Legal Issues in Compensation

Legal Issues in Compensation- The laws of compensation and work hours are very complex. An employer with best intentions could also commit mistakes while going through the various terms and conditions. Federal and state laws take the issue of an employer to trust on the requirements in such a favorable manner for most of the employees. It is really tough to judge which employees are perfectly immune and not exempt from the lowest amount of wage.

Compensation and Income Tax Act, 1961

Income under heads of salary is defined as remuneration received by an individual for services rendered by him to undertake a contract whether it is expressed or implied. According to the Income Tax Act 1961, these are the following conditions where all such remunerations are chargeable to income tax:

• When remuneration is due from the former employer or present employer in the previous year.
• When remuneration is paid or allowed in the previous year, by or on behalf of a former employer or present employer, though not due or before it becomes due.
• When arrears of salary is paid in the previous year by or on behalf of a former employer or present employer, if not charged to tax in the period to which it relates.

Under Section 197 of the Income Tax Act, 1961 the income which come under the heads of salary are as follows:

• Salary (including advance salary)
• Wages
• Fees
• Commissions
• Pensions
• Annuity
• Perks
• Gratuity
• Annual bonus
• Income from Provident Fund
• Leave Encashment
• Allowance
• Awards

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