Under the Income Tax Act, "Salary" is a broad term. It includes your basic pay, any dearness allowance (DA), bonuses, commissions, and other cash payments. Beyond cash, it also covers the value of non-monetary benefits, known as perquisites or 'perks', provided by your employer.

Two of the most common components requiring specific calculations are House Rent Allowance (HRA) and perquisites like company-provided accommodation.

If you receive HRA and live in a rented house, a portion of it is exempt from tax under Section 10(13A). The amount of the exemption is the lowest of the following three figures:

For example, if an employee in Delhi has a basic salary of ₹6,00,000, receives an HRA of ₹2,40,000, and pays an annual rent of ₹3,00,000, the exemption is calculated as:

1. Actual HRA received: ₹2,40,000
2. Rent paid (₹3,00,000) - 10% of salary (₹60,000) = ₹2,40,000
3. 50% of salary (since Delhi is a metro) = ₹3,00,000

The lowest amount is ₹2,40,000, so the entire HRA is exempt from tax in this case. If the rent paid was only ₹1,80,000, the second condition would become ₹1,20,000 (₹1,80,000 - ₹60,000), making it the lowest value. In that scenario, ₹1,20,000 would be exempt and the remaining ₹1,20,000 would be taxable.

Perquisites are benefits provided by an employer. The tax rules specify how to value them. For instance, the value of rent-free accommodation provided by an employer is added to your salary income. The valuation depends on whether the accommodation is owned by the employer or leased, and the population of the city.

Another common perk is a company car. Its taxable value depends on factors like the car's engine capacity and whether it's used for official purposes, personal purposes, or both.

After calculating your gross salary, including all allowances and perquisites, all salaried individuals are entitled to a standard deduction of ₹50,000. This is a flat deduction and doesn't require any proof of expense.

This head of income covers earnings from property you own. It's not about the rent you actually receive, but the property's potential to earn income. The calculation starts with the Gross Annual Value (GAV).

Once you have the Net Annual Value (NAV), you can claim two key deductions under Section 24.

The treatment of the interest deduction differs significantly depending on how the property is used.

If a property is self-occupied, meaning you live in it, its Gross Annual Value is considered nil. Since the NAV is zero, you cannot claim the 30% standard deduction. However, you can still claim a deduction for interest on your housing loan, but it's capped at ₹2,00,000 per year. This applies if the loan was taken after 1 April 1999 for acquisition or construction, and the construction was completed within 5 years.

For a let-out property (rented out), there is no limit on the amount of housing loan interest you can claim as a deduction. The full interest amount paid during the year is deductible from the NAV.

What about interest paid before you took possession of the house? This is called pre-construction interest. The total interest paid during the pre-construction period is deductible in five equal annual instalments, starting from the year the construction is completed.

These rules for salary and house property form a core part of calculating your total taxable income. Understanding how to apply these exemptions and deductions is key to accurate tax planning.