New IT Act 2025 — Knowledge Bank

Income not forming part of total income and expenditure in relation to such income

Section 14 — Income not forming part of total income and expenditure in relation to such

income

Old Act equivalent: 10 of IT Act 1961 Sub-part: Computation of Total Income

Statutory Text

  1. (1) Irrespective of anything to the contrary contained in this Act, for the
    purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. (2) Where the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with— ( a) the correctness of the claim of expenditure incurred by the assessee; or ( b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under this Act, he shall determine such amount of expenditure in accordance with any method, as may be prescribed. (3) Irrespective of anything to the contrary contained in this Act, the provisions of this section shall apply in a case where any expenditure has been incurred during any tax year in relation to income which does not form part of the total income under this Act, but such income has not accrued or arisen or has not been received during that tax year. B.—Salaries Salaries.
  2. (1) The following income shall be chargeable to income-tax under the
    head “Salaries”:— ( a) any salary due from an employer to an assessee in the tax year, whether paid or not; ( b) any salary paid or allowed to him in the tax year by or on behalf of an employer though not due or before it became due to him; ( c) any arrears of salary paid or allowed to him in the tax year by or on behalf of an employer, if not charged to income-tax for any earlier tax year. (2) For the purposes of sub-section (1), employer includes former employer. (3) If any salary paid in advance is included in the total income of any person for any tax year, it shall not be included again in the total income of such person when the salary becomes due. (4) Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as salary for the purposes of this section. Income from salary.
  3. For the purposes of this Part, “salary” includes— ( a) wages; ( b) any annuity or pension; ( c) any gratuity; ( d) any fees or commission; ( e) perquisites; ( f) profits in lieu of, or in addition to, any salary or wages; ( g) any advance of salary; ( h) any payment received by an employee in respect of any period of leave not availed of by him; ( i) the annual accretion to the balance at the credit of an employee par - ticipating in a recognised provident fund, to the extent to which it is chargeable to tax as per paragraph 6 of Part A of Schedule XI; ( j) the aggregate of all sums that are comprised in the transferred balance as referred to in paragraph 11(2) of Part A of Schedule XI of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-paragraphs (4) and (5) thereof; ( k) the contribution made by the Central Government or any other employer in any tax year, to the account of an employee under a pension scheme referred to in section 124; and ( l) the contribution made by the Central Government in any tax year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 125. Perquisite.
  4. (1) For the purposes of this Part, “perquisite” includes— ( a) the value of rent-free accommodation provided to the assessee by his employer computed in such manner as may be prescribed; ( b) the value of any accommodation, computed in such manner as may be prescribed, provided to the assessee by his employer at a concessional
    rate which is in excess of rent recoverable from or payable by the
    assessee; ( c) the value of any benefit or amenity granted or provided free of cost or at concessional rate in the following cases:— ( i) by a company to an employee, who is a director thereof or who has a substantial interest in the company; ( ii) by any employer (including a company) to an employee [other than employee referred in sub-clause ( i)] whose income under the head “Salaries” by way of monetary payment (from one or more employers) exceeds such amount as may be prescribed; ( d) the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the current employer, or former employer, free of cost or at concessional rate to the assessee; ( e) the value of any other benefit or amenity, as may be prescribed; ( f) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; ( g) any sum payable by the employer to effect an assurance on the life of the assessee or to effect a contract for an annuity, whether directly or through a fund, other than— ( i) a recognised provident fund; or ( ii) an approved superannuation fund; or ( iii) a Deposit-linked Insurance Fund established under— ( A) section 3G of the Coal Mines Provident Fund and Miscella - neous Provisions Act, 1948 (46 of 1948); or ( B) section 6C of the Employees’ Provident Funds and Miscella - neous Provisions Act, 1952 (19 of 1952); ( h) aggregate amount of any contribution, in excess of ` 750000 in a tax
    year, made to the account of the assessee by the employer— ( i) in a recognised provident fund; ( ii) in the scheme referred to in section 124(1); and ( iii) in an approved superannuation fund; ( i) the annual accretion by way of interest, dividend or any other amount of similar nature during the tax year to the balance at the credit of the fund or scheme referred to in clause ( h), computed in such manner, as may be prescribed (to the extent it relates to the contribution referred to in the said clause in any tax year). (2) Nothing in sub-section (1) shall apply to— ( a) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer; ( b) 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— ( i) 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; ( ii) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commis - sioner having regard to such guidelines as may be issued in this behalf; ( c) 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, for the purposes of section 30(c), by the— ( i) Central Government; or ( ii) Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999); ( d) 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 for the purposes of section 126, by the— ( i) Central Government; or ( ii) Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999); ( e) any expenditure incurred by the employer for the use of any vehicle 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; ( f) any expenditure incurred by the employer, or any sum paid by the
