Section 15 of ITA, 1961 : Section 15: Salaries

Explanation using Example

Imagine John is employed by XYZ Corp and his annual salary is due at the end of the financial year on March 31st. However, XYZ Corp decides to pay him his salary in advance in December of the previous year. According to Section 15 of the Income-tax Act, 1961:

• John's advanced salary would be taxable in the previous year when he received it (December), even though it was not due until March of the following year.
• If XYZ Corp later pays John some arrears of salary that were due from the previous year and these were not taxed before, they would be taxable in the year he receives them.
• Any salary that John receives from XYZ Corp in the current financial year, which was due for this period, will also be taxable in the current year.

Additionally, if John had received an advance on his salary and it was included in his income for the previous year, it will not be taxed again when the salary is actually due, as per Explanation 1 of Section 15.

And if John were a partner receiving remuneration from his firm, this remuneration would not be considered "salary" under this section, as clarified in Explanation 2.