Income From Salaries
Income from salary is the income or remuneration received by an individual for services he is rendering or a contract undertaken by him. This clause essentially assimilates the remuneration received by a person for the services provided by him under the contract of employment. Salary is defined to include:
- Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
- Advance of Salary
- Leave Encashment
- Annual accretion to the balance of Recognized Provident Fund
- Transferred balance in Recognized Provident Fund
- Contribution by Central Government or any other employer to Employees Pension Account
Points to consider for taxability of salary :
- Salary income is chargeable to tax on “due basis” or “receipt basis” whichever is earlier.
- Existence of relationship of employer and employee is must between the payer and payee to tax the income under this head.
- Income from salary taxable during the year shall consists of following:
- Salary due from employer (including former employer) to taxpayer during the previous year, whether paid or not;
- Salary paid by employer (including former employer) to taxpayer during the previous year before it became due;
- Arrear of salary paid by the employer (including former employer) to taxpayer during the previous year, if not charged to tax in any earlier year;
Exceptions - Remuneration, bonus or commission received by a partner from the firm is not taxable under the head Salaries rather it would be taxable under the head business or profession.