Income Tax
Ashok Kumar Sharma
(Querist) 01 March 2011
This query is : Resolved
Dear Sir,
Please comment on following question.
"QUESTION: I am an officer of a public sector bank. I am getting an amount of about Rs.2.80 lakh as arrears on pay revision from which Rs.40,000 is deducted towards provident fund contribution.
Since I am also using the occasion for availing myself of the option to join the pension scheme, an amount of Rs.1 lakh is deducted from my arrears as contribution to the corpus fund as a condition for availing the option. I am worried whether my employer would consider the gross arrears as reduced only by provident fund contribution under Sec. 80C and deduct tax from Rs.2.40 lakh as my income liable for tax deduction at source.
Since I am not receiving the amount of Rs.1 lakh which is retained towards corpus and in fact I would not receive any part of the corpus except for pension on which I will be paying tax, only the net arrears should be taken into consideration. I would like to be advised whether this is a correct understanding.
I have, meanwhile, addressed a letter to the Income-tax Officer/ Public Relation Officer for a clarification in this regard in order to be able to convince the employer, if he wants to take a line of abundant caution and deduct tax from the gross salary."
Guest
(Expert) 02 March 2011
Section 89(1) of the Income Tax Act provides relief to employees receiving salary in arrear.
Relief u/s 89(1) is available to an employee when he receives salary in advance or in arrear or when in one financial year, he receives salary of more than 12 months, or receives 'profit in lieu of salary' covered u/s 17(3). W.e.f. 1.6.89 89(1) relief can be granted at the time of TDS by employers in the following conditions :
(1) If the employee is a Government Servant.
(2) He is employee in a
(a) PSU,
(b) Company,
(c) Co-operative Society,
(d) Local Authority,
(e) University,
(f) Institution or Body.
The employee may furnish to the DDO or the person responsible for making payment such particulars in Form 10E (read with Rule 21 AA) which should be duly verified by him. Thereupon the DDO/Person responsible for making payment is required to compute the relief u/s 89(1) on the basis of such particulars and take into account this relief while making tax deduction u/s 192. In case of an employee of category other than the stated above, such relief can only be allowed by the Assessing Officer.
PS Dhingra
Chief Executive Officer
Dhingra Group of Management & Vigilance Consultants
New Delhi-110089
Mobile: 09968076381
[dcgroup1962@gmail.com]
soumitra basu
(Expert) 04 March 2011
I am sorry your contention is not tenable. Gross Arrear shall be taken into accout for the purpose of calculating TDS.
