It is generally known as dearness allowance or dearness pay. Allowances that are given to an employee but are not included in the list of exempt allowances as stated in the Act are taxable as salary. This amount is treated as salary if it is paid under the service contract or as under the Payment of Bonus Act or as an award by a Labour Tribunal or in accordance with a decision of a trade association. If bonus is paid gratuitously itshall be exempt. In assessment year 2000-2001, if the employer has alloted shares and securities to the employees at a consessional price than that alloted to the public, the difference between the two prices is taxed as a perquisite.
Any sum paid in behalf of the employee by the employer is a perquisite.
The sum paid by the employer as a contribution to a fund effecting insurance on the employees' life. This list is generalised so that it includes within its scope all the additional monetary as well as non-monetary emoluments provided by the employee. All perquisites are not taxable the Act states that some of the perquisites are exempt either in whole or in part. There is a specific sequence, which you can use to find your taxable salary and the amount of tax payable. From the total amount of your salary deduct the following deductions prescribed by the act.