Salary Due on Last Day of Months v/s Salary due
Day of Next Month
The point of time at which the salary becomes
due depends upon the terms of employment agreement between the employer and the employee.
is due on the last day of the month, salary from April 2019 to March 2020 shall become due during PY 2019-20.
is due on the 1st day of the next month, salary
from March 2018 to February 2019 shall become
due during PY 2018-19.
'Contract of Service' v/s 'Contract far
Contract of Service: The employment agreement under which the employee agrees
to work under
the control and supervision of the employer is generally referred
to as a 'contract of service.
Contract for Service: Under a contract
for service, one person agrees
to provide specific
services to the other
person on freelancer basis. In other words,
both parties are
on equal footing
and there does not exist
a relationship of employer-employee between the two parties. Income from a contract for service is generally taxable
u/h PGBP in the hands of the payee.
v/s 'Advance Against
In such cases,
salary for a future period
is taken in advance by the employee. Advance salary is taxable when it is received by the employee irrespective of the fact whether
it is due or not.
Salary: Advance against
salary is different from advance salary.
It is an advance taken
by the employee from
his employer. This advance is generally adjusted
with his salary
over a specified time period. It cannot be taxed as salary.
Foregoing of Salary v/s
surrender of Salary
Foregoing of Salary: Foregoing of salary refers
to walver of salary by the employee. Once salary accrues, the subsequent waiver by the employee
does not absolve
him from his income tax liability. Such waiver is only an application of salary
and hence, chargeable to tax.
Example: An employee instructs his employer that
he is not interested in receiving his
salary for April
2017 and the same might be donated to a girls'
hostel. In this
case, the employee
cannot claim that he cannot
be charged in respect of the salary
for April 2017.
It is only due to his instruction that the donation
was made to a girls'
hostel by his employer. It is only
an application of income. Hence,
the salary for
the month of April 2017
will be taxable
in the hands
of the employee.
Surrender of Salary If an employee
surrenders his salary to the Central Government u/s 2 of the Voluntary Surrender of Salaries (Exemption from Taxation) Act, 1961, the salary so surrendered would
be exempt while computing his taxable
In such cases, the employer bears
the burden of the tax
on the salary of the employee. If tax has been paid
by the employer
on behalf of the employee, such payment of tax shall
be considered to be a monetary perquisite in the hands
of the employee
taxable u/s 17(2)(iv).
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