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Govt to levy income-tax
on 40 pc pay arrears this year
New Delhi, September 04, 2008
The Government has said it would tax only 40 percent 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 on Wednesday.
A section of the media on Wednesday 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 percent of arrears
during the current financial year and the remaining amount in
the next financial year.
Government instructions issued on 30th August 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 percent 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.
The increased burden on the Centre would be Rs 22,131 crore in
2008-09 due to the increased payout. While the additional load
on the Union Budget would be Rs 15,717 crore, the Railway
Budget would take Rs 6,414 crore.
However, one-fifth to one-fourth of this amount is expected to
come back to the government exchequer in the form of personal
income-tax, depending on the slab that each employee would
fall in after the pay hike, sources said.
This means that Rs 4,426.2-5,532.75 crore would be added to
the central kitty.
The government has increased the income tax exemption limit
from Rs 1.10 lakh to Rs 1.50 lakh, in addition to
restructuring the slabs in this fiscal's budget.
The tax exemption limit for women assesses has been hiked from
Rs 1.45 lakh to Rs 1.80 lakh, while in case of senior citizens
it has been increased from Rs 1.95 lakh to Rs 2.25 lakh.
Though it is yet to be calculated as to how many of the 50
lakh government employees would still enjoy the tax exemption,
it is expected that many more would move to taxable income.
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