CS Executive · Tax Laws and Practice · Basic Concept of Income Tax
Under section 124 of the Income-tax Act, 2025, for computing the 'salary' limit on employer pension contribution, which of the following is included in salary?
Only dearness allowance, where the terms of employment provide for it, is included. For section 124, salary excludes all other allowances and perquisites, so house rent allowance and perquisites do not count when computing the percentage limit on employer pension contributions.
- ADearness allowance, if the terms of employment so provideCorrect
- BHouse rent allowance
- CAll perquisites provided by the employer
- DBonus paid as a festival gift
Explanation
Section 124(13)(b) states that salary includes dearness allowance if the terms of employment so provide, but excludes all other allowances and perquisites. HRA and perquisites are therefore excluded for this limit, and the bonus option is not covered by the inclusion.
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