Salary as per section 17(1): meaning, Form 16 line 1(a) and the new section 16

Salary as per section 17(1) is the gross salary paid to you in money: basic pay, dearness allowance, HRA and every other allowance, bonus, commission, pension, gratuity, leave encashment and any salary advance, before any exemption or deduction. Section 17(1) of the Income-tax Act, 1961 defines it, Form 16 reports it at item 1(a), and the same figure is “Salary as per section 17(1)” in your ITR. From tax year 2026-27 the definition sits in section 16 of the Income-tax Act, 2025, with the same list.

The number is larger than your take-home and usually larger than your taxable salary, because exempt allowances (section 10), the standard deduction and professional tax (section 16) are subtracted after it. Perquisites and profits in lieu of salary are not in it: they are the next two lines, 17(2) and 17(3). We checked the wording of both Acts and of Form 16 on 30 October 2026; the screenshots below are from that day.

What does salary as per section 17(1) include?

Salary as per section 17(1) includes eight kinds of payment, listed in the Act itself. Section 17(1) opens “Salary includes”, so the list is inclusive, and anything paid for the employment in money falls in it even if it has another name on the payslip. The Act’s words:

What each clause covers in a normal payslip, with its letter in section 16 of the 2025 Act:

Two things are not in 17(1) even though they appear in your CTC: the employer’s own provident-fund contribution (not salary; only the part above 12% of salary is taxed, through clause (vi), and the part above ₹7.5 lakh a year across PF, NPS and superannuation is a perquisite) and reimbursements of actual expenses incurred for the employer’s work. Gifts and benefits in kind are perquisites under 17(2).

Where to find details of salary as per section 17(1)?

Details of salary as per section 17(1) are in Part B of your Form 16, at item 1(a), the first line under “Gross Salary”. Form 16 is the TDS certificate your employer must give you by 15 June after the financial year. The same figure appears in three other places:

• Form 16, Part B, item 1(a): “Salary as per provisions contained in section 17(1)”, with perquisites at 1(b), profits in lieu at 1(c) and the total at 1(d). If you changed jobs, the previous employer’s salary is at 1(e).
• Your ITR: Schedule Salary in ITR-1 and ITR-2 has the line “Salary as per section 17(1)”, pre-filled from the employer’s Form 24Q statement. ITR-2 asks for the break-up by nature (basic, DA, HRA, and so on).
• AIS and TIS: the Annual Information Statement on the e-filing portal shows the salary your employer reported, which is the 17(1) figure plus perquisites and profits in lieu.
• Salary slips: add the gross of all twelve months (basic + DA + HRA + all allowances + bonus + arrears), before deductions. It should match 1(a) if there were no perquisites.

For FY 2025-26, the return you file in 2026, you still receive Form 16 and the ITR still says section 17(1). From tax year 2026-27 the certificate is Form 130 (Rule 215 of the Income-tax Rules, 2026), whose Part C, Annexure I, carries the same salary computation under the new section numbers.

How is 17(1) different from 17(2) and 17(3)?

Section 17(1) is salary paid in money, section 17(2) is perquisites (benefits in kind or paid for by the employer) and section 17(3) is profits in lieu of salary (lump sums connected with the job, such as termination compensation). Form 16 keeps them on three lines because perquisites need a separate valuation statement, Form 12BA, and profits in lieu can qualify for relief under section 89.

How to calculate salary as per section 17(1)?

To calculate salary as per section 17(1), add every component paid to you in money during the year, before any exemption, deduction or TDS, and leave out the employer’s PF contribution and benefits in kind. For a CTC of ₹12,00,000 with a common private-sector structure:

So the Form 16 line 1(a) for this employee is ₹11,35,200, not the CTC of ₹12,00,000 and not the taxable salary. Taxable salary comes after HRA exemption (old regime only), the standard deduction of ₹75,000 in the new regime or ₹50,000 in the old, and professional tax. The salary calculator runs the full chain from CTC to in-hand, and the HRA calculator gives the exempt HRA that is deducted at item 2(e).

Three details that change the figure:

• Arrears and advance: salary is taxed when due or when paid, whichever is earlier (section 15), so arrears paid this year are in this year’s 17(1). Relief under section 89 (section 157 of the 2025 Act) is claimed separately through Form 10E.
• Gratuity and leave encashment: the full amount received is in 17(1); the exempt part (gratuity up to ₹20 lakh under the Payment of Gratuity Act, leave encashment up to ₹25 lakh for non-government employees) is shown as a deduction at item 2.
• Employer NPS contribution: included in 17(1) under clause (viii), then deducted under section 80CCD(2) (up to 14% of basic plus DA in the new regime, 10% in the old; section 124 of the 2025 Act).

