30 October 2012
My query is, a comapany went into liqudation and distributed the outstanding sums to its employees. Sums includes salary and other compensations which were outstanding for more than 10 years. The company was shut down 10 years ago but did not paid their employee's remuneration salary for the working period. This year liqudator distributed the outstanding sums to the employees. As per the liqudator's receipt, the amount is shown as dividend warrant. My query is: 1) Is that amount taxable??Under which head it will be taxable? 2) What will be the income called? compensation received,salary income or any other income??
31 October 2012
if the amount involves arrears it would be taxable under the head Salaries and employees will get the benefit of Section 89 i.e. relief for arrears and if the amount of salary is not arrears it need not require any thing since the amount of salary is taxable on due or receipt basis whichever is earlier so the amount would have been offered for tax in the respective year in which it became due.
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