Income tax on salary

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 December 2014 Is employee liable to pay tax on salary which is not received due to default in payment by the employer ?

For example, annual salary of Mr.X is Rs.5 lacs, but he has actually received Rs.4.5 lacs as employer defaults in payment of remaining 50 thousand during the year.

Now my question is Mr. X is liable to pay tax on Rs.5 lacs or on Rs.4.5 lacs.

As per my view he is liable for 4.5 lacs only, am I correct ??

Thanks.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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02 December 2014 Salary is taxable on employee get right to get compensated or any amt received as salary whichever is earlier.
Both arrears and advances are covered under the definition of taxability of salary.

Therefore, you are incorrect and all Rs. 5 lacs will be taxable in that in which employee gets right to received.

Querist : Anonymous

Querist : Anonymous (Querist)

03 December 2014 In the cited case if it is certain that the employee Mr. X will not to receive the pending salary of Rs.50 thousand as company is shut down then ?? In that case what will be the taxable amount ??

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CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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03 December 2014 Even in case of arrears of salary it is taxable only once either on accrual basis or on receipt basis. If it is certain that Mr. X will not receive the pending salary then salary will be taxable only on the basis of actual receipt that is Rs. 4.5 lacs.

CA Kumar Mukesh

CA Kumar Mukesh (Expert)
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03 December 2014 You are telling a case out of one lacs.
can You please quote any case law over your reasoning.

My view is based on the section 17 of Income Tax Act 1961
Fuhrer, in case of Employer deny the contractual liability by refusing to pay salary to its employees, then employee has every right to go to Court of Law, for recovering of their claims.