Salary" is the remuneration received by or accruing periodically to an individual for service rendered as a result of expressed or implied contract. Compensation or remuneration even in the following circumstances is chargeable to Income-tax under the head 'Salaries': - a) When due from the former employer or present employer in the previous year, whether paid or not. b) When paid or allowed in the previous year, by or on behalf of a former employer or present employer, though not due or before it becomes due. c) When arrears of salary are paid in the previous year by or on behalf of a former employer or present employer, if not charged to tax in the period to which it relates. It is, therefore, clear that apart from current years salary, even advance salary and/or arrears of salary may be taxed in the year of receipt. More specifically and elaborately, the Income-tax Act has stipulated that salary includes :- a) Salary, including advance/arrears of salary; b) Wages; c) Fees; d) Commission; e) Pension; f) Annuity; g) Perquisite; Receipts from Provident Fund chargeable to tax; Profit in lieu of or in addition to salary or wages; Gratuity; Contribution of employer to Recognised Provident Fund in excess of prescribed limit; Interest on credit balance of Recognised Provident Fund in excess of notified rates; i) Encashment of leave.definition of 'salary' is inclusive and not exclusive.
