# Basis of Charge in Income

24/07/2020**Basis of Charge of an Income** lets us know that on what grounds Income earned by a person is chargeable to tax. It specifically defines whether Income so received is tax chargeable on receipt basis or accrual basis, or in case of variations in accounting method how tax should be charged. All five heads of Income have different Basis of Charge which you will come to know as you surf through each head of Income.

Salary Income is chargeable to tax on ‘**DUE OR RECEIPT BASIS WHICHEVER IS EARLIER**’

Income Tax Act however specifically states that where any salary in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. It is also worthwhile to note that the Accounting Method employed by the Assessee is absolutely irrelevant to violate the chargeability rule as stated above in bold.

Let’s go through the following examples to gain more clarity on this rule:

You being an employee of a MNC are faced with the following alternative situations during the P.Y. 2009-10 (A.Y. 2010-11)

**1)** You received your annual salary of Rs. 9,00,000/- due & receivable by you in the previous year.

The salary of Rs. 9,00,000/- will be chargeable to tax in P.Y. 2009-10 in your hands.

**2)** An Annual salary due to you of Rs. 9,00,000/- out of which only Rs. 5,50,000/- was received during the P.Y. 2009-10 and rest was received by you in the next P.Y. i.e., 2010-11.

The whole salary amount of Rs. 9,00,000/- will be chargeable to tax in your hands in the P.Y. 2009-10 i.e., A.Y. 2010-11. The salary of Rs 3,50,000/- received in P.Y. 2010-11 will not be chargeable to tax again in P.Y. 2010-11 i.e., A.Y. 2011-12 since it has already been taxed earlier.

**3)** Advance salary received during the P.Y. 2009-10 pertaining to P.Y. 2010-11 of Rs. 2,50,000/-.

The salary received of Rs. 2, 50,000/- will be chargeable to tax in the P.Y. 2009-10 instead of P.Y. 2010-11 since the rule specifically says due or receipt whichever is earlier, however it will not be charged to tax again in P.Y. 2010-11.

**4)** Arrears of salary pertaining to P.Y. 2008-09 received in P.Y. 2009-10 amounting to Rs. 4,00,000/-.

The amount so received of Rs. 4,00,000/- will not be tax chargeable in your hands in P.Y. 2009-10 since it must had been already taxed in your hands in P.Y. 2008-09, i.e., A.Y. 2009-10.

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