INCOME TAX

Taxability of second instalment of arrears from the implementation of the recommendations of the Sixth Pay Commission in the financial year 2008-09

 Instruction F.No. 173/163/2008/IT(A-1)

Dated 26-6-2009

Consequent to the acceptance of the recommendations of the Sixth Pay Commission, the Department of Expenditure, vide its O.M.F.No.1/1/2008-IC dated 30-8-2008 issued an instruction that the first instalment of the salary arrears, amounting to 40% of the total arrears would be paid in the financial year 2008-09, and that separate orders will be issued in respect of payment of second instalment of salary arrears.

2. The Board has considered the question of taxability of the second instalment of salary arrears in the financial year 2008-09, i.e., the assessment year 2009-10. Section 15(1)(c) of the Income-tax Act, 1961, provides that arrears of salary shall be chargeable to tax in the previous year in which they are paid or allowed. It has accordingly been decided that the second instalment of salary arrears, comprising of 60%, arrears of salary, cannot to be brought to tax in the assessment year 2009-10 as the arrears had neither been paid nor allowed up to March 31, 2009.

 This may be brought to the notice of all officers of your charge.