SALARIES :-

Any remuneration paid by an employer to his employee in consideration of his services is called salary. It includes monetary value of those benefits and facilities provided by the employer which are taxable.

Under section 15, the following incomes are taxable under the head 'Salaries':

(a) The salary due from an employer or former employer to an assessee in the previous year, whether paid or not;

(b) The salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it becomes due to him;

(c) Any arrear of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax for any earlier previous year.

Place of Accrual of Salary :-

(i) If any income taxable under the head 'Salaries' is earned in India, it is deemed to accrue or arise in India.

(ii) If a person employed in India goes on leave outside the country and draws his salary for the leave period there, the leave salary shall be deemed to have been earned in India.

(iii) If a person, after having served in India, retires from service and settles outside India, the pension drawn by him in the foreign country will be deemed to have been earned in India and will be treated as Indian income.

 Some Important Points regarding Salaries :-

(1) Salaries. :-

Every kind of remuneration of every kind of servant, public or private, and however highly or lowly placed he may be, is covered under the scope of this term used in the Income Tax Act. It means that for the purposes of the Income Tax Act, there is no distinction between the wages of labourer and salaries of high officials.

(2) Foreign Salary and Pension. :-

 Salary taxable under the head 'Salaries'. and pension received from foreign government is taxable under the head salaries 

(3) Relationship of employer and employee. :-

It is very essential for a payment to fall under the head 'salaries' that the relationship of employer and employee must exist between the payer and the payee.Every servant is an employee but an agent may or may not be an employee.

4) Salaries and professional income. :-

Where the employment is merely merely incidental to the exercise of a profession the income from such employment would be professional income, taxable under the head Profit and gains of business or profession.

5) Receipts from person other than employer. :-

 Perquisites or profits or any remuneration received from person other than the employer would be taxable under the head 'Income from Other Sources' even if they accrue to the employee by reason of his employment.

(6) Payment made after cessation of employment. :-

Payment made by an employer to his employee after the cessation of his employment is also taxable under the head 'Salaries'. It is taxable under this head because it represents remuneration for services rendered in the past.

(7) Payments made to employee or to the widow or legal heirs. :-

Lump-sum payment made gratuitously or by way of compensation or otherwise to the widow or other legal heirs of an employee, who dies while still in active service, will not be taxable as income.

8) Pension. :-

Pension received by an employee after his retirement is taxable as salary. 9)Application of salary Voluntary foregoing

(10) Tax-free salary.

11) Deductions by employer.

12) salary of a member of parliament.

13) salary of a partner.

14) Family pension.

15) salary grade or scale of pay.

 Salary includes:-

(i) wages;

(ii) any annuity or pension;

(iii) any gratuity;

(iv) any fees, commission, perquisites or profit in lieu of or in addition to any salary or wages.

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