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SALARY ADVANCE WHETHER TAXABLE

Vikram Singh (RPFC) (28 Points)

24 October 2007

I am a salaried person, i took salary advance which govt gives on transfer, it is two months pay and is refundable in 36 instalments,

illustration: Rs 36000 advance, refundable in 36 monthly instalments of Rs 1000 each.

now office says it is taxable, If it is than i am in 30% bracket and will have to shelf out Rs 12000 i.e. 30% of 36000

please help siting provisions or illustrations etc

Vikram Singh

vik_indelhi @ yahoo.com

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28 Replies

Prakash Popat (3134 Points)
Replied 24 October 2007

Salary Advance is not taxable.

(Guest)

how can i satisfy my office people, they are showing some illustrations in swami's handbook regarding the tax calculation, please help with some citations or case laws or book illustration etc

Prakash Popat (3134 Points)
Replied 24 October 2007

Salary advance is temporary Loan to the employee,Your salary may be taxable but the temporary advances R not taxable as it's returnable.

Prakash Popat (3134 Points)
Replied 24 October 2007

Once it's Get converted as Salary that's Point of time your taxability would be determined.

Yogeesha (Service) (70 Points)
Replied 24 October 2007

In your case in actual terms u took a loan from the employer so hence it is not considered as advance salary.Because u r repaying it in instalments it is a advance on salary not advance salary.so it is not taxable

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 24 October 2007

Advance salary is taxable in the year of taking advance but loan against salary is not taxable. both are different.

Gurmet Siingh (Chartered Accountant) (413 Points)
Replied 24 October 2007

As far as i m concerned Salary is taxable at the time of payment or due,whichever is earlier. so advance salary is taxable as per IT Act.

Pravin (Accountant) (46 Points)
Replied 24 October 2007

As Far As Salary Advance is concern it will be taxable because salary is taxed on payment basis. You need not to worry as salary advance will be deducted from salay and tax in that month would be less. But if tyou are repaying salary advance in 36 installments than it cannot be called as salary advance. Same is a kind of loan which you have take from employer and so such loan is not taxable.

SANJAY KUMAR SINHA CHOWDHUR (Practice) (41 Points)
Replied 24 October 2007

Salary advance taken by you is repayable in 36 instalments. Such advance is not taxable.

Sathish Karunakaran (ACA) (614 Points)
Replied 24 October 2007

Salary is taxable on accrual or receipt basis whichever is earlier. i.e. salary advance is taxable at the time of receipt. from ur instance it seems that u have received staff loan and loans are not subject to tax. hence check with ur employer whether it is in nature of advance or loan and conclude that advance is taxable and loan is non-taxable. if it is an advance, u will be taxed but u can also enjoy relief u/s. 89 of IT Act. discuss with ur accountant.

CA O.P. SINGH (O P Singh & Co.) (426 Points)
Replied 25 October 2007

salary advance is taxable.. as per section salary received or accruer which ever is earlier is taxable. its not a loan.. actually it is not refund of loan but adjustment in advance salary any any co. will do. i strongly recommend that it will be taxable.

Sonia Uthuppu (Chartered Accountant) (34 Points)
Replied 25 October 2007

Defenition of Salary u/s 17(1) (v) includes advance of salary. It form part of the taxable salary.

CA.Saibaburao Nanduri (Chartered Accountant) (3847 Points)
Replied 25 October 2007

Dear Vikram Singh ! Sonia Uthuppu, rightly referred section 17 of the Income-tax Act which is as follows: 17. For the purposes of sections 15 and 16 and of this section,— (1) “salary” includes— (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; [(va) any payment received by an employee in respect of any period of leave not availed of by him;]......... By virtue of the definition 'advance salary' is taxable

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 25 October 2007

Repayment of loan is different from deduction in salary. hence its taxable as I have mentioned earlier. CA.Saibaburao Nanduri has also been mentioned charging sec. 17 of the salary head so now it should be clear.. i think