Salaries
[Section 15 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 15(1) of Income Tax Act 2025
15(1) The following income shall be chargeable to income-tax under the head “Salaries”:—
- (a) any salary due from an employer to an assessee in the tax year, whether paid or not;
- (b) any salary paid or allowed to him in the tax year by or on behalf of an employer though not due or before it became due to him;
- (c) any arrears of salary paid or allowed to him in the tax year by or on behalf of an employer, if not charged to income-tax for any earlier tax year.
Section 15(2) of Income Tax Act 2025
15(2) For the purposes of sub-section (1), employer includes former employer.
Section 15(3) of Income Tax Act 2025
15(3) If any salary paid in advance is included in the total income of any person for any tax year, it shall not be included again in the total income of such person when the salary becomes due.
Section 15(4) of Income Tax Act 2025
15(4) Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as salary for the purposes of this section.
FAQs on Section 15 of Income Tax Act 2025
1. What is considered “Salary” under the Income Tax Act, 2025?
As per Section 15(1), salary includes:
a) Salary due from an employer in the tax year, whether paid or not.
b) Salary paid before it becomes due or when not yet due.
c) Arrears of salary paid in the tax year, if not previously taxed.
2. Does salary include payments from a former employer?
Yes, as per Section 15(2), employer includes a former employer.
3. Is advance salary taxable in the year it is received?
Yes, but as per Section 15(3), if an advance salary is taxed in one year, it won’t be taxed again when it becomes due.
4. Are bonuses, commissions, or remuneration paid to a partner of a firm considered salary?
No, as per Section 15(4), such payments to a partner are not treated as salary for taxation purposes.
5. If an employee does not receive a due salary in a tax year, is it still taxable?
Yes, salary is taxable in the year it is due, even if not received.
6. If an employer pays an employee’s salary in advance, when is it taxable?
It is taxable in the year of receipt. However, it will not be taxed again when it becomes due.
7. If an employee receives arrears of salary, is it taxable again?
Yes, unless it was already taxed in an earlier year.
8. Is pension considered salary under the Income Tax Act?
No, pension is generally classified under “Income from Other Sources” unless it is received while still in service.
9. Can a person be taxed under “Salaries” if they are not in an employer-employee relationship?
No, salary taxation applies only when there is an employer-employee relationship.
10. Is salary received from multiple employers taxed separately?
No, the total salary from all employers is aggregated and taxed under “Salaries.”
11. Are allowances taxable under the Salary head?
It depends. Some allowances are fully taxable, some are partially exempt, and some are fully exempt.
12. Is gratuity taxable?
It depends on the type of employment and whether it falls under exemption limits set by the Act.
13. Are perquisites included in salary for taxation?
Yes, perquisites like rent-free accommodation, employer-provided car, etc., are taxable.
14. Are retirement benefits taxable?
Some retirement benefits are tax-exempt up to a limit, while others are taxable.
15. Can an employee structure their salary to minimize tax liability?
Yes, through components like HRA, LTA, meal coupons, and retirement benefits.
16. Is the salary of government employees taxed differently?
The tax treatment is mostly similar, but some allowances for government employees may be tax-exempt.
17. How is salary taxed in case of an employee’s death?
Salary due but unpaid is taxable in the hands of the legal heir. Certain death benefits may be exempt.
18. Is salary earned abroad taxable in India?
It depends on the person’s residential status and the tax treaty between India and the foreign country.
19. Can salary refunds be claimed if taxed incorrectly?
Yes, a taxpayer can file a revised return or seek a refund.
20. What if an employer does not deduct TDS on salary?
The employee is still responsible for paying the tax. The employer may face penalties.
The Income Tax Act, 2025, provides a clear framework for the taxation of salaries, ensuring that all income earned from an employer—whether due, received in advance, or paid as arrears—is subject to tax in the appropriate year. The Act also clarifies that payments to partners in a firm do not fall under the “Salaries” category. Understanding these provisions helps employees and employers comply with tax laws and optimize tax planning.
By structuring salary components efficiently and being aware of exemptions and deductions, taxpayers can minimize their tax liability while ensuring full compliance with the Act.
