Salaries Defined: Section 15
Under Sec. 15, the following incomes are chargeable to Income tax under the head “Salaries”:
(a) Any salary due form an employer or a former employer to an assessee in the previous year whether paid or not;
(b) Any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it becomes due to him;
(c) Any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer if not charged to income tax for any earlier previous year.
Characteristics of Salaries:
For any payment to be made taxable under the head “Salaries”, it must fulfill the following characteristics:
a) There must a relationship of an employer and employee between the payer and the payee.
b) Any amount of salary received or due from one or more than one employer shall be taxable under this head.
c) Salary from Present, Past or Prospective employer is taxable under this head.
d) Any amount or benefits received from persons other than the employer, would not be taxable under this head even if such income arises by reason of his employment or while he was discharging his normal duties.
e) Salaries accrue at that where services are rendered.
f) If salaries are received after certain deductions made by the employer on account of professional tax, contribution to PF, TDS etc., the salary will be Gross salary due to the employee.
g) Payment received after cessation of employment from employer is also taxable under this head.
h) Voluntary foregoing of salary is taxable whether it is paid or not but voluntary surrender of salaries is exempted from tax.
i) Salary is taxable on due or receipt basis whichever is earlier.