What should be included in salary for tax computation?

Basic Salary + Allowances {Exempt u/s 10 (14) & 10 (13A)} + Bonus {Limit} = Gross Salary - pt = Net Salary

Gross salary which should include all the above... then you will get exemption for house rent allowance, conveyance allowance, medical allowance, transportation allowance, child education allowance, hostel allowance and other exemption allowance u/s 10(14) ......... balance will be taxable after allowance deduction u/s 16

Please note that - Expenses in income from salary should be ignore (only for ur case)

(1) The following income shall be chargeable to income-tax under the head "Salaries" :

(a)  any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;

(b)  any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him.

(c)  any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.

Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as "Salary".

In ur case exemption is amount of the actual allowance received or actual amount utilized for the official purpose for this type allowance given.