Meaning of salary u/s. 10 (13a)

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CA Suresh Jain (Querist)
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31 July 2013 Whether Ex-gratia and Bonus is to be treated as a part of salary while calculating exemption of House rent allowance u/s 10 (13a)

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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02 August 2013 No. Salary meaning for calculating HRA exemption u/s.10(13A)is

Basic salary, Dearness allowance(if forming part of computing retirement benefits) and Commission based on turnover achieved by the employee.

No other components can be considered

CA Suresh Jain

CA Suresh Jain (Querist)
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03 August 2013 Thanks Mr. Ramesh, I request you please to reconsider your opinion in view of the following :-

As per first explanation to Rule 2A "salary" shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;
and as per rule 2 h of Fourth schedule "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

This is an inclusive definition of the term salary which means salary includes dearness allowance and all other receipts to an employee but excluding all other allowances and perquisites.
The exgtratia payment is neither allowance nor a perquisite. This payment is a profit in lieu of salary and hence includible in salary for calculation of exemption limit u/s. 10 (13A).