Income Tax: Pay Commission

Because of Sixth Pay Commission report implementation, a lot of government and PSU employees on India are getting substantial backwages. This lumpsum payment has resulted in a substantial tax payout for even the lowest paid employees. Not only now these individuals fall under the higher tax slabs, but most of the officers need to pay a surcharge on their income tax (which typically was paid only by the highest paid private sector employees)

However, I was talking to my tax consultant and he said that if an individual has preserved all his tax papers, then there is a way out.
Pay Commission Arrears are payouts of the income withheld by the employer (Government). Hence they are technically income generated in the past years. Hence the individuals can submit a revised income tax documents and correct (increase) their salary in the previous years to reflect the new pay commission pay scales. Doing so they can avoid landing up in the highest tax slab for the financial year 2008-2009.

More details about the Sixth Pay Commission and official notifications/circulars on the same can be found here.

PS: Please consult your tax consultant for further details.

5 replies on “Income Tax: Pay Commission”

but ankur
this is not usa and we have the most at least one of the most repressive one sided tax systems geared solely towards the hinet taxpayers and govt
because both partys have capacity to litigate

and us allows revising returns at no cost for last 3yrs and even claiming refunds

not in india we can only revise one yr or max two yrs ago and dont talk about getting a refund
even in a case u should get a refund u have to pay speed money at 10%

I know indian income tax rules leaves a lot to be desired… but still this provision in pay commission implementation is correct.. and should be a big boom for government employees..

btw why don’t u write an article on the hong kong report about Indian beureucrats being the most inefficient in the world

This is only a solution for those who land in the highest tax bracket due to arrears. For them filing a revised return for the previous years may be advantageous. However for those already in the highest bracket, it is better to show it as current income as the tax rates and slabs are more favourable for 2008-2009 than for the previous years.

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