I am a state government employee serving in Judicial department. Our salary for the month of march will be received during April every year and our officials are going to submit statement of income-tax particulars in February salary bill and submit returns for the financial period from 1.3.2007 to 29.2.2008. Whether the Form No.16 is to be issued for the period 1.3.2007 to 29.2.2008 or 1.4.2007 to 31.3.2008. Kindly clarify Prasad , Chikkmaglur

Income from salary is taxable on due basis or on receipt basis, whichever is earlier. The salary for the month of March in case of government , many public sector employees and even private companies falls due in next month that is April and is also disbursed in the month of April. This is due to accounting of salary expense by respective employers ,typical of government employers .So, the salary for March 2008 , fallen due and received in April 2008 becomes taxable in FY 2008—09 and not 2007-08. Accordingly, for the year FY 2007-08, salary due and received during the year starts from March 2007 to February 2008 . That’s why Form 16 issued by the employer is for period 1.3.2007 to 29.2.2008. If the employer accounts for salary of March making it due in month of March only , even if it is disbursed in the month of April ,the taxable salary will be computed upto March on due basis as it happened earlier than receipt of salary.