Leave

salary
Para 49.8
ofsalaryincome
of accrual [Sec.9(1)]
Place under the head""Salaris" is
ncosDect of deemed to
e ered in Indiawhich it accruesis accrueor arisrise at the
is rendered. Under place where the
deemed to section
sicerer or hayable alter the
accrue or arise in 9(1Xi), salary ini respect of
India, even if it is
paid contract of dia
or is is deemed to id outside
paid
a accrue in India, il itemployment
is
in India
comes to an end. Pension
paida eave salary paid abroad in paid in
respect of leave respect of services ndercd in India.
carned in India is rend
in India. deemed to accrueor
to the rule -
arise
Section9()(ii),
aEroeptiosoffthis se
this section, however,makes a
virtue salary paid by the Indian departure to the aforesaid
By .orarise in India Government to anIndian rule,
even if service is national is
1oaccrue.1ijd areapplicable only in rendered outside
India. deemed
respect of Deeming provisions o
paid/allowed by the Government salary and not in respect of
to Indian allowances and
tes are national
exempt under section working abroad as sucn
ns of section 10(7) [see para 50.5|
Theprovis (1(i)/(ii) are summarized below
servce is rendered). (i* is assumed
that salary is
where paid at the place
Who is employee Who is
employer Where service It is taxable in India
is
rendered

Salary Allowance/
1 Indian citizen (resident perquisite
Case Government
or non-resident) Outside India
of India Yes No
Case 2 Non-resident (but not
Any
covered by Case 1) Outside India No No
Case 3 Resident and ordinarily Any
resident (butother than Anywhere Yes Yes
Case 1)

ate
Na :Incase1,salary is taxable by virtue of
section
of section 10( 7. 9(! )(i)and allowanceand
as per the provisions perquisites arenot taxable

Tax treatment of different forms of salary

income
49. Basic salary anddearness pay are
charged to tax undersection 15. Tax
treatment of other
receiptsisgiven below:
49.1 Advance salary [Sec. -
17(1)(v)] Advance salary is taxable on
assessment year relevant tothe receipt basis, in the
previous year in which it is received,
incidence of taxin the hands the irrespective of the
of employee. Therecipientcan, however,claim relief in termns
ofsection89(1) read with rule 21A
[see para 60.1]. A loan taken from
of this section. employer is outside the
scope

49.2 t
Arrear salary - is taxable on
receipt basis, if the same has not been
earlier on due basis. Inthis case also subjected to tax
recipient can claim relief under section
rule 21A [seepara 60.1 89(1) read with

49.3 Leave salary- As per service rules,an

to earn leave in the first instance and
employeegets differentleaves. An employeehas
only when he has leave to his credit, he can
leave. If a leave apply for
(standing to his credit) is not taken within a
year, as per the service rules it
may lapse orit may be encashed orit may be accumulated. The accumulated
leaves standing
the credit of an employee may be availed by the
to

to
employeeduring his service time or,
subject service rules,such leaves may be encashed at the time of
retirement or leaving the
Job. Encashmentof leave by surrendering leave standing to one's credit is known as
"leave
salary".

Tax Itis given below:

treatment-
Leave encashment during continuity of employment -If leave encashment is received
aurning the continuity of employment,it is
chargeable to tax, irrespective of the fact whether
employee is in Government service orprivate service.The employeecan however,claim
relief in terms
of section 89(1).