EaseValueIn plain language
Section 15 is the "charging section" for salary income — it decides when your salary becomes taxable. Every rupee your employer owes you or pays you is brought to tax under the head "Salaries" through this one section, and the timing rule it lays down (tax on the earlier of "due" or "received") is the foundation on which the rest of the salary chapter (Sections 16 to 19) is built.
The core rule: taxed on "due" OR "received", whichever is earlier
Salary is unusual among the heads of income because it is taxed on the earlier of two events:
- Salary due — once your salary becomes due from your employer in a tax year, it is taxable even if it has not actually been paid to you [Section 15(1)(a)]. So if your March salary becomes due on 31 March but is paid on 5 April, it is taxed in the year it became due.
- Salary paid (even if not yet due) — if your employer pays or allows salary in a tax year, it is taxable in that year even though it was not yet due, or was paid in advance [Section 15(1)(b)].
- Arrears of salary — arrears paid or allowed in a year are taxable in that year, but only if they were not already taxed in an earlier year [Section 15(1)(c)]. This prevents the same income being taxed twice.
In short: the department will tax salary at the first of the two points — when it fell due, or when you received it — and never both.
"Employer" includes a former employer
Section 15(2) clarifies that an employer includes a former employer. This matters because pensions, leave encashment, gratuity or dues received after you leave a job are still "salary" — they don't escape the head just because the employment has ended.
Advance salary is never taxed twice
Section 15(3) protects you where advance salary has already been taxed once (on the receipt basis). When that advance later becomes due, it is not included again. Example: an advance for April taxed in March is not re-taxed when April's salary formally becomes due.
A partner's remuneration from a firm is NOT salary
A common point of confusion: money a working partner draws from their partnership firm — salary, bonus, commission or remuneration by any name — is expressly excluded from "Salaries" by Section 15(4). There is no employer-employee relationship between a firm and its partner, so that income is taxed as business/profession income in the partner's hands instead.
How Section 15 fits with the rest of the salary chapter
Section 15 only tells you what is charged and when. The related sections then complete the picture: Section 16 defines what "salary" includes (wages, pension, gratuity, perquisites, leave encashment, etc.); Section 17 covers perquisites; Section 18 covers profits in lieu of salary; and Section 19 gives the deductions (the ₹75,000 standard deduction and professional tax) that reduce your gross salary to taxable salary. Where salary arrears bunch up into one year and push you into a higher slab, separate relief provisions can spread the tax impact — ask our team if this applies to you.
Because salary is taxed on an accrual-or-receipt basis, timing of joining, resignation, bonus payouts and final settlements can all affect which year income lands in — worth planning around a job change or a large arrears payout.