Advance salary is taxable
Aonly when it actually falls due
Bin the year the employment ends
Conly if the employer claims it
Dwhen it is received by the employee
Answer & Solution
Correct answer: D. when it is received by the employee
1. Advance salary is received before it becomes due.
2. It is taxable when it is received by the employee, whether or not it is due.
3. This follows directly from the due or receipt, whichever is earlier, rule.
4. Here receipt is the earlier event, so receipt fixes the year of charge.
5. Waiting for it to fall due would contradict the basis of charge.
_Source: ICAI Income Tax Law, Ch3 'Heads of Income', Unit 1 'Salaries', section 1.2.1_
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