Sixth Pay Commission: Salary arrears paid in FY09 to be taxed
Clearing doubts on the tax treatment of arrears given to Central government employees following the Sixth Pay Commission, the finance ministry on Tuesday clarified that income tax would be deducted only from the arrears of salary actually paid during 2008-09. “On the balance, tax would be deducted during the financial year in which these pay arrears are actually paid,” as per an official release.
Section 192 of Income Tax Act, 1961 (which deals with tax deduction at source) 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, the release added.
Going one step ahead of the recommendations of the Pay Commission, the government had last month announced an average increase of 21% in the wages of its employees. It had also decided to pay 40% arrears of their increased salaries this year while the balance 60% will be paid in the next fiscal to reduce the burden on the exchequer.
Source: http://www.financialexpress.com
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