TaxSaral
Section 15Income Headswas Section 15 in IT Act 1961

Salaries — Charging Section

Salary income is taxable in the year it is due, paid, or whichever is earlier. Covers basic pay, dearness allowance, bonus, commission, allowances, and perquisites.

Who this applies to

All employees — both government and private sector — who receive compensation from an employer.

Key Points

  • Tax is on the amount that is 'due' OR 'paid', whichever comes first — arrears are taxed when due.
  • Salary from a former employer (arrears, gratuity top-ups) is still taxable under this head.
  • Perquisites like rent-free accommodation, ESOP vesting, and company car are also salary income.
  • Use Form 12BA (perquisite statement) and Form 16 to reconcile all salary components.

Worked Examples

1

Delayed salary — which year is it taxable?

Scenario

Arun's company runs into a cash crunch and delays paying December 2026 salary. It is actually paid on January 15, 2027. When is it taxed?

Calculation

Taxable in the earlier of 'due' or 'paid':
  Due date: December 31, 2026 (end of payroll month) → TY 2026-27
  Payment date: January 15, 2027 → TY 2027-28
Earlier = Due date (December 31, 2026)
→ Taxable in TY 2026-27

Result

The December salary is taxable in TY 2026-27 even though it was physically received in January 2027. Arun's employer should include it in the TY 2026-27 TDS computation and Form 16.

2

Bonus taxed in the year received, not the year earned

Scenario

Shalini's performance bonus for FY 2025-26 is approved and paid in May 2026. When is it taxed?

Calculation

Bonus becomes 'due' when the employer approves and commits to paying it.
If the employer's approval (and hence obligation) arises in May 2026 → TY 2026-27.

Result

The bonus is taxable in TY 2026-27 (the year it became due and was paid), not TY 2025-26. This is correct — Shalini's Form 16 for TY 2026-27 will include this bonus.

Related Sections

Section 17Standard Deduction from Salary
Section 392TDS on Salary
Section 14Heads of Income
Schedule IIIHRA Exemption

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Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.