BASIS OF CHARGE (SECTION 15)

BASIS OF CHARGE (SECTION 15)

• Section 15 deals with the basis of charge. Salary is chargeable to tax either on ‘due’ basis or
on ‘receipt’ basis, whichever is earlier.

• However, where any salary, paid in advance, is assessed in the year of payment, it cannot be
subsequently brought to tax in the year in which it becomes due.

• If the salary paid in arrears has already been assessed on due basis, the same cannot be
taxed again when it is paid.

(1) Advance Salary

Advance salary is taxable when it is received by the employee irrespective of the fact whether it is
due or not. It may so happen that when advance salary is included and charged in a particular
previous year, the rate of tax at which the employee is assessed may be higher than the normal rate
of tax to which he would have been assessed. Section 89(1) provides for relief in these types of
cases.
(2) Arrears of salary

Normally speaking, salary arrears must be charged on due basis. However, there are circumstances
when it may not be possible to bring the same to charge on due basis.