Salaried employee? Know how Income-Tax Bill 2025 defines salary income for taxation

The draft Income-Tax Bill 2025 has proposed to simplify the meaning of incomes to be taxed under the head "Salaries".

It is expected that the draft bill will be tabled in the Parliament soon. However, it may undergo revisions before fully replacing the Income-tax Act, 1961, which is likely to happen by next year.

1. Any income earned by taxpayers are taxed under different heads of incomes. In the new bill, there are five heads of incomes, including salary. Other heads are income from house property, profits and gains of business or profession, capital gains, and income from other sources.

2. The new bill proposes to replace the concepts of assessment year and previous year with tax year for the 12-month period between April and March.

What the new income-tax bill says about salary

As per the new income tax bill, the following incomes will be taxed under the head salaries:

• Any salary due from an employer, including former employer, to an assessee in the tax year, whether paid or not.
• Any salary paid or allowed to him in the tax year by or on behalf of an employer though not due or before it became due to him
• Any arrears of salary paid or allowed to him in the tax year by or on behalf of an employer, if not charged to income-tax for any earlier tax year.

List of incomes to be considered as salary in the new income-tax bill 2025

The bill says that if salary is paid in advance and included in the total income of any person for any tax year, it will not be included again in the total income when the when the salary actually becomes due.

Furthermore, any salary, bonus, commission or remuneration due to, or received by, a partner of a firm from the firm will not be considered for tax calculation under the head "Salary".

Further, there might be some changes in the draft bill in the course of its passage in the Parliament.