(1) Subject to the provisions of sub-section (2), income from employment shall include the following incomes, namely:—

(a) any monetary receipts, salaries and benefits received or receivable from employment;

(b) income earned from employee share schemes;

(c) untaxed arrear salary; or

(d) any amount or benefit received from a past or future employer.

(2) Income from employment shall not include the following receipts, namely:—

(a) amounts received for medical expenses related to heart, kidney, eye, liver and cancer operations of any such employee who is not a shareholder director; or

(b) any conveyance allowance, traveling allowance and daily allowance received wholly and exclusively incurred in the performance of the duties of employment.

Explanation.— For the purposes of this section,—

(a) “salary” means sums of any nature received by an employee from employment and shall include the following items, namely:—

(i) any salary, wages or remuneration;

(ii) any allowance, leave allowance, leave encashment, bonus, fees, commission, overtime;

(iii) advance salary;

(iv) gratuities, annuities, pensions or supplements thereof;

(v) perquisites;

(vi) profit in lieu of salary or wages or receipts in addition to salary or wages;

(b) “profit in lieu of salary or wages” or “receipt in addition to salary or wages” shall include—

(i) any compensation received on account of termination of employment, called by whatever name;

(ii) remaining portion excluding employee’s contribution to provident fund or any other fund; (iii) the fair market value of benefits or sums received as a result of modification of the terms and conditions of the employment contract;

(iv) the fair market value of benefits or sums received at the time of joining employment or under any other condition of employment;

(c) “perquisite” means any payment or benefit, including incentive bonus, made by the employer to the employee, but shall not include the following payments, namely:—

(i) basic salary, arrears, advance salary, festival allowance, leave encashment and overtime;

(ii) contributions to recognized provident funds, approved pension funds, approved gratuity funds and approved superannuation funds;

(d) “basic salary” means the pay which is payable monthly or otherwise on the basis of which other allowances and benefits are determined, but the following allowances or benefits shall not be included in the basic salary, namely:—

(i) all types of allowances, perquisites, annuities, bonuses and benefits; and

(ii) employer’s contributions made by the employer to various funds of the employee;

(e) “employer” means the person who employs and pays the wages and salaries or the person who performs the said work on behalf of the employer shall also be deemed to be the employer.