Section 15 of the Income-tax Act, 1961: When Salary Is Taxable

What is Section 15 of the Income-tax Act?

Section 15 specifies when income is chargeable under the head "Salaries" under the Income-tax Act, 1961. It covers salary that becomes due, salary paid before it becomes due, and salary arrears that were not taxed in an earlier year. The section concerns the timing of taxability; the meaning and components of salary are addressed primarily by section 17, while deductions are governed by section 16.

Employer-employee relationship: The income must ordinarily arise from an employment relationship. Professional fees paid to an independent consultant generally fall under a different head of income, depending on the facts. Payments from a former employer can still be taxable as salary.

Section 15(a), (b) and (c): Three situations

The expressions "previous year" and "assessment year" belong to the 1961 Act framework. For periods under the 2025 Act, use the applicable tax year terminology and charging provisions.

Explanations to Section 15

Explanation 1: No double taxation of advance salary

If salary paid in advance has already been included in total income for a previous year, it must not be included again when it later becomes due. This protects against charging tax twice on the same salary merely because the payment and due dates differ.

Explanation 2: Partner's remuneration is not salary under Section 15

Salary, bonus, commission or other remuneration due to or received by a partner from the partnership firm is not regarded as salary for the purposes of section 15. Under the 1961 Act, such remuneration is generally considered under the business or profession head, subject to the relevant provisions, including section 28(v) and applicable deductions and adjustments. This differs from an employee's wages.

Practical examples of salary taxation

Example 1: Salary due but unpaid

An employee's March salary becomes due in March but is credited to the bank in April. If the salary was due in March, section 15(a) generally places it in the previous year ending in March, not the next year merely because the employer paid late.

Example 2: Advance salary

An employee receives two months' salary in advance in December. Under section 15(b), that amount may be taxed when received. Explanation 1 prevents the same amount being taxed again when the relevant months arrive.

Example 3: Arrears of a pay revision

An employer pays retrospective salary arrears following a pay revision. Under section 15(c), arrears not previously charged to tax are generally taxable when paid or allowed. Depending on the facts and applicable year, relief under section 89 may be available, subject to prescribed conditions and reporting.

Example 4: Payment from a former employer

Salary payable by a former employer can still fall within section 15. The employee need not remain on that employer's payroll when the amount becomes due or is paid.

How Section 15 connects with other salary provisions

• Section 14: classification of taxable income under the statutory heads.
• Section 16: deductions from salary income, subject to the applicable regime and year.
• Section 17: statutory definitions of salary, perquisites and profits in lieu of salary.
• Section 89: potential relief where arrears or advance salary produce qualifying additional tax burden.
• Section 192: tax deduction at source on salary payments under the 1961 Act.

Gross salary can include basic pay, allowances, bonuses, taxable perquisites, retirement-related receipts and other amounts within the statutory definition. Exemptions, valuation rules and deductions must be applied separately; section 15 alone does not decide whether every component is exempt or deductible.

Records and compliance checklist

• Reconcile salary due dates and actual payment dates using payslips and employment terms.
• Check Form 16, salary statements, Form 26AS and the Annual Information Statement where relevant.
• Identify any advance salary or arrears already taxed to avoid duplication.
• For arrears, examine section 89 relief and the applicable Form 10E requirement for years governed by the 1961 Act.
• Distinguish employment salary from independent professional fees and partner remuneration.
• Use the applicable statutory provisions and return forms for the correct tax year.

Official legislation and income-tax resources

• Income Tax Department - legislation, rules and guidance
• Income Tax e-Filing portal - returns, forms and taxpayer services
• India Code - central Acts, including income-tax legislation
• Gazette of India - official notifications

Read the legislation as applicable to the year concerned, together with subsequent amendments, notifications and binding judicial decisions. The historical extract below is preserved from the uploaded webpage and should not be treated as a substitute for the consolidated current law.

Original Section 15 statutory extract and amendment history

The original webpage's statutory text, explanations and legislative notes are preserved below for reference.

Frequently asked questions

Is unpaid salary taxable?

Under section 15(a), salary that has become due is generally taxable even if the employer has not yet paid it.

Can salary received in advance be taxed twice?

No. Explanation 1 prevents salary already taxed on advance receipt from being taxed again when it becomes due.

Is a partner's salary from a partnership firm taxable as employment salary?

No. Explanation 2 excludes remuneration received by a partner from the firm from the scope of salary under section 15.

Can an employee claim tax relief on salary arrears?

Relief may be available under section 89 of the 1961 Act if its conditions are met. Eligibility and forms depend on the year and circumstances.