by a) Salary income is chargeable to tax on “due basis” or “receipt basis” whichever is earlier.
b) Existence of relationship of employer and employee is must between the payer and payee to tax the income under this head.
Tax treatment in respect of contributions made to and payment from various provident funds are summarized in the table given below:
| Particulars | Statutory provident fund | Recognized provident fund | Unrecognized provident fund | Public provident fund |
| Employers contribution to provident fund | Fully Exempt | Exempt only to the extent of 12% of salary* | Fully Exempt | – |
| Deduction under section 80C on employees contribution | Available | Available | Not Available | Available |
| Interest credited to provident fund See Note |
Fully Exempt | Exempt only to the extent rate of interest does not exceed 9.5% | Fully Exempt | Fully Exempt |
| Payment received at the time of retirement or termination of service | Fully Exempt | Fully Exempt (Subject to certain conditions and circumstances) | Fully Taxable (except employee’s contribution) | Fully Exempt |
Specified Employee
The following employees are deemed as specified employees:
1) A director-employee
2) An employee who has substantial interest (i.e. beneficial owner of equity shares carrying 20% or more voting power) in the employer-company
3) An employee whose monetary income* under the salary exceeds Rs.50,000
