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Salary

midhun (student) (39 Points)

09 April 2016

how is salary taxed receipt basis or due basis??

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3 Replies

Deepak Kumar (Chartered Accoountant) (270 Points)
Replied 09 April 2016

If a employer keep his books of accounts on merchentile basis, he will book all employees salary on due basis & deduct as expenses in p&l. In this case employer give Salary certificate on due basis & employee should submit his return on due basis. Otherwise if employer keep books on cash basis employee should submit his return on cash basis.

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Abhijeet Deshpande (Co-Founder & Manager @ Tax-Yantra) (1171 Points)
Replied 09 April 2016

As per Sec 15 of the Income tax Act, 1961, income is taxable under the head Salary on due or receipt basis whichever is Earlier. Where any dues/ arrears are received in the previous year for any earlier years which are not taxed, same will be taxable in the PY of receipt.

Ex-

1. Due date for the month of Feb is 7th March and salary paid in the month of April, salary will be taxable in the month of March itself on due basis.

2. Due date for the month of April is 7th May. However, employee receives the salary in month of March as advance (it is advance salary and not advance against the salary), salary will be taxable in the month of March on receipt basis.

Hope that clears your doubt.

Thank You!

midhun (student) (39 Points)
Replied 09 April 2016

What if a person hasn't received his salary for 3 months in a financial year.. Are u saying that he ought to pay taxes for that salary income he hasn't yet received??