Home Income Tax What is a Difference between Advance Salary and Advance against Salary?

What is a Difference between Advance Salary and Advance against Salary?

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What is a Difference between Advance Salary and Advance against Salary

People have no idea what salary is like and how Taxability of Salary is done. So, today we give you a complete overview of the Basis of Charge of Salary and its Taxability in this post. Here, we learn about the main Difference between Advance Salary and Advance against Salary and their Meaning.

Basis of Charge of Salary (Section 15)

Section 15 of Income Tax Act,1961 deals with the basis of charge of salary. Salary is chargeable to assess either on “Due Basis” or on “Receipt Basis”, whichever is earlier as per IT act.

However, where any salary paid in advance (Basic Salary, Advance Salary, Advance against Salary and Arrears of Salary) is assessed in the year of payment, it cannot be subsequently brought to tax in the year in which salary becomes due.

if the salary paid in arrears has already been assessed on due basis, the same cannot be taxed again when it is paid.

Advance Salary

Advance salary is taxable when it’s received by the employee regardless of the very fact whether it’s due or not.

It may so happen that when advance salary is included and charged during a particular previous year, the rate of tax at which the employee is assessed could also be higher than the normal rate of tax to which employee would have been assessed. Section 89(1) of Income tax act,1961 provides for relief in these types of cases.

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Difference between Advance Salary and Advance against Salary

Loan is different from salary. When an employee takes a loan from his employer, which is repayable in certain specified installments, the loan amount can’t be delivered to tax as salary of the employee.

In a similar way, advance against salary is different from advance salary. It’s an advance taken by the employee from his employer. This advance is usually adjusted with his salary over a specified period of time. It can’t be taxed as salary.

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