TaxSaral

Section 15 · was Section 15 in the 1961 Act

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 it 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 No. 123 (the perquisite statement, earlier Form 12BA) and Form No. 130 (earlier Form 16) to reconcile all salary components.

Worked examples

1. Delayed salary — which year is it taxable?

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?

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 No. 130.

2. Bonus taxed in the year received, not the year earned

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

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 No. 130 for TY 2026-27 will include this bonus.

Related sections

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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.