## Key Observations: Meaning of 'Salary' & Default Regime Disallowances

### A. Meaning of 'Salary' for various computations

Different provisions define 'salary' differently — memorise the base for each:

Purpose	Components of 'Salary'
Rent-Free Accommodation	Basic + DA (for retirement benefits) + any Commission + Bonus + taxable portion of allowances
RPF contribution (17(1)), VRS (10(10C)), Gratuity where Act NOT applicable (10(10)(iii)), Leave encashment (10(10AA)), HRA (10(13A))	Basic + DA (for retirement benefits) + Commission (% of turnover)
Gratuity where Payment of Gratuity Act IS applicable	Basic + DA (any DA)
Retrenchment Compensation ('Wages')	All monetary payments (except bonus) + Allowances + Value of RFA + LTC + Commission

### B. Deductions / exemptions NOT allowed under the Default Regime [Section 115BAC]

Helper allowance, Uniform allowance, Research allowance
Allowances for Judges; salaries & pensions paid by the UNO
Rent-free official residence to Judges
Leave Travel Concession [10(5)]
House Rent Allowance [10(13A)]
Special allowances for personal expenses [10(14)(ii)] — except transport allowance for differently-abled
Entertainment allowance & professional tax [Sec 16(ii) & (iii)]
Exemption for free food / non-alcoholic beverages / vouchers up to ₹50 per meal [Rule 3]

Worked example

### Example 1

HRA base: For computing exempt HRA u/s 10(13A), 'salary' = Basic + DA (forming part of retirement benefits) + commission as a % of turnover only — NOT bonus or other allowances. So if Basic = ₹5,00,000, DA (in retirement benefits) = ₹1,00,000, turnover commission = ₹50,000, then salary base = ₹6,50,000.

### Example 2

Default regime: An employee under the Default regime (115BAC) receives HRA and LTC. Neither the HRA exemption u/s 10(13A) nor LTC u/s 10(5) is available — both are fully taxable under the default regime.

⚠️ Common exam mistakes

Using a single uniform definition of 'salary' across all provisions — the base differs by purpose.
Including bonus in the salary base for HRA/leave encashment (bonus is only included for RFA).
Including the whole commission rather than only commission as a % of turnover for retirement-benefit computations.
Allowing HRA / LTC / entertainment allowance / professional tax deductions under the Default regime — they are disallowed.
Forgetting the exception: transport allowance for differently-abled employees remains allowed under the default regime.

Reference: Section 115BAC; 17(1); 10(5); 10(10); 10(10AA); 10(10C); 10(13A); 10(14)(ii); 16(ii) & (iii) — Income-tax Act, 1961

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Meaning of 'Salary' for Various Purposes & Default Regime Disallowances [Section 115BAC]

Worked example

⚠️ Common exam mistakes