TAX v. SMT. SHEGGY ABDULLA.
COMMISSIONER OF INCOME-TAX v. DWARKADAS GHASHIRAM
