Profit in lieu of salary is a part of salary income and accordingly it is taxable under the head “Income from Salary”. Profit in lieu of salary means any payment made to an employee on lieu of salary even if the same has no connection with the profits of the employer. The word ‘profit’ is used only to convey any ‘advantage’ or ‘gain’ by receipt of any payment by the employee. As per the Income Tax Act, 1961 “Profit in lieu of salary” includes the following:

1.       Any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms & conditions relating thereto is taxable as profit in lieu of salary. The recipient may however claim exemption u/s 10(10B) or 10(10C), if eligible.

2.    Any payment (except to the extent it is specifically exempt u/s 10) due to or received by an employee from his employer or former employer or from a provident fund, or other fund (to the extent it does not consist of contributions made by the assessee or interest thereon) which may otherwise be taxable as income from salary. It may be noted that the assessee is entitled to exemption to the prescribed extent in respect of the following payments received by him-

a.    Payment of Gratuity u/s 10(10);

b.    Payment of commuted pension u/s 10(10A);

c.    Payment of retrenchment compensation u/s 10(10B);

d.    Payment from statutory provident fund and public provident fund u/s 10(11);

e.    Payment from  recognised provident fund u/s 10(12);

f.    Payment from  an approved superannuation fund u/s 10(13);

g.    Payment of House Rent Allowance (HRA) u/s 10(13A).

3.    Payment from unrecognised provident fund or superannuation fund to the extent it does not consist of contribution by the employee or interest on employee’s contribution (at the time of payment to the employee).

4.    Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy is taxable as “profit in lieu of salary”.

5.    Any amount received in lump sum or otherwise from any person prior to his joining employment or after cessation of employment with that person.

We at Taxmantra.com have the expertise in handling issues relating to individual taxation (Tax Returns + Tax Support+ Tax Planning).

Taxmantra.com provides most hassle free tax return filing/ online return filing experience. Once you have collected, your salary certificate and other documents, we request you to please log in to www.taxmantra.com/ereturns or you can also directly mail at info@taxmantra.com to submit the details. Upon receiving the documents, we would contact you to file your return of income.Profit in lieu of salary is a part of salary income and accordingly it is taxable under the head “Income from Salary”. Profit in lieu of salary means any payment made to an employee on lieu of salary even if the same has no connection with the profits of the employer. The word ‘profit’ is used only to convey any ‘advantage’ or ‘gain’ by receipt of any payment by the employee. As per the Income Tax Act, 1961 “Profit in lieu of salary” includes the following:

1.       Any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms & conditions relating thereto is taxable as profit in lieu of salary. The recipient may however claim exemption u/s 10(10B) or 10(10C), if eligible.

2.    Any payment (except to the extent it is specifically exempt u/s 10) due to or received by an employee from his employer or former employer or from a provident fund, or other fund (to the extent it does not consist of contributions made by the assessee or interest thereon) which may otherwise be taxable as income from salary. It may be noted that the assessee is entitled to exemption to the prescribed extent in respect of the following payments received by him-

a.    Payment of Gratuity u/s 10(10);

b.    Payment of commuted pension u/s 10(10A);

c.    Payment of retrenchment compensation u/s 10(10B);

d.    Payment from statutory provident fund and public provident fund u/s 10(11);

e.    Payment from  recognised provident fund u/s 10(12);

f.    Payment from  an approved superannuation fund u/s 10(13);

g.    Payment of House Rent Allowance (HRA) u/s 10(13A).

3.    Payment from unrecognised provident fund or superannuation fund to the extent it does not consist of contribution by the employee or interest on employee’s contribution (at the time of payment to the employee).

4.    Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy is taxable as “profit in lieu of salary”.

5.    Any amount received in lump sum or otherwise from any person prior to his joining employment or after cessation of employment with that person.

We at Taxmantra.com have the expertise in handling issues relating to individual taxation (Tax Returns + Tax Support+ Tax Planning).

Taxmantra.com provides most hassle free tax return filing/ online return filing experience. Once you have collected, your salary certificate and other documents, we request you to please log in to www.taxmantra.com/ereturns or you can also directly mail at info@taxmantra.com to submit the details. Upon receiving the documents, we would contact you to file your return of income.