salary not received from employer

[Taranjeet Singh]

An employee has not received salary for the past 5 months in F.Y. 2015-16. He has interest income on FDR in the past years, which will continue in the current year also.

He has in the past filed his returns for salary received and interest received plus some small accrued interest as of march ending, for all past years.

Can he file the return for this year for the 7 months salary portion he received and the interest received and accrued on his FDR for this year.

What happens to the TDS deducted by employer, the employer has not paid TDS as it is not appearing in the 26 AS.

[Ganeshan Kalyani]

TDS is deductible when salary is paid to the employee. In this scenario as explained by you I am of the view that income tax return can be filed. Thanks.

[ROHAN THAKKAR]

Dear Sir,

As per section 15(a) and 15(b) of IT Act, 1961, salary is taxable on due or receipt basis, whichever is earlier.

Thus, because of above, irrespective of fact whether he has received salary or not, the employee has to file return for 12 months salary.

However, as per sec 192, the employer will deduct TDS only on Payment basis.

Thus, for the year 2015-16, if the employer has not deducted TDS, in such case, employee has to pay tax on full salary of 12 months.

In 2016-17, if the employer makes payment, then technically, TDS provisions will come. However, if the provisions of proviso to section 201 of the IT Act, 1961 is followed, then it will be fine if the employer does not deduct TDS because employee has paid tax on the salary income.

Rohan Thakkar

[KASTURI SETHI]

Nicely explained by both experts. It has enriched my knowledge.

AI Summary

Taxability of salary on due or receipt basis requires inclusion of full annual salary even if some months remain unpaid. Salary unpaid for part of a fiscal year is taxable to the employee on the due or receipt basis, requiring inclusion of the full twelve months' salary in that year's return. Employer TDS operates on the payment basis, so non-deduction in the year of accrual leaves the employee liable for tax; subsequent payment in a later year attracts TDS but may be addressed if the employee has already paid the tax on that salary.