Income Tax Act, 2025  ·  Chapter III — Incomes Not Forming Part of Total Income  ·  Section 16

Section 16
Income from salary

IT Act 2025 Chapter III Effective 1 April 2026 Old: 45 17
New Provision
Section 16, IT Act 2025
Replaces (IT Act 1961)
45 17
Chapter
Chapter III — Incomes Not Forming Part of Total Income
Effective From
1 April 2026
Statutory Text — Section 16

For the purposes of this Part, “salary” includes— (a) wages; (b) any annuity or pension; (c) any gratuity; (d) any fees or commission; (e) perquisites; (f) profits in lieu of, or in addition to, any salary or wages; (g) any advance of salary; (h) any payment received by an employee in respect of any period of leave not availed of by him; (i) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax as per paragraph 6 of Part A of Schedule XI; (j) the aggregate of all sums that are comprised in the transferred balance as referred to in paragraph 11(2) of Part A of Schedule XI of an employee participating in a recognised provident fund, to the extent to

which it is chargeable to tax under sub-paragraphs (4) and (5) thereof; (k) the contribution made by the Central Government or any other employer in any tax year, to the account of an employee under a pension scheme referred to in section 124; and (l)the contribution made by the Central Government in any tax year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 125. Perquisite 17.(1) For the purposes of this Part, “perquisite” includes— (a)the value of rent-free accommodation provided to the assessee by his employer computed in such manner as may be prescribed; (b) the value of any accommodation, computed in such manner as may be prescribed, provided to the assessee by his employer at a concessional rate which is in excess of rent recoverable from or payable by the assessee; (c)the value of any benefit or amenity granted or provided free of cost or at concessional rate in the following cases:— (i) by a company to an employee, who is a director thereof or who has a substantial interest in the company; (ii) by any employer (including a company) to an employee [other than employee referred in sub-clause (i)] whose income under the head “Salaries” by way of monetary payment (from one or more employers) exceeds such amount as may be prescribed; (d)the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the current employer, or former employer, free of cost or at concessional rate to the assessee; (e)the value of any other benefit or amenity, as may be prescribed; (f)any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; (g)any sum payable by the employer to effect an assurance on the life of the assessee or to effect a contract for an annuity, whether directly or through a fund, other than–– (i)a recognised provident fund; or (ii)an approved superannuation fund; or (iii)a Deposit-linked Insurance Fund established under–– (A) section 3G of the Coal Mines Provident Fund and

CH. IV B.- SALARIES [Sec 15-19] Miscellaneous Provisions Act, 1948; or (B) section 6C of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; (h) aggregate amount of any contribution, in excess of ₹ 750000 in a tax year, made to the account of the assessee by the employer— (i) in a recognised provident fund; (ii) in the scheme referred to in section 124(1); and (iii) in an approved superannuation fund; (i) the annual accretion by way of interest, dividend or any other amount of similar nature during the tax year to the balance at the credit of the fund or scheme referred to in clause (h), computed in such manner, as may be prescribed (to the extent it relates to the contribution referred to in the said clause in any tax year). (2) Nothing in sub-section (1) shall apply to–– (a) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer; (b) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family— (i) in any hospital maintained by the Government, or any local authority, or any other hospital approved by the Government for the purposes of medical treatment of its employees; (ii) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to such guidelines as may be issued in this behalf; (c) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved, for the purposes of section 30(c), by the–– (i) Central Government; or (ii) Insurance Regulatory and Development Authority established under section 3(1) of the Insurance Regulatory and Development Authority Act, 1999; (d) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme, approved for the purposes of section 126, by the—

Shahi & Co. — Our Understanding
This section falls under Chapter III which lists incomes that are specifically exempt from income tax — the equivalent of Section 10 of the old Income Tax Act, 1961.
Practical Note: Exempt incomes do not form part of total income for tax computation. However, they may still need to be disclosed in the ITR. Always verify eligibility conditions before claiming an exemption.
Shahi & Co., Chartered Accountants
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Disclaimer: This is a reproduction of Section 16 of the Income Tax Act, 2025 (No. 30 of 2025) as published in the Official Gazette of India (CG-DL-E-22082025-265620) for informational and reference purposes only. Shahi & Co., Chartered Accountants makes no warranty as to completeness or accuracy. For the official authenticated text refer to egazette.gov.in or incometaxindia.gov.in. This does not constitute legal or tax advice.