For those who got 6th PC arrears ** *
Tax on pay commission arrears >From following two circulars, the pay commission arrears will not come under relief to submit revised return to take relief as accrued income during financial years ending 31 mar 06, 31 mar 07, 31 mar 08. However, we can check with CAs and PRO of IT Deptt regarding this. CLARIFICATION REGARDING TDS OF ARREARS OF SALARY PAID TO GOVERNMENT SERVANTS ON ACCOUNT OF THE IMPLEMENTATION OF THE RECOMMENDATIONS OF SIXTH PAY COMMISSION CIRCULAR NO. 9/2008, DATED 29-9-2008 The Implementation Cell of the Department of Expenditure, Ministry of Finance vide its Office Order F. No. 1/1/2008-IC, dated 30th August, 2008 has stated at Para 2(v) Bills may be drawn separately in respect of the arrears of pay and allowances for the period from January 1, 2006 to August 31, 2008. The aggregate arrears, computed after deduction of subscription at enhanced rates of GPF and NPS with reference to the revised pay, may be paid in two instalments, the first instalment being restricted to 40 per cent of the aggregate arrears. DDOs/PAOs will ensure that action is taken simultaneously in regard to Governments contribution towards enhanced subscription. Orders in regard to the payment of the second instalment of arrears will be issued separately. A number of representations have been received by CBDT seeking clarification as to whether TDS need to be deducted on 40 per cent of arrears to be paid during 2008-09 or on the entire arrears payable to the Government servant. The matter has been examined by the Board; the issue is clarified as given below. Salary is as defined under section 15 of Income-tax Act, 1961 : (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year. 2. It is clear from the Office Memorandum issued by the Department of Expenditure that 60 per cent of the pay arrears neither fall in the category of due nor are allowed. Moreover, section 192 of Income-tax Act, 1961, inter alia, requires any person responsible for paying any income chargeable under the head Salaries to deduct income-tax on the amount payable at the stipulated rate at the time of payment. Therefore it is clarified that income-tax at source would be deducted under section 192 only from the arrears of salary actually paid during financial year 2008-09. On the balance, tax would be deducted during the financial year in which these pay arrears are actually paid. *** * * * * *CLARIFICATION REGARDING DEDUCTION OF TAX AT SOURCE FROM PAYMENTS OF SECOND INSTALLMENT OF ARREARS TO GOVERNMENT EMPLOYEES ON ACCOUNT OF IMPLEMENTATION OF SIXTH CENTRAL PAY COMMISSION'S RECOMMENDATIONS*** *CIRCULAR NO. 6/2009, DATED 31-8-2009* * * *U*nder the provisions of Section 192 of the Income-tax Act, an employer is required to deduct tax at source from any payments in the nature of salary, which inter alia also includes any arrear payments. The Implementation Cell of the Department of Expenditure, Govt of India, vide its Office Order dated 30th Aug' 08 had stated that 40% of the aggregate arrear (first installment of arrears) would be payable during FY 2008-09. In Circular No. 09/2008 dated 29th Sept. 2008 issued from this office it was stated that during 2008-09 the tax has to be deducted at source on this 40% of aggregate arrear during FY 2008-09. The OM,F.No-1//1/2008-IC, of the Implementation Cell of the Department of Expenditure, Govt of India, vide its order dated 25th August, 2009 has stated that the remaining 60% of the aggregate arrear ( second installment of arrears) would be paid to the concerned Government servants during FY 2009-10. Such arrangements could be followed by State Governments also. In this regard, all the DDOs and PAOs as the case may be, in the Central/State Government and various organizations under them are advised to compute the correct tax liability of every employee on second installment of arrears drawn by him and immediately recover the full tax liability along with education cess thereon at the rates in force. The deduction of tax at source on such arrear payment should not be deferred in any circumstance. They should further ensure that the tax so recovered is paid to the account of Central Government account immediately as per the Income Tax Rules, 1962. The DDOs/PAOs are further advised that they should ensure that the PAN details of the deductees (recipient of arrears) are correctly quoted in the relevant quarterly e-TDS returns filed by them so that the Government Servants get proper credit of their tax deducted in their respective income tax returns. DDOs/PAOs who fail to comply with the provisions of Section 192 of the Income-tax Act, 1961 would be liable to pay interest under section 201(1)/(1A) of Income Tax Act along with other penal consequences. * *
