Section 15 of the Income-tax Act, 2025 charges salary to tax on whichever is earlier of due or receipt. It covers salary due but unpaid, salary paid before it fell due, and arrears not taxed in an earlier year. Partner's remuneration from a firm is not salary.
What section 15 does
Section 15 is the charging section for the salary head. It does not tell you what salary is — that is section 16 — it tells you when a receipt becomes taxable in your hands. The rule it applies is the one most salaried taxpayers already know as the due-or-receipt basis, whichever happens first.
The practical consequence is that your salary income for a tax year is not simply what hit your bank account. It is what became due to you in that year even if the employer did not pay it, plus anything the employer paid you ahead of time, plus arrears that never got taxed in an earlier year.
Section 15 corresponds to section 15 of the Income-tax Act, 1961 — one of the rare instances where the section number does not change at all. The drafting is tightened and the partner's-remuneration exclusion, which the old Act carried as an Explanation, is now a numbered sub-section.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 15 | Charge of salary on due or receipt basis, whichever is earlier | 15 |
| 15, Explanation 2 | Partner's salary/commission from a firm excluded from the salary head | 15(4) |
| 17(1) | Definition of what 'salary' includes | 16 |
| 17(2) | Definition of perquisite | 17 |
| 17(3) | Definition of profits in lieu of salary | 18 |
Section 15 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the three limbs of the charge
Salary is chargeable if it falls into any of three buckets. Clause (a) covers salary due from an employer in the tax year, whether paid or not — so an unpaid March salary is still taxed in that year. Clause (b) covers salary paid or allowed in the tax year though not due, which is how advance salary is caught. Clause (c) covers arrears of salary paid in the tax year, but only if they were not already charged to tax in an earlier year.
Sub-section (2) — a former employer still counts
For the purposes of sub-section (1), employer includes former employer. This is what brings a pension paid by an ex-employer, or arrears settled long after you left, squarely within the salary head rather than leaving them to the residuary head.
Sub-section (3) — no double taxation of advance salary
If salary paid in advance has already been included in your total income for a tax year, it is not included again when it later becomes due. This is the safeguard that makes clause (1)(b) workable — advance salary is taxed once, in the year of receipt.
Sub-section (4) — partner's remuneration is not salary
Any salary, bonus, commission or remuneration by whatever name called, due to or received by a partner of a firm from that firm, is not regarded as salary for this section. It remains business income in the partner's hands. The 1961 Act achieved the same result through an Explanation; the new Act states it as a sub-section, which makes it harder to miss.
Worked example
Take an employee whose employer runs into a cash crunch in tax year 2026-27.
| Item | Amount | Which tax year is it taxed in? |
|---|---|---|
| Salary for April 2026 to February 2027, paid on time | ₹11,00,000 | 2026-27 — due and paid |
| Salary for March 2027, due but paid only in June 2027 | ₹1,00,000 | 2026-27 — due basis under clause (1)(a), even though unpaid |
| Advance of two months' salary taken in January 2027 against 2027-28 | ₹2,00,000 | 2026-27 — receipt basis under clause (1)(b) |
| Arrears for 2024-25 settled in December 2026, never taxed earlier | ₹1,50,000 | 2026-27 — clause (1)(c); relief may be claimed under section 157 |
Salary chargeable under section 15 for tax year 2026-27 is therefore ₹15,50,000, not the ₹13,00,000 the bank statement shows. When the advance of ₹2,00,000 becomes due in 2027-28, sub-section (3) keeps it out of that year's income. And because the ₹1,50,000 of arrears relates to an earlier year, the employee can claim relief under section 157 — the successor to section 89, the provision behind Form 10E.
Compliance checklist and due dates
- Reconcile Form 16 to the due basis, not just to bank credits — an unpaid March salary still belongs to the year it fell due.
- Where arrears are received, compute relief under section 157 and file the supporting statement before filing the return under section 263.
- Advance salary already taxed once should be tracked, so it is not offered again when it becomes due.
- Partners drawing remuneration from a firm should report it as business income, not salary, and should not expect the section 19 standard deduction on it.
- Employers deduct tax on salary under section 392 (the successor to section 192), on an estimated basis for the year.
Common mistakes
- Treating Form 26AS or AIS credits as the complete measure of salary income — those follow payment and deduction, not the due basis.
- Offering the same advance salary twice: once on receipt and again when it becomes due. Sub-section (3) exists precisely to stop this.
- Claiming the standard deduction against partner's remuneration. Sub-section (4) puts it outside the salary head entirely.
- Assuming arrears are always taxed in the year they relate to. They are taxed in the year of receipt, with relief under section 157 to soften the rate impact.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.