Section 15 – Basis of Charge of Salary

# Basis of Charge – Section 15

## Basic rule

Salary is chargeable to tax on a due basis or receipt basis, whichever is earlier. This prevents double taxation and ensures salary is taxed at the first trigger point.

## Special situations

### Advance salary

• Taxed in the year of payment (receipt), even before it becomes due.
• Cannot be taxed again when it later becomes due.
• Relief under Section 89 is available (to mitigate higher-slab impact).

### Arrears of salary

• If already taxed on due basis, cannot be taxed again when paid.
• Arrears must ordinarily be charged on due basis; but where this is not possible, they are taxed in the year of receipt.
• Relief under Section 89 is available.

### Advance against salary

• An advance adjusted against future salary (a loan against future pay).
• NOT taxable on receipt — it is a loan, not income, at that point.

### Loan from employer

• A loan repayable in instalments is likewise NOT taxable on receipt.

## Distinguish carefully