INTRODUCTION
The provisions pertaining to Income under the head “Salaries” are contained in sections 15, 16 and
17.
Let us now recap the important concepts relating to Salaries.
(1) Employer-employee relationship : Every payment made by an employer to his employee for service rendered would be chargeable to tax as salaries. Before an income can become
chargeable under the head ‘salaries’, it is vital that there should exist between the payer and
the payee, the relationship of an employer and an employee.
(2) Full-time or part-time employment : Once the relationship of employer and employee exists, the income is to be charged under the head “salaries”. It does not matter whether the employee is a full-time employee or a part-time one.
If, for example, an employee works with more than one employer, salaries received from all the
employers should be clubbed and brought to charge for the relevant previous years.
(3) Foregoing of salary : Once salary accrues, the subsequent waiver by the employee does not absolve him from liability to income-tax. Such waiver is only an application and hence, chargeable to tax.
(4) Surrender of salary : However, if an employee surrenders his salary to the Central
Government under section 2 of the Voluntary Surrender of Salaries (Exemption from Taxation)
Act, 1961, the salary so surrendered would be exempt while computing his taxable income.
(5) Salary paid tax-free : This, in other words, means that the employer bears the burden of the tax on the salary of the employee. In such a case, the income from salaries in the hands of the
employee will consist of his salary income and also the tax on this salary paid by the employer.
However, as per section 10(10CC), the income-tax paid by the employer on non-monetary perquisites on behalf of the employee would be exempt in the hands of the employee.
(6) Place of accrual of salary: Under section 9(1)(ii), salary earned in India is deemed to accrue or arise in India even if it is paid outside India or it is paid or payable after the contract of employment in India comes to an end.
If an employee gets pension paid abroad in respect of services rendered in India, the same will
be deemed to accrue in India. Similarly, leave salary paid abroad in respect of leave earned in
India is deemed to accrue or arise in India.
Now, let us discuss the chargeability section 15, the provisions explaining the meaning of
Salary, Perquisites and Profits in lieu of salary contained in section 17 and the deductions
under section 16.
If, for example, an employee works with more than one employer, salaries received from all the
employers should be clubbed and brought to charge for the relevant previous years.
(3) Foregoing of salary : Once salary accrues, the subsequent waiver by the employee does not absolve him from liability to income-tax. Such waiver is only an application and hence, chargeable to tax.
(4) Surrender of salary : However, if an employee surrenders his salary to the Central
Government under section 2 of the Voluntary Surrender of Salaries (Exemption from Taxation)
Act, 1961, the salary so surrendered would be exempt while computing his taxable income.
(5) Salary paid tax-free : This, in other words, means that the employer bears the burden of the tax on the salary of the employee. In such a case, the income from salaries in the hands of the
employee will consist of his salary income and also the tax on this salary paid by the employer.
However, as per section 10(10CC), the income-tax paid by the employer on non-monetary perquisites on behalf of the employee would be exempt in the hands of the employee.
(6) Place of accrual of salary: Under section 9(1)(ii), salary earned in India is deemed to accrue or arise in India even if it is paid outside India or it is paid or payable after the contract of employment in India comes to an end.
If an employee gets pension paid abroad in respect of services rendered in India, the same will
be deemed to accrue in India. Similarly, leave salary paid abroad in respect of leave earned in
India is deemed to accrue or arise in India.
Now, let us discuss the chargeability section 15, the provisions explaining the meaning of
Salary, Perquisites and Profits in lieu of salary contained in section 17 and the deductions
under section 16.
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