tl; dr : yes people face issues, but risk can be taken
Entire legal soup:
So original notification said that in applying income test: "Income from salaries and agriculture operations will not be clubbed with any other sources of income."
To me, it simply means that you don't add salary with other sources to claim that prescribed limit is crossed (8 lacs). Eg 6 lac salary, 3 lac share dividend
But some secy in 2004 interpreted it to mean that you don't count salary at all. Cool.
But weirdly, he also concluded that you count same wrt PSUs etc. Without recording any reason for this differential treatment. (I read somewhere that probably it is so since PSU offers a lot of perks, so cant equate them with ordinary govt employees. imho, this is not sound legal reasoning)
Now there exist some CAT & HC decisions where they apparently invalidated this distinction. (But still you'd face issues, b/c even SC rulings don't settle stuff in practice, eg s. 66A IT Act FIRs :D)
Moreover there also exist contradictory decisions where they uphold my interpretation of "clubbing" to count salary. All these cases related to PSUs, but I fear similar reasoning can be extended to ordinary employees. In practice, ordinary employees' kids don't face such issues, since, govt only messes up with PSU cases (as per its differential interpretation).
So there exist layers of legal inconsistencies in this area. Ideally, SC should have settled these issues at least a decade ago, but it remains too busy playing an attention seeking bureaucrat (PILs, daily commentary and all that jazz), while EWS case, 50% limit, OBC cut off getting higher than general in some PCS exams etc are pending for years.
Similarly, PSUs etc should have got relevant grading. Income test for them was an adhoc mechanism, after all.
But reservation is a political game. It pays to keep it an ad-hoc mechanism, to play ping pong with electoral promises and judicial review. I think I'll see OBC reservations' phasing out, and sub-categorization exercises making creamy layer concept irrelevant, before SC gives any final word on the aforesaid issues.
This order will answer most questions on the law as it exists now (though some of it may not make sense)
https://documents.doptcirculars.nic.in/D2/D02adm/36033_5_2004-Estt.Res-14102004B.pdf
