House rent allowance exemption excludes bonus from salary when computing rule-based relief under the income-tax framework

For house rent allowance exemption under rule 2A, "salary" is confined to contractual remuneration for services rendered and is read with the Fourth Schedule definition adopted by the rule. That definition includes dearness allowance only if the employment terms so provide, and excludes other allowances and perquisites. On that scheme, bonus is ordinarily a payment in addition to wages or remuneration and is not a contractual component of salary. The article therefore states that bonus does not form part of "salary" for rule 2A, so it is excluded from the HRA exemption computation.

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Issues: Whether, for the purpose of house rent allowance exemption under section 10(13A), bonus forms part of "salary" as defined for rule 2A of the Income-tax Rules, 1962.

Analysis: Rule 2A makes the exemption depend on the amount of salary due for the relevant period, and its Explanation adopts the meaning of "salary" in clause (h) of rule 2 of Part A of the Fourth Schedule to the Income-tax Act, 1961. That definition treats only dearness allowance, if the terms of employment so provide, as part of salary and excludes other allowances and perquisites. On that scheme, salary means remuneration payable under the contract of employment for services rendered. Bonus is ordinarily a payment in addition to wages or remuneration and is not, by its nature, a contractual component of salary. The structure of the Fourth Schedule, including the treatment of periodical payments and contingent contributions, also supports exclusion of bonus from salary.

Conclusion: Bonus does not form part of "salary" for the purpose of rule 2A, and the question is answered in the negative in favour of the assessee.

Ratio Decidendi: For computing house rent allowance exemption under rule 2A, "salary" is confined to contractual remuneration for services rendered and does not include bonus unless the governing statutory definition expressly brings it within salary.

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