Salary paid in advance and already assessed in the year of payment is
Ataxed again in the year it falls due
Btaxed at half rate when it falls due
Cnot taxed again when it falls due
Drefunded to the employee on assessment
Answer & Solution
Correct answer: C. not taxed again when it falls due
1. The earlier of due or receipt decides the year of charge.
2. Where salary paid in advance is assessed in the year of payment, that year has already taxed it.
3. It cannot subsequently be brought to tax in the year in which it becomes due.
4. The mirror rule applies to arrears: salary already assessed on due basis is not taxed again when paid.
5. Together these two rules prevent the same salary being taxed twice.
_Source: ICAI Income Tax Law, Ch3 'Heads of Income', Unit 1 'Salaries', section 1.2_
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