How is salary income taxed under the Income Tax Act?

Salary income is taxable under the head ‘Income from Salaries’ as per Section 15 of the Income Tax Act, 1961. It includes wages, pension, annuity, gratuity, fees, commissions, allowances and perquisites. Certain allowances and perquisites are fully taxable while others are partly taxable or exempt under Section 10. Standard deduction of Rs. 50,000 is allowed from salary income. Note: Finance Act 2025 has amended Section 16 to increase the standard deduction limit to Rs. 75,000 from FY 2025-26 onwards. Supporting Case Law: Govind Saran Ganga Prasad vs Commissioner of Income Tax (1981 – Supreme Court) – Held that perquisites and allowances form part of salary income under Section 15. Current Status: The tax treatment of salary income is well-settled with clear provisions and judicial precedents.