Income from salary

Section 16 — Income from salary

Old Act equivalent: Section 17(1) of IT Act 1961 Sub-part: B.—Salaries

Statutory Text

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 participating 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.

Sub-sections

This section has no sub-sections — it is a single definition clause with items (a) to (l).

Provisos

None.

Explanations

None.

Tables

None.

Key Structure

• Applies to: All assessees chargeable under the head “Salaries”
• Nature: Inclusive definition — “salary” includes the listed items but is not limited to them
• Items included:
  • (a) Wages
  • (b) Annuity or pension
  • (c) Gratuity
  • (d) Fees or commission
  • (e) Perquisites (defined in section 17)
  • (f) Profits in lieu of salary (defined in section 18)
  • (g) Advance of salary
  • (h) Leave encashment
  • (i) RPF annual accretion (taxable portion per Schedule XI, Part A, Para 6)
  • (j) RPF transferred balance (taxable portion per Schedule XI, Part A, Para 11)
  • (k) Employer’s NPS contribution (section 124)
  • (l) Central Government’s Agnipath contribution (section 125)
• Monetary limits: None in this section (limits are in section 19 for deductions)

Cross-References

• s015-charging — Section 15: charging section under which salary is taxable
• s017-perquisites — Section 17: detailed definition of “perquisite” (referenced at clause (e))
• s018-profits-in-lieu — Section 18: detailed definition of “profits in lieu of salary” (referenced at clause (f))
• s019-deductions — Section 19: deductions from salary (gratuity, leave encashment, pension commutation exemptions)
• s124-nps-contribution — Section 124: NPS contribution deduction (referenced at clause (k))
• s125-agnipath-scheme — Section 125: Agnipath Scheme deduction (referenced at clause (l))
• Schedule XI, Part A — Recognised Provident Fund rules (referenced at clauses (i) and (j))

Amendment Notes

None noted from the extracted pages.

Practical Notes

• This is an inclusive definition — items not listed may still qualify as “salary” if they partake of the character of salary.
• Clause (k) brings employer’s NPS contribution into salary; the employee then claims deduction under section 124 — this is a change from the old Act structure.
• Clause (l) for Agnipath is a new addition specific to the IT Act 2025.
• Leave encashment (clause (h)) is included in salary but exempt up to limits under section 19 (Table: Sl. No. 13 and 14).
• Gratuity (clause (c)) is similarly included but has deductions under section 19 (Table: Sl. Nos. 3–6).