Basis of Charge [Sec. 15]
by Under the Income tax Act, 2025, Section 15 provides the basis for charging income under the head “Salaries”. Salary income is taxable when an employer employee relationship exists between the payer and the recipient. The important point is that salary is generally taxable on the basis of due or receipt, whichever occurs earlier. Therefore, the actual date on which salary is received is not always decisive.
The following amounts are generally chargeable to tax under the head Salaries:
| Basis | Explanation |
|---|---|
| 1. Salary Due | Salary becomes taxable when it becomes due to the employee from the employer, even if it has not actually been received. |
| 2. Salary Paid in Advance | Salary received in advance is taxable in the year in which it is received, even though it was not yet due. |
| 3. Arrears of Salary | Salary relating to an earlier period but received later is generally taxable in the year of receipt if it was not taxed earlier. Relief may be available under the applicable provisions. |
| 4. Salary Due and Received | Where salary becomes due and is also received during the same tax year, it is taxable in that year. |
| 5. Previous Employer Salary | Salary received from a former employer may also be taxable as salary where it relates to employment and falls within the charging provisions. |
Important Rule
The basic principle can be expressed as:
Salary Taxable = Salary Due OR Salary Received, Whichever is Earlier
For example, if an employee’s salary for March becomes due on 31 March but is actually paid in April, it is generally taxable in the tax year in which it became due. Similarly, if an employer pays salary in advance before it becomes due, the advance salary is taxable in the year of receipt.
Thus, Section 15 determines the point of taxation of salary income, while the actual computation of taxable salary requires consideration of allowances, perquisites, deductions, exemptions and other applicable provisions.