TDS only on arrears of salary actually paid during FY 2008-09

TDS only on arrears of salary actually paid during FY 2008-09
October, 01st 2008
TDS only on arrears of salary actually paid during FY 2008-09
No. 402/92/2006-MC (46 of 2008)
Government of India/ Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, the 30th September 2008
Clarification regarding tax deduction at source on arrears of salary paid to government servants on account of implementation of the recommendations of Sixth Central Pay Commission
The Implementation Cell of the Department of Expenditure, Ministry of Finance vide its Office Order F. No. 1/1/2008-IC dated 30th August, 2008 has stated at Para 2(v)
“Bills may be drawn separately in respect of the arrears of pay and allowances for the period from January 1, 2006 to August 31, 2008. The aggregate arrears, computed after deduction of subscription at enhanced rates of GPF and NPS with reference to the revised pay, may be paid in two installments, the first installment being restricted to 40% of the aggregate arrears. DDOs/PAOs will ensure that action is taken simultaneously in regard to Government’s contribution towards enhanced subscription. Orders in regard to the payment of the second installment of arrears will be issued separately.”
2. A number of representations have been received by Central Board of Direct Taxes(CBDT) seeking clarification as to whether TDS need to be deducted on 40% of arrear to be paid during 2008-09 or on the entire arrear payable to the government servant. The matter has been examined by the CBDT and the issue is clarified as under:-
Salary is as defined under Section 15 of Income Tax Act, 1961:-
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
3. It is clear from the Office Memorandum issued by the Department of Expenditure that 60% of the pay arrears neither fall in the category of due nor are allowed. Moreover, Section 192 of Income Tax Act’61, inter alia, requires any person responsible for paying any income chargeable under the head “Salaries” to deduct income tax on the amount payable at the stipulated rate at the time of payment. Therefore it is clarified that income tax at source would be deducted u/s 192 only from the arrears of salary actually paid during FY 2008-09. On the balance, tax would be deducted during the financial year in which these pay arrears are actually paid.
4. The above clarification has been issued by the CBDT vide Circular No.9/2008 [F.No.275/192/2008-IT(B)] dated 29th September, 2008.

'If it is creamier after Rs 4.5 lakh, then raise tax limit to Rs 4.5 lakh'

'If it is creamier after Rs 4.5 lakh, then raise tax limit to Rs 4.5 lakh'
October, 04th 2008
Ashoka Kumar Thakur, a lawyer and a petitioner in the Supreme Court case against the 27 per cent OBC quota in educational institutions, says that the increase in the income ceiling for creamy layer would hurt the poor among the OBC most.
Your petition had sought exclusion of the creamy layer from the OBC quota. What do you think of the increase in the cut-off in income ceiling of creamy layer?
It de facto means inclusion of the creamy layer. How many people earn Rs 4.5 lakh a year? The decision would hurt the poor among the OBC most and almost nullify the benefits of quota for them as the well-to-do among them grabs all.
Will the Supreme Court look at it as a contempt of its judgement?
It dilutes the whole spirit of the ruling. However, the government has every right to decide income limits for the poor and rich. I don’t think the court would say anything. I had asked so-called OBC leaders like Lalu Prasad and others if they needed quotas. They need it just for the votes.
What do you propose to do now?
I had agitated against the inclusion of creamy layer in OBC quotas earlier when Uttar Pradesh, Bihar and later Tamil Nadu and Kerala tried to open quota to all. I still believe that the benefits should reach only the deserving and not spread thin to all and sundry. We will examine the decision and see what can be done.
May be the limit of Rs 4.5 lakh would look all right after a few years?
Why then is our income-tax ceiling less than Rs 2.5 lakh? Why don’t they (the government) raise it to Rs 4.5 lakh if the creamy layer starts there?
What would be the increase in the number of beneficiaries after this change in the income limit?
I can only say that everyone except the poor among the OBC would benefit now. I have always believed that reservation is a churning and not the permanent solution. Unless poverty and illiteracy is not removed, the poor among the OBC will never be able to make use of these quotas.

LAW SOON TO PERMIT LIMITED LIABILITY PARTNERSHIPS

A law will soon be enacted to permit limited liability partnerships for professions like chartered accountancy, Prime Minister Manmohan Singh said Tuesday, even as he emphasised on good corporate governance for India Inc to compete globally.
“A law on limited liability partnership is on the anvil,” the prime minister told the diamond jubilee celebrations of the Institute of Chartered Accountants of India (ICAI) here.
“This would help in the consolidation and growth of small firms and promote multi-disciplinary practices in line with the evolving global trends,” the prime minister added.
Unlike public and private limited companies, India at present does not permit limited liability clause for partnership firms, as a result of which all its partners are jointly and severally liable in the event of losses.
Even the personal assets of a partner and his immediate family can be used to settle debts and pay off creditors in the event of loss. This apart, chartered accountancy firms cannot float private or public limited companies.
He also said the Chartered Accountants Act of 1949 will be amended and invited suggestions in this regard from the institute, whose membership has grown from 1,700 professionals in 1949 to over 150,000 today.
According to the prime minister, in various public discourses concerning the way Indian companies had been functioning, not much attention was being paid to corporate