Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii)]

An employee shall be a specified employee, if he falls under any of the following three categories:

1. he is a Director of a company; or
2. he, i.e. the employee, has a substantial interest in the company.

As per section 2(32), person who has a substantial interest in the company, in relation to a company means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than 20% of the voting power;

• basic salary,
• dearness allowance,
• bonus,
• commission,
• taxable allowances/perquisites
• but shall not include the value of any non-monetary benefits/perquisites.

The following are to be deducted from salary for this purpose:

1. entertainment allowance (to the extent deductible under section 16(ii);
2. tax on employment [Section 16(iii)].

Monetary Salary includes :

1. Basic Salary.
2. D.A. / D.P. / A.D.A.
3. Bonus, Commission, Fees and all taxable allowances or taxable portion of an allowance.
4. Any perquisites received in cash or in monetary form.
5. Gratuity, Pension, Leave Salary but arrears of salary and salary received in advance is to be excluded.
6. In case employee is working simultaneously with more than one employer, salary from all the employers is to be included.
7. Monetary annual salary income Rs. 50,000 shall be calculated after allowing deductions u/s 16(u) and 16(iii).