Only 40 percent Arrears of Sixth Pay commission will be taxed

Government today said it would tax only 40
per cent of salary arrears to be paid to central government employees
in the current fiscal on implementation of Sixth Pay Commission
recommendations.Generally speaking income earned in a year is taxed in that particular year, official sources said.



A section of the media today reported that the entire amount of arrears would attract tax this fiscal.As per the notification issued by the government last month,
central government employees will get 40 per cent of arrears during the
current financial year and the remaining amount in the next financial
year.


Government instructions issued on August 30, 2008, regarding
fixation of pay and payment arrears consequent to implementation of the
Sixth Central Pay Commission recommendations clearly states that in
authorising the arrears income tax as due may also be deducted and
credited to the government.The arrears with effect from January 2006 would cost Rs 29,373
crore. Of the arrears, 40 per cent would be paid during the current
year to the 50 lakh employees of the central government.


The revised pay scales will add Rs 4,500-5,500 crore to the
government exchequer this fiscal in the form of personal income tax.Besides, some money would also come through indirect taxes as some
of the increased pay would go into buying products and services,
official sources said here