Home > Help Center > Salary FAQsLast Updated: May 12th 2019

Salary, Form16 FAQs for Income Tax Filing

A comprehensive list of frequently asked questions on Salary Income covering Salary, Deductions, Allowances, Exemptions and differene between Form16 and form16A. Guide refering all aspects such as form16, employer, employee, relationship, taxfree salary, deductions, deputation, rent, entertainment, transport, child education, foreign, Gross Salary, allowances

FAQs

1.What is the Financial Year ?

Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called Financial Year [FY]) is taken into account for purposes of calculating Income Tax.

2.What is an Assessment Year ?

It is the twelve-month period 1st April to 31st March immediately following the financial year. In the Assessment year a person files his return for the income earned in the financial year. For example for FY: 2006-07 the AY is 2007-08.

3.What is consider as a salary income ?

Generally whatever is received by an employee from an employer in cash, kind or as a facility [perquisite] is considered as salary.

4.Difference between form-16 and form-16A ?

Form-16: Certificate for TDS or Tax Deducted at Source from the income that is chargeable under the Salaries.

Form-16A: Certificate for TDS or the Tax Deducted at Source for income apart from the Salary.

5.What are allowances? Are all allowances taxable ?

Allowances are fixed periodic amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. E.g., HRA allowance, transport allowance, medical allowance, etc.

There are generally three types of allowances – taxable allowances, fully exempted allowances and partially exempted allowances.​

6.Are arrears of salary taxable ?

Yes. However, the benefit of spread over of income to the years to which it relates to can be availed for lower incidence of tax. This is called as relief u/s 89​ of the Income-tax Act.​​

7.Are retirement benefits like PF and Gratuity taxable ?

In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.​

8.Is the leave encashment taxable as a salary ?

It is taxable if received while in service. Leave encashment received at the time of retirement is exempt in the hands of the Government employee. In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.​




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