ES वेतन से आपका क्या आशय है? वेतन शीर्षक के तहत अग्रिम वेतन एवं बकाया वेतन को समझाइए।

 Meaning of Salary and Its Components

1. Definition of Salary (Section 17, Income Tax Act, 1961)

• Salary refers to the compensation paid by an employer to an employee for services rendered.
• It includes wages, pensions, gratuities, allowances, commissions, perquisites, and bonuses.
• Salary is taxable under the head "Income from Salary" in the hands of the employee.

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2. Components of Salary

Salary includes the following:
✔ Basic Salary – Fixed amount paid monthly.
✔ Dearness Allowance (DA) – Paid to compensate for inflation.
✔ House Rent Allowance (HRA) – Given for accommodation expenses.
✔ Leave Encashment – Payment for unused leave.
✔ Bonus and Incentives – Extra earnings based on performance.
✔ Perquisites – Non-monetary benefits (e.g., car, rent-free accommodation).
✔ Retirement Benefits – Pension, gratuity, provident fund.

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3. Advance Salary and Arrears of Salary

A. Advance Salary (Section 17(1)(v))

• Advance salary refers to the salary received by an employee before it becomes due.
• It is taxable in the year of receipt, even if it relates to a future period.
• Example: An employee receives his March salary in February; it is taxable in February itself.

Tax Treatment:

• Fully taxable in the year it is received.
• No separate deduction allowed.
• Relief under Section 89(1) may be claimed if the advance salary causes higher tax liability.

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B. Arrears of Salary (Section 17(1)(iv))

• Arrears of salary are payments due for a past period but received later.
• They arise due to salary revisions, delayed increments, or retrospective pay hikes.
• Example: If an employee’s salary is revised from ₹50,000 to ₹60,000 per month retrospectively from January, but he receives the difference in April, the extra ₹10,000 per month for January-March is arrears.

Tax Treatment:

• Taxable in the year of receipt, even if it relates to past years.
• Relief under Section 89(1) can be claimed to reduce the tax burden due to past income being taxed in one year.

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4. Difference Between Advance Salary and Arrears of Salary

Basis	Advance Salary	Arrears of Salary
Meaning	Salary received before it becomes due.	Salary due for earlier periods but received later.
Taxability	Taxed in the year of receipt.	Taxed in the year of receipt, even if it belongs to past years.
Reason	Employer pays in advance.	Delay in payment due to salary revision, promotion, or government orders.
Section under Income Tax Act	Section 17(1)(v)	Section 17(1)(iv)
Eligibility for Section 89(1) Relief	Yes, if it results in higher tax liability.	Yes, since it belongs to past years.

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5. Conclusion

• Advance salary is received before it is due, whereas arrears are received for a past period due to delays.
• Both are taxable in the year of receipt, but relief under Section 89(1) can be claimed to reduce excess tax burden.