Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: Central Excise rule to resale the machines to a new company :: form 3cd :: TDS :: VAT Audit :: VAT RATES :: empanelment :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: cpt :: list of goods taxed at 4% :: articles on VAT and GST in India
« News Headlines »
 Draft Rules for prescribing the method of valuation of fair market value in respect of the trust or the institution-Chapter XII-EB of the Income-tax Act, 1961- reg.
 India is moving towards a flawed GST
 ICAI to organise two-day international conference in Hyderabad
 Here's how to calculate tax payable on your capital gains
 Income Tax calculations for the financial year 2016-17
 CPE Events 17 October - 22 October 2016
 High Court raps I-T Department for wrong tax demand
  CBDT signs 5 advance pricing pacts with Indian taxpayers
 Finance ministry warns tax officials of action against GST protest
 Big changes for small units under GST
 Parliament’s winter session to begin on November 16 to expedite GST rollout

Clarifications on taxability of wage arrears required
September, 09th 2008

The Central government had announced wage revision for the government employees recently. As a result, the employees expect to receive the arrears of salary (the increased wages) shortly. It is expected that a part of this increase would be paid in the current financial year and the balance may be paid in the next financial year. An issue arises as to the taxability of the income likely to be received by the employees.

The income chargeable to tax under the head salaries includes:

Salary due from an employer in the financial year, whether paid or not; salary paid or allowed to an employee in a financial year, even though not due; any arrears of salary paid or allowed to an employee in a financial year.

Therefore, an issue arises whether only the partial income that is received in the current financial year would be liable to tax or whether the entire income which the employee is likely to receive in the current financial year and the next financial year would be liable to tax now.

In this context, it is important to note the provisions of Section 192 of the Income-tax Act, 1961 (the Act), which specify the deduction of tax on salary by the employer. As per these provisions, an employer responsible for paying salary shall at the time of payment deduct income tax on the amount payable to the employee. It is pertinent to note that employer is required to deduct tax only at the time of payment of salary. Therefore, if no payment is made, no tax is required to be deducted by the employer.

By implication, if only partial payment is made in current financial year then the government is required to withhold tax only in respect of part amount paid in the current financial year.

However, an issue still remains that even if the balance portion which is not paid by the government and on which no tax is deducted, whether the said amount would still be liable to tax in the hands of the employees in the current financial year. This issue requires deliberations as to whether the phrase allowed to would cover the payment which is yet to be made to the employees and hence this requires further clarifications from the government.

It is also important to note that government employees are also entitled to relief u/s 89 in respect of salaries received in arrears in any one financial year which relates to earlier financial years. Briefly, relief is calculated by spreading the arrears over the past years to which they pertain i.e., the tax payer can get the benefit of relief at the time of the deduction of tax at source by requesting his employer concerned.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Content Management System development CMS development Content Management Solutions CMS Solutions Content Management Services CMS Services CMS Software

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions