## Arrears of Salary
Arrears arise when salary is increased with retrospective effect and the differential pay is released later.
- Fully Taxable in the year of receipt (if not already taxed earlier on due basis).
- Relief under Section 89 may be claimed to mitigate the higher tax incidence caused by lump-sum receipt taxed in one year.
## Advance Salary vs Advance Against Salary
The wording in the question is decisive here.
| Wording used | Nature | Taxability |
|---|---|---|
| 'Advance Salary' (salary itself paid in advance) | Salary received before it became due | Fully Taxable in the year of receipt [section 17(1)(v)] |
| 'Advance' / 'Advance against salary' (loan recoverable from future salary) | Pure loan; adjusted from future pay | Not Taxable – it is a debt, not income |
### Why the distinction matters
- Advance Salary increases income in the year of receipt.
- An advance/loan creates a liability; the amount becomes income only when it gets adjusted month-by-month against future salary (and is taxed then).