The relationship of payer and payee must be of employer and employee
for an income to be categorized as salary income.
For example: Salary
income of a Member of Parliament cannot be specified as salary, since it is
received from Government of India which is not his employer.
2. The Act makes no distinction between salary and wages, though generally
salary is paid for non-manual work and wages are paid for manual work.
3. Salary received from employer, whether one or more than one is included
in this head.
4. Salary is taxable either on due basis or receipt basis which ever matures
i) Due basis – when it is earned even if it is not received in the previous
ii) Receipt basis – when it is received even if it is not earned in the previous
iii) Arrears of salary- which were not due and received earlier are taxable
when due or received, which ever is earlier.
5. Compulsory deduction from salary such as employees’ contribution to
provident fund, deduction on account of medical scheme or staff welfare
scheme etc. are examples of instances of application of income. In these
cases, for computing total income, these deductions have to be added