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No salary

Shivani (Learner) (1881 Points)

07 December 2016

Dear Friends

Mr. X who has a salary of Rs. 25000 per month did not receive salary for the month of Feb and Mar in the PY 15-16.

While filing his ITR for AY 16-17, how much income under the head Salaries will he show and why?

regards

shivani

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13 Replies

tarun (article) (28 Points)
Replied 07 December 2016

300000 because accrual base

Sanmitra Sanjeev Ratnaparkhi (-) (223 Points)
Replied 07 December 2016

As per section 15(a), salary is taxable in the hands of the assessee whether he has actually received it or not.(e.g. salary of March not received but still taxable - which is your case actually)

As per section 15(b), salary includes any amount actually received by the assessee whether the same is due or not. (e.g. salary of April received in March itself)

In other words, salary is taxable on the basis of cash or accrual, whichever is earlier.

So, in your case, salary pertaining to the entire year will be taxable.

2 Like

lovely kumari (student) (37 Points)
Replied 07 December 2016

300000 because ITR file on estimated bases . suppose, Today Mr. X didn't receive salary for 2 month but actually he will receive in future as his salary is fixed for month.

1 Like

Avinash Kumar (CA-Final Students) (192 Points)
Replied 07 December 2016

300000 bcz of accrual basis concept

CA Rizwan Saifi (Founder @ CharteredHelp) (117 Points)
Replied 07 December 2016

Salary Income will be Rs. 3,00,000/- (including salary for the month of Feb & March).

Best explained by Sanmitra Sanjeev Ratnaparkhi

Shivani (Learner) (1881 Points)
Replied 08 December 2016

Dear Friends

Thanks for your replies.

I had read section 15 before asking my query.

But I was wondering govt is aksing employee to pay tax. Now he can pay tax only out of cash available with him. If a person has not received salary for say whole year, then on one hand he is facing cruelty from employer who paid him not a single paisa for whole year and on the other hand govt is asking him to pay tax when in fact he has no cash in hand.

This may be a case where employer establishment is going through financial trouble and very often employees work for 5-6 months for no salary as they want to remain in job.

In such a scenario, section 15 seems very unfair to employee.

What you say?

regards

shivani

CA Ashish Barthwal (Practising Chartered Accountant) (104 Points)
Replied 08 December 2016

1)If the salary income is exceeding the maximum amount not chargeable to tax. It is the duty of employer to deduct TDS and if don't do so, he/she will be liable for the penal provisions under the Income Tax Act. If he don't deduct TDS, employee has to meet his tax liability. Above was on tax on salary. 2) Now come to your query directly, a) First thing whether the employer will give the salary for the month Feb and March , if Yes then salary will be 3,00,000 b) if not salary will be 2,50,000. 3) Employer make his books of accounts on accrual basis, so he make entry of expense of salary in his books without actually paying the salary and the salary becomes due to employee. So in the hands of employee salary becomes taxable on the basis of accrual.

Z ( ) (2960 Points)
Replied 08 December 2016

There are other provisions which can help assessee in such a situation.

Tax can also be allowed to be paid in installments.

(Guest)

We cannot agrue on the law already made. If the employee is unable to recover the salary from the employer, he can approach Labour court/civil court for the recovery.

shubham sharma (Chartered Accountant) (30 Points)
Replied 08 December 2016

due or receipt which ever is earlier

Shivani (Learner) (1881 Points)
Replied 08 December 2016

Dear Z

I beg to differ with you TDS provision is applicable to employer on accrual basis.

TDS of any type is governed by its mother section.

TDS on salary is governed by section 192 and section 192 very specifically says that employer is liable to deduct TDS at the time of payment.

So suppose if an employee salary is Rs. 50000 per month, then if an employer doesnt pay salary then he not bound to deduct TDS. Section 205 will not be able to help employee as employer deducted no TDS at first place as he didnt pay salary.

Dear Ashish

No doubt employer will be debiting its PL account with rs. 50000 per month as salary expense and showing it payable in its balance sheet but since he has not paid it, seciton 192 doesnt get attracted.

Section 192 will come into picture only when salary is paid.

I request all memebrs to share their views on this.

Can employer postope his TDS liability by simply not paying salary to its employees?

Dear Madahavi

I agree we cant argue with law but can only humbly bring to notice to the Government its shortcomings.

Regards

shivani

Z ( ) (2960 Points)
Replied 08 December 2016

You accurately noticed the error.

It was an unexpected, but nevertheless, an error.

When I was going to make reference to kingfisher I was going to give example where the tax was deducted. But I mixed up.

However, I think there is one judgment, wherein the court held that tax need not to be paid.

I could not digest that judgment, therefore I have saved it to have someone's view on the same.

I will share that judgment with you. But give me some time to recall where I saved that.

Sanjay S (Chartered Accountant) (1375 Points)
Replied 11 December 2016

Shivani, Thats a good question you've raised here.

Can employer postope his TDS liability by simply not paying salary to its employees?

Firstly, section 192 is the one section for TDS where deductibility of tax at source solely depends on the date of payment. The date of credit (Accrual) has no relevance for TDS on Salaries.

Secondly, I have read some answers above quoting section 15(a) & (b) for arriving at conclusion that TDS on salaries is based on accrual or payment whichever is earlier. Well, I dont think that is right. Section 15 is a section governing the Computation of Total Income by Assessee. It has no role to play in determining the TDS liability u/s 192.

On a conclusive note, you seem to be right in saying that the employer can postpone his TDS liability by delaying the payment of salary.

Practically, I would say that delaying the payment of salaries to employees is the last thing an employer would want to do, since it would adversely affect the morale of employees and thereby ultimately affecting the performance of company. All for a meagre savings on TDS remittance which would not give him any significant returns.

But the final point is TDS need be made only at the time of payment.