Exceptions to salary income:
The existence of an ‘employer-employee’ relationship is a must for a payment to be taxed under the head salaries. Accordingly, the following classes of payments do not fall under the purview of the head ‘salary’
(i) Salary received by a partner from his partnership firm carrying on business – This income is taxable under the head “profits and gains of business and profession”.
(ii) Salary received by a person as MP or MLA- This income is taxable under the head “income from other sources”. However, the salary received by a person as a Minister of Central Government/State Government is chargeable under the head salaries.
(iii) Family pension that is pension received by the members of the family of an employee subsequent to his death – This is taxable under the head “income from other sources”. However the pension received by an employee from his former employer is taxable under the head salaries.