Is a salary figure stated net of exemptions being read as gross?

It was. Tax charged on income the exemptions had already removed. ₹49,920 on one return, with the suite green.

Outcome

Divergent

Published

24 August 2026

Question fixed

21 August 2026· stated by us, not proven

What came back.

It was. The certificate’s post-exemption figure was being stored as the gross and used for BOTH regimes — but the concessional regime allows neither of the two exemptions the employer had applied, so tax was being charged on an amount those exemptions had already removed. The direction is an undercharge, which is why nothing complained.

Understated tax, one return: ₹49,920
Regime affected: Concessional (s.115BAC) only
Exemptions added back: 2 of 5 present
Exemptions correctly NOT added back: 3 — gratuity, leave encashment, voluntary retirement
Test suite state when found: Fully green

The system under test.

An employer’s certificate does not state one salary figure. It states a gross, a list of exemptions the employer applied, and the remainder. Whether the remainder or the gross is the right input depends on which regime the return is computed under — and the reader of the document cannot see the regime.

Document: One real annual salary certificate (Part A and Part B), identifying details removed
Regimes computed: Both — the old regime and the concessional regime under s.115BAC
Exemptions present: Leave travel under s.10(5) and house rent under s.10(13A), both applied by the employer
Second instrument: A clean-room reference calculator: plain statutory tables, whole-rupee arithmetic, no shared rules engine
Authority consulted: The compiled ruleset, not recollection — each exemption’s permitted regimes read from the rule files themselves

The stated constraints

R1The figure used as salary income must be the one the applicable regime charges tax on
R2An exemption disallowed by the regime must be added back before tax is computed
R3An exemption allowed in BOTH regimes must never be added back
R4The stated components must sum to the stated gross, to the rupee

The second instrument.

Independence is a claim. The table below is the evidence for it — including the two things that ARE shared.

First instrument

The production ingestion and evaluation path

Reads the certificate, resolves each labelled row to a field, builds the taxpayer’s profile and computes the liability under both regimes through the rules engine.

Second instrument

A clean-room reference calculator, plus the document’s own sum identity

The reference calculator implements the statute directly from per-year tables with no rules engine, no solver and no shared constants, and recomputes the same return. Separately, the certificate’s own component break-up is summed and compared against the gross it states — a rupee-exact identity the document must satisfy on its own terms.

Shared?	What	Note
Not shared	Rules engine	The reference calculator implements none. It is plain arithmetic over statutory tables and cannot inherit an error in rule compilation, selection or evaluation.
Not shared	Statutory tables	Written out twice, deliberately. A mirror that imports the engine’s tables verifies nothing.
Not shared	The sum identity	It comes from the document itself. Neither implementation is consulted: the components either add up to the stated gross or they do not.
Shared	The input document	Both read the same certificate. A misread ROW is reproduced by both — which is why the sum identity matters, because it catches exactly that.
Shared	The taxpayer profile shape	Both consume the same intermediate model. A field that does not exist in that model is invisible to both, and that is precisely what this check found.
Shared	The statutory reading	Both were written by people reading the same sections. A misread statute is honoured identically by each.

The reasoning

Five steps, each checkable without a computer.

This is the part that does not require you to trust the solver.

01The certificate states salary net of what the employer exempted.It reports the gross, then the exemptions applied under s.10, then the remainder. Ingestion stored the remainder in the field the computation treats as salary income.

02That is correct under the old regime and wrong under the other.The old regime permits the exemptions the employer applied, so the remainder is the right base. s.115BAC(2)(i) permits neither s.10(5) nor s.10(13A).

03The profile cannot see the regime.By design: the taxpayer profile is a statement of facts, and the regime is a choice made downstream. So the reader of the document had no way to store the right figure — there was only one field, and it needed to hold two different quantities.

04Both engines therefore agreed, and both were wrong.The reference calculator computed the same understated figure, because it was handed the same understated input. Agreement between two independent computations is evidence about the computation and says nothing about the input.

05The sum identity is what broke the tie.The certificate’s own components did not reconcile with the base being used. The document was asserting a gross that the stored figure contradicted, and that contradiction is visible without reference to either engine.

06Which exemptions to add back was resolved against the compiled rules, not from memory.Two resolve to the old regime alone and are added back. Three — gratuity, leave encashment and voluntary retirement compensation — are permitted under both, and adding those back would have manufactured an overcharge while fixing an undercharge.

What this does not settle.

It is one certificate, from one employer, in one format.: The defect class is general; this measurement is not. A different employer’s layout could carry the same fault with a different figure, or not carry it at all.
The ₹49,920 is the effect on this return, not an estimate of exposure.: It is not multiplied by anything. We do not know how many returns were affected and we do not claim to.
The second instrument shares the input.: It establishes that the computation is faithful to what it was given. It cannot, by itself, establish that what it was given is right — a separate identity was needed for that, and this check is the argument for having one.
Both implementations were written from the same reading of the statute.: If that reading is wrong, both are wrong together. Independence here is against implementation error, not against misreading the law.

What would change the conclusion.

A certificate whose stated components do not sum to its stated gross for an unrelated reason would weaken the identity as a discriminator.
An amendment permitting either exemption under the concessional regime would remove the add-back entirely.
A certificate that states the pre-exemption gross rather than the remainder inverts the problem: the same field would then be over-stated for the old regime.
If the profile model ever gains a regime, the whole structure of this defect disappears — and so does the argument for the field that fixed it.

Artifacts

identifiedThe corrected reading and its regression test: The field carrying the old-regime-only exemptions, the add-back in the evaluator, and the test that fails if either is removed. Identified by content hash; not yet published as a downloadable file.
unavailableThe source certificate: A real document belonging to a real person. It will not be published in any form, redacted or otherwise.
unavailableA reproducible synthetic case: A fabricated certificate carrying the same shape, so the check can be re-run by a reader without access to anyone’s salary. Not yet built.

Revisions

24 Aug 2026
Published.

A corrected figure stays in the record. Silently fixing one would make every other figure unverifiable.

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