
BASIS OF CHARGE 

Q) What does one mean by
the term ‘Basis of Charge’? Basis
of Charge of an Income let’s us know that on what grounds Income earned by a
person is chargeable to tax. It specifically defines whether Income so received
is tax chargeable on receipt basis or accrual basis, or in case of variations
in accounting method how tax should be charged. All five heads of Income have
different Basis of Charge which you will come to know as you surf through
each head of Income. Q) What is the Basis of Charge for Salary Income? Salary
Income is chargeable to tax on ‘DUE OR
RECEIPT BASIS WHICHEVER IS EARLIER’ Let’s
go through the following examples to gain more clarity on this rule: You being an employee of a MNC are faced with the following
alternative situations during the P.Y. 200910 (A.Y. 201011) 1) You
received your annual salary of Rs. 9,00,000/ due & receivable by you in
the previous year.  The
salary of Rs. 9,00,000/ will be chargeable to tax in P.Y. 200910 in your
hands. 2) An
Annual salary due to you of Rs. 9,00,000/ out of which only Rs. 5,50,000/
was received during the P.Y. 200910 and rest was received by you in the next P.Y.
i.e., 201011.  The
whole salary amount of Rs. 9,00,000/ will be chargeable to tax in your hands
in the P.Y. 200910 i.e., A.Y. 201011. The salary of Rs 3,50,000/ received in
P.Y. 201011 will not be chargeable to tax again in P.Y. 201011 i.e., A.Y.
201112
since it has already been taxed earlier. 3) Advance
salary received during the P.Y. 200910 pertaining to P.Y. 201011 of Rs.
2,50,000/.  The salary
received of Rs. 2, 50,000/ will be chargeable to tax in the P.Y. 200910
instead of P.Y. 201011 since the rule specifically says due or receipt
whichever is earlier, however it will not be charged to tax again in P.Y.
201011. 4) Arrears
of salary pertaining to P.Y. 200809 received in P.Y. 200910 amounting to Rs.
4,00,000/.  The
amount so received of Rs. 4,00,000/ will not be tax chargeable in your hands
in P.Y. 200910 since it must had been already taxed in your hands in P.Y.
200809, i.e., A.Y. 200910.