Is pension covered under section 17(1)?

Yes. Pension is covered under section 17(1), which lists “any annuity or pension” at clause (ii), so a retiree’s uncommuted monthly pension is salary income, taxed under the head “Salaries” with the standard deduction. Section 16(b) of the 2025 Act repeats the words. Three related payments are treated differently:

• Commuted pension (a lump sum in place of part of the pension) is in 17(1) but exempt under section 10(10A): fully for government employees, and one-third or one-half of the full pension value for others, depending on whether gratuity was also received.
• Family pension, paid to a spouse or child after the employee’s death, is not salary. It is income from other sources, with a deduction of one-third of the pension or ₹25,000 (whichever is less) in the new regime and ₹15,000 in the old (section 57(iia) of the 1961 Act, section 93(1)(d) of the 2025 Act).
• Annuity from an insurer or NPS after retirement is taxed as salary only if it comes from the employer’s arrangement; an annuity you bought yourself is income from other sources.

What is salary as per section 17(1) in ITR?

In the ITR, “salary as per section 17(1)” is the first line of Schedule Salary, and it should equal item 1(a) of Form 16, or the sum of 1(a) across employers if you changed jobs. The e-filing portal pre-fills it from the TDS statement (Form 24Q) your employer filed, which is also what the AIS shows. Check three things before you confirm it:

1. Match Form 16: if the pre-filled figure differs from 1(a), use Form 16 and ask the employer to revise the TDS statement; a mismatch can trigger a notice.
2. Two employers: enter each employer separately; ITR-1 allows one employer row for the current employer and asks for the previous one through 1(e), ITR-2 takes several.
3. Exemptions go on their own lines: HRA, LTA, gratuity and leave encashment exemptions are entered under section 10, not netted out of the 17(1) figure. Entering a net figure understates gross salary and overstates the exemption.

ITR-2 and ITR-3 also ask for the nature of the 17(1) salary: basic, dearness allowance, HRA, other allowances, and the employer’s NPS contribution each on its own row. The totals must agree with the 17(1) line.

What changed under the Income-tax Act, 2025?

The Income-tax Act, 2025 moved the definition of salary from section 17(1) to section 16, with the same list of items plus one new clause, and it applies to income from 1 April 2026 (tax year 2026-27). The words “salary as per section 17(1)” stay on every Form 16 and ITR for FY 2025-26 and earlier; the Form 130 and ITR forms for tax year 2026-27 will refer to section 16 instead.

Three substantive differences, beyond the numbering: clause (l) of section 16 adds the Central Government’s contribution to an Agniveer Corpus Fund account; the exemptions that were in section 10 (HRA, gratuity, leave encashment, commuted pension) move into Schedules II and III; and the year is called a tax year, so there is no separate assessment year. Our TDS rate chart and TRACES guide map the other renumbered sections and forms.

What is level 17 salary?

“Level 17 salary” is a different thing from section 17(1): it is pay level 17 of the 7th Central Pay Commission matrix, a fixed basic pay of ₹2,25,000 a month, the apex scale for Secretaries to the Government of India and equivalent posts. Google shows the question next to this one because both contain “17”. The top of the matrix (gazette notification of 25 July 2016):

Levels 17 and 18 have a single cell, so there are no annual increments; dearness allowance (60% from 1 January 2026) and HRA are paid on top. For a Level 17 officer the whole basic pay, DA and allowances are salary as per section 17(1) of the Income-tax Act, like anyone else’s. See the government salary pages for the full matrix in practice.

Is 50% basic salary mandatory?

No. Neither the Income-tax Act nor the labour codes say basic salary must be 50% of CTC. The rule people mean is section 2(y) of the Code on Wages, 2019, in force since 21 November 2025, which defines “wages” as basic pay, dearness allowance and retaining allowance, and then says that if the excluded components (HRA, conveyance, overtime, commission, bonus, employer PF and so on, clauses (a) to (i)) exceed one-half of all remuneration, the excess is deemed to be wages. So “wages” for PF, gratuity and bonus is at least half of total pay, whatever the payslip calls the parts.

For section 17(1) the split does not matter: basic, HRA and special allowance are all in the 17(1) figure. The 50% rule changes what counts as wages for the employer’s PF contribution, gratuity and leave encashment, which can raise those (and lower take-home) when allowances were more than half of pay. The salary slip guide shows the usual structure.

सेक्शन 17(1) के अनुसार सैलरी क्या है?

Common questions