Section 15 Income Tax Act 2025: When Is Salary Taxable?

What does Section 15 of the Income-tax Act, 2025 provide?

Section 15 appears under Part B, Salaries, in Chapter IV (Computation of Total Income). It specifies when amounts arising from employment are chargeable under the head Salaries. Broadly, salary is taxed when it becomes due or when it is paid, whichever occurs earlier. Salary arrears are brought to tax on receipt if they have not been taxed in an earlier tax year.

An employer-employee relationship is ordinarily necessary for income to be assessed under the salary head. The mere description of a payment as a salary or fee does not conclusively determine its tax treatment.

Section 15(1): When is salary chargeable to income tax?

Section 15(1)(a): Salary due, whether received or not

Salary that becomes due from an employer during a tax year is chargeable in that tax year even if the employer has not actually paid it. The date on which salary becomes legally due is important; a delay in payment does not ordinarily defer taxation.

Section 15(1)(b): Salary received before it becomes due

Salary paid or allowed by or on behalf of an employer in a tax year, although not yet due, is chargeable in the year of payment or allowance. This includes advance salary, subject to the protection against taxing the same amount again under subsection (3).

Section 15(1)(c): Arrears of salary

Arrears paid or allowed by or on behalf of an employer are chargeable in the tax year of payment if they were not charged to income tax for any earlier tax year. If the salary was already taxed on the due basis, its later receipt should not trigger taxation of the same salary again.

Section 15(2): Does salary from a former employer count?

Yes. For the purposes of Section 15(1), the expression employer includes a former employer. Consequently, payments such as previously untaxed salary arrears from an earlier employer may fall within Section 15 even after employment has ended.

Section 15(3): Can advance salary be taxed twice?

No. Where advance salary has already been included in a person's total income for a tax year, Section 15(3) prevents it from being included again when the salary subsequently becomes due. Proper records of the original inclusion help establish that the amount has already been taxed.

Section 15(4): Is remuneration paid to a partner taxable as salary?

No. Salary, bonus, commission or remuneration, by whatever name called, due to or received by a partner from the firm is not regarded as salary for the purposes of Section 15. Its treatment must instead be examined under the applicable provisions governing income from business or profession, including Section 26 of the 2025 Act, where relevant. The partnership relationship is distinct from an employer-employee relationship for this purpose.

Important statutory definitions and related provisions

Read with: Section 13 (heads of income), Section 16 (income from salary), and the subsequent provisions concerning perquisites, profits in lieu of salary and deductions. Section 15 addresses chargeability and timing; it does not itself prescribe salary tax rates or a universal exemption.

Practical examples of Section 15

Example 1: Salary due but unpaid

An employee's March 2027 salary becomes due in March 2027 but is paid in April 2027. It is generally chargeable in tax year 2026-27 because it became due during that year.

Example 2: Advance salary

An employee receives Rs. 80,000 in December 2026 as advance salary for a later month. If the amount is included in taxable income for tax year 2026-27, it must not be taxed again when it becomes due.

Example 3: Untaxed arrears

A former employer pays Rs. 1,20,000 of salary arrears in August 2027. If these arrears were not charged to income tax in an earlier tax year, Section 15(1)(c) brings them to tax in the year of payment, subject to other applicable provisions.

Example 4: Partner remuneration

A partner receives remuneration under a partnership deed. Even if described as 'salary', the payment is not assessed under the Salaries head by reason of Section 15(4); its correct treatment must be determined under the business-income provisions.

Frequently asked questions about Section 15

Is unpaid salary taxable?

Generally yes, if it has become due from an employer during the tax year, even though actual payment is delayed.

Is advance salary taxable when received?

Yes. Advance salary is ordinarily chargeable when paid or allowed before it becomes due. Section 15(3) prevents a second inclusion when it later becomes due.

Are salary arrears taxable in the year received?

Yes, if they were not charged to income tax in any earlier tax year.

Does Section 15 apply to payments by a former employer?

Yes. Section 15(2) expressly includes a former employer for the purposes of subsection (1).

Is a partner's salary from a firm treated as salary income?

No. Section 15(4) excludes partner remuneration from the Salaries head; other provisions govern its tax treatment.

Does Section 15 itself allow a standard deduction?

No. Section 15 establishes chargeability of salary. Deductions are governed by separate provisions.

Official law and further reading

Consult the enacted Income-tax Act, 2025 and subsequent amendments for the operative text. The official department guidance on salary income offers further context on employment income and its computation.