Salary is defined to include:
e) Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
f) Advance of Salary
g) Leave Encashment
h) Annual accretion to the balance of Recognized Provident Fund
i) Transferred balance in Recognized Provident Fund
j) Contribution by Central Government or any other employer to Employees Pension Account as referred in Sec. 80CCD
Points to consider:
a) Salary income is chargeable to tax on “due basis” or “receipt basis” whichever is earlier.
b) Existence of relationship of employer and employee is must between the payer and payee to tax the income under this head.
c) Income from salary taxable during the year shall consists of following:
i. Salary due from employer (including former employer) to taxpayer during the previous year, whether paid or not;
ii. Salary paid by employer (including former employer) to taxpayer during the previous year before it became due;
iii. Arrear of salary paid by the employer (including former employer) to taxpayer during the previous year, if not charged to tax in any earlier year;
Exceptions – Remuneration, bonus or commission received by a partner from the firm is not taxable under the head Salaries rather it would be taxable under the head business or profession.
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