Basic & DA
Basic pay and dearness allowance form the core of salary and are fully taxable unless specifically exempted by law.
Salary Terms
Understand common components in Form 16 and pay slips
Basic Salary
The fixed component of pay that often forms the base for computing allowances and retirement benefits. Fully taxable.
HRA Exemption
Exemption equals the least of: actual HRA; rent paid minus 10% of salary; 50% of salary (metro) or 40% (non‑metro). Available in the old regime subject to proofs.
LTA/LTC
Leave Travel Allowance may be exempt for specified domestic travel within limits and rules, usually on proof submission.
Standard Deduction
For FY 2025–26, salaried taxpayers may claim ₹75,000 under the new regime and ₹50,000 under the old regime from salary income.
Professional Tax
State‑levied tax on professions; employer may deduct from salary. Deductible from salary income per rules.
Perquisites
Non‑cash or additional benefits like accommodation, car, ESOPs are taxable per valuation rules unless specifically exempt.
Bonus
Performance or statutory bonus paid by employer is generally fully taxable in the year of receipt, subject to TDS.
Gratuity
Lump‑sum benefit on retirement/death; exemption available up to prescribed limits depending on employer category and years of service; balance is taxable.
Leave Encashment
Encashment of unutilised leave on retirement may be exempt up to limits for non‑government employees; during service, it is generally taxable.
EPF (Employee Provident Fund)
Retirement savings scheme with employee and employer contributions; tax treatment depends on contribution amounts and withdrawal conditions.
NPS (National Pension System)
Voluntary pension scheme; employee contributions may qualify for additional deduction; employer contributions taxed per specified rules with eventual annuity/withdrawal treatment.