![]() However, due to the late receipt of income, the Income Tax Department allows relaxation under Section 89(1) to save you from the additional tax burden. If your income includes dues from the past salary, you might be worried about paying extra tax on the total earnings. Income tax is levied on the total earnings in the financial year. Income tax on salary arrears and relaxation The due amount is paid later after salary restructuring in the form of salary arrears. Employees commonly receive arrears when they get a salary hike but get the updated salary in another month. All payments due since the first payment comes under the arrears. Introduction to salary arrearsĪrrears refer to overdue payments meant to be paid at the end of a specific period. This article talks about how salary arrears are calculated and various ways to save taxes on salary arrears. However, per the Income Tax Act, 1961, if an employee is granted an arrear of salary and tax is not charged in the previous tax cycle, it will be charged in the current year.įortunately, there are a few relaxations on income tax for salary arrears. It is eventually paid by the employer at some stage. This outstanding amount is called salary arrears. ![]() While they do their best to pay salaries regularly, an amount, especially after a hike, may sometimes remain unpaid and carried to the next year or salary cycle. ![]() ![]() It feels great to receive your salary arrears, but do you know it increases your tax liability?Īn employer is bounded by regulations when paying salaries to employees.
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