    employer in respect of any expenditure actually incurred by the employee, on— ( i) medical treatment of the employee or any family member of such employee outside India; ( ii) travel and stay abroad for the employee or any member of the family of such employee for medical treatment; ( iii) travel and stay abroad of one attendant who accompanies the
    patient in connection with such treatment. (3) For the purposes of sub-section (2)( f),— ( a) the expenditure on medical treatment and stay abroad shall be excluded from the 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 such amount as may be prescribed. (4) For the purposes of this section,— ( a) “fair market value” means the value determined in accordance with the method, as may be prescribed; ( b) “family”, in relation to an individual, shall have the meaning assigned to it in Schedule III (Note 2); ( c) “gross total income” shall have the meaning assigned to it in section 122(10); ( d) “hospital” includes a dispensary or a clinic or a nursing home; ( e) “option” means a right but not an obligation, granted to an employee to apply for the specified security or sweat equity shares at a predetermined price; ( f) “specified security” means the securities as defined in section 2( h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees’ stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme; ( g) “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; ( h) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, on the date on which the option is exercised by the assessee, as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares. Profits in lieu of salary.
  5. (1) For the purposes of this Part, “profits in lieu of salary” includes,— ( a) the amount of any compensation due to, or received by, an assessee from his employer or former employer at or in connection with the— ( i) termination of his employment; or ( ii) modification of the terms and conditions relating thereto; ( b) any amount due to, or received, whether in lump sum or otherwise, by any assessee from any person— ( i) before his joining any employment with that person; or ( ii) after cessation of his employment with that person; ( c) any payment due to or received by an assessee— ( i) from an employer or a former employer; or ( ii) from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contri - butions; or ( iii) any sum received under a Keyman insurance policy as defined in Schedule II (Note 1), including the sum allocated by way of bonus on such policy. (2) The payment referred in sub-section (1)( c) shall not include any payment referred to in— ( a) Schedule II (Table: Sl. No. 3); ( b) Schedule II (Table: Sl. No. 4); ( c) Schedule II (Table: Sl. No. 8); and ( d) Schedule III (Table: Sl. No. 11). Deductions from salaries.
  6. (1) The income chargeable under the head “Salaries” shall be computed
    after making the deductions in respect of sums of the nature mentioned in
    column B of the following Table, not exceeding the amount as mentioned in column C thereof:— TABLE Sl. No.Nature of sum Amount of deduction A B C
  7. Sum paid by the assessee as a tax on employment as per article 276(2) of the Constitution, leviable by or under any law.Entire amount.
  8. Standard deduction. (a) 75000 or the salary, whichever is less, where income-tax is computed under section 202(1); (b) 50000 or the salary, whichever is less, in any other case.
  9. Death- cum-retirement gratuity received as referred to in sub- section (2)( g).Entire amount.
  10. Payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services.Entire amount.
  11. Gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972).Amount received, as restricted to the amount calculated as per the provisions of section 4(2) and (3) of the said Act. Sl. No.Nature of sum Amount of deduction A B C
  12. Any other gratuity received by an employee— (i) on his retirement; or (ii) on his becoming incapaci- tated before such retire- ment; or (iii) on termination of his employment.Amount being minimum of— (a) actual gratuity received; (b) amount specified by the Central Government, by notification, having regard to the limit appli - cable in this behalf to the employ - ees of the Central Government; and (c) half month’s salary for each com - pleted year of service, calculated as under:— Amount = 1 (A × B) 2 where,— A = average salary for ten months immediately preceding the month when any such event occurs; B = number of such completed years.
  13. Payment in commutation of pension received— (a) under the Civil Pensions (Commutation) Rules of
    the Central Government; or (b) under any similar scheme applicable to— ( i) the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union, [such mem - bers or holders not covered under ( a)]; ( ii) the members of the all-India services; ( iii) the members of the defence services;Entire amount. Sl. No.Nature of sum Amount of deduction A B C ( iv) the members of the civil services of a State, or the holders of civil posts under a State; or ( v) the employees of a local authority or a corporation estab - lished by a Central Act or State Act or Provincial Act.
  14. Payment in commutation of pension is received under any scheme from any other employer.The commuted value shall be deter- mined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality, and— (a) where the employee has received gratuity, the commuted value of one-third of the pension, which he is normally entitled to receive; and (b) in any other case, the commuted value of one-half of such pension.
  15. Payment in commutation of pension received from a fund as specified in Schedule VII (Table: Sl. No. 3).Entire amount.
  16. Compensation received by a workman at the time of his retrenchment— (a) under the Industrial Dis - putes Act, 1947 (14 of 1947); or (b) under any other Act or
    rules, orders or notifica- tions issued thereunder;
    or (c) under any standing orders; orMinimum of— (a) compensation received; (b) amount calculated as per provisions of section 25F( b) of the Industrial Disputes Act, 1947 (14 of 1947); (c) such amount, not being less than ` 50000, as may be notified by the Central Government.

Provisos

None.

Explanations

None.

Tables

See statutory text above.

Cross-References

To be updated.

Notes

  • Verification status: pending
  • Auto-generated from IT Act 2025 PDF on 2026-04-13

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