Worldwide lawmakers have accepted that Indian taxation law is very difficult to understand. I will be sharing with you a little but 100% correct knowledge of salary taxation as per Indian Taxation Law.
This is not a maze, It is beautifully designed with logic, on an independent approach to being an employee and employer. If you are studying any topic or eager to know about it, this is important to understand its root, if you don’t do it then you might fall into chaos.
WHEN DOES IT APPLY? WHAT IS SALARY TAXATION
It is very easy to understand, but very complicated in-depth “Hey when is salary get taxed? when you get SALARY”. NOW, THE POINT IS, When will you say that it is my salary, and salary taxation will apply?… let’s understand by this example and you tell me if this is salary, yes /no:-
- A partner receives remmunaration from his firm.
- A director receive comission apart from his monthly salary.
- An organisation pays allowances to its employees for specefic purpuses.
- A partener is paying salary to its partener.
- Employees of the State and Center government.
- An employer paying salary to its employees.
There are thousands of examples you can set for this purpose and still get confused that it will be taxed under salary taxation or not. HERE IS THE ANSWER, AS PER SECTION 15(1) OF INCOME TAX ACT, any payment received by the receiver from the payer will be called salary only if the relationship between them consists of the relationship of EMPLOYER AND EMPLOYEE.
SALARY becomes taxable on a due or receipt basis whichever is earlier, s