Taxation of Salary-FAQs

Taxation of Salary – Income Tax FAQs (FY 2024-25)

Salary income is one of the largest taxable segments under the Income-tax Act, 1961.
These FAQs explain the taxation of salary under the Income Tax Act, covering computation of taxable salary, standard deduction FY 2024-25, HRA exemption, perquisites taxation, TDS on salary Section 192, and Form 16 requirements.
Whether you are a new employee or a payroll professional, this guide clarifies how income tax on salary in India works in FY 2024-25.

Want more? Please refer our Income tax FAQ Hub Page.

Frequently Asked Questions-Taxation of Salary

Salary income includes wages, basic pay, bonuses, commissions, allowances, and perquisites received from an employer. Under the Income-tax Act 1961, the taxation of salary determines how these components are aggregated and taxed after considering exemptions and deductions.

Taxable salary = Gross Salary (including perquisites) − Exempt allowances (HRA, LTA etc.) − Standard Deduction + Taxable Perquisites.
The standard deduction FY 2024-25 is ₹75,000 under the new regime and ₹50,000 under the old regime. Employers compute TDS on salary under Section 192 based on this formula.

Under the new tax regime FY 2024-25, salaried individuals with income up to ₹12.75 lakh (after standard deduction) may effectively pay zero tax due to the salary rebate limit FY 2024-25 and lower slab rates.

House Rent Allowance (HRA), Leave Travel Allowance (LTA), certain conveyance or medical reimbursements, and other specified allowances are partially or fully exempt under the Income-tax Act 1961. Conditions for HRA exemption income tax depend on city of residence, rent paid, and salary components.

Every employer must deduct tax at source on salary payments based on estimated annual income and declared exemptions. The TDS on salary Section 192 calculation ensures advance collection of tax during the year.

Form 16 Income Tax is the TDS certificate issued by the employer summarizing gross salary, deductions, and tax deposited with the government. It is required for reconciling taxable salary India figures while filing the return.

Perquisites such as rent-free accommodation, company car, or employer-paid utilities are valued and added to taxable salary. The perquisites taxation rules define limits and exemptions, updated annually by CBDT.

Generally no; only deductions expressly allowed (standard deduction, professional tax, section 80C/80D investments) can be claimed. Business-style expenses are not deductible under salary income tax.

Gratuity and leave encashment received at retirement enjoy partial exemptions. Pension is taxable, except for specified commuted amounts. These benefits fall within salary under Income Tax Act 1961 provisions.

Use ITR-1 (Sahaj) if you have income from salary, one house property, and other sources.
Use ITR-2 or ITR-3 if you also have capital gains or business income.

The due date for salary ITR filing FY 2024-25 is 31 July 2025, unless extended by CBDT.

A belated return may be filed with late fees and interest. However, certain exemptions and carry-forward benefits may be lost if the return is delayed.

Match the Form 16 Income Tax figures with Form 26AS (and AIS/TIS) on the portal. Discrepancies should be corrected by the employer before filing the return.

Closing Notes & Checklist

Understanding the taxation of salary under the Income Tax Act 1961 is crucial for every employee. Correctly claiming the standard deduction, verifying TDS on salary Section 192, and using the right ITR form ensure compliance.

Checklist before filing:
1️⃣ Download Form 16 and Form 26AS.
2️⃣ Compute taxable salary India after standard deduction.
3️⃣ Choose old or new tax regime for salaried taxpayers.
4️⃣ Verify HRA exemption and investment proofs.
5️⃣ Pay self-assessment tax (if needed) and file ITR before 31 July 2025.

FAQs on taxation of salary under the Income Tax Act 1961

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Disclaimer: These FAQs on taxation of salary under the Income Tax Act 1961 are for general informational purposes only. The content reflects provisions of the Finance Act 2025. It should not be treated as professional advice. Please consult a qualified tax expert or the official income-tax portal for personalized guidance.