Deduction of tax at source from payments of second installment of arrears - Reg.


Government of India

Ministry of Finance

Department of Revenue


NewDelhi,Dated 31th August,2009.

Subject:- 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 matter regarding.

Under 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 2008-09The 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 propercredit 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.


dick said…
What about those whose income is exempted from tax - such as Gallantry holders of the "Chakra" series?
Anonymous said…
What about the employees who are not coming under tax bracket even after adding the arrears to the taxable salaries drawn during this year i.e from March, 2009 to August, 2009. Someone may please clarify.
vasudev said…
the order for release of 60% of arrears says that those desiring to deposit the arrears in GPF account will be encouraged.
can anyone clarify what is the encouragement? whether the arrears received if deposited in GPF account is waived from tax?
please clarify
Jaswinder Singh said…
No arrears deposited in PF will not be waived from tax.
NATHAN said…
since a person is depositing the 60% arrers of pay commission amount in gpf which is used by govt should be exempted from tax deduction the amoutn is used by govt will govt conside this
Unknown said…
Exempted Incomes will always be exempted without any link to 'Arrears'. Any contribution to GPF upto Rs One Lakh, including other investments under Sec 80C would not be taxed. Details of all such investments/ Contributions / Exemptions should be informed in writing to the Pension Disbursing Authority to enable them not to deduct tax at source, to the permitted extent while paying the arrears. So , wake up immediately as the payments would be made by 30 Sep 09. Income Tax would be deducted only if there is taxable income including arrears.
Krishnan said…
The income tax is calculated for the financial year and not in the middle of the year. But the anticipated income can be calculated in advance and the tax can be deduced at source monthly till the financial year end. Now to deduct the full tax at a time from 60% is against the rules. For example an employee avail 2/3 months leave on loss of pay the anticipated income changes. Moreover, the income tax comes on income. There may be answers that one can claim refund. We all know the delay taking place for refund and it will take minimum one and half years to get the refund. Therefore anticipated tax may be deducted at source ( from September to February fixing instalment) instead of deducting tax fully from 60% of arrears on 6th cpc.
Anonymous said…
Government shoule do something about the hike price of daily consumable items. kindly consider the matter
Mahesh said…
saigsolution said…
Every one has wrongly Interpreted the order. The order says only the Income Tax on arrears amount should be deducted at the time of giving arrears amount and rest of tax should be deducted as per normal proceedure. For all your it queries contact
Anonymous said…
The amount now paid belatedly should be apportioned to the earlier years actually due and income tax deducted accordingly
Ajay said…
What is the rule regarding saving details intimation to the office.Whether office is ready to accept the written things to them.
Eg.LIC premium for an employee is due in the month of Feb.Office is not calculating these thins and they are considering only PF, what they are done through office only.
clarify how we will fight for this injustice.
ASWAL said…
What about Section 89(1) relief?
Circular dt 31/08/2009 is silent about this aspect.IT Dep. should issue a clarification by giving direction to all DDOs to make TDS accordingly. Because now every employee is paying ITax and so that filing IT return.

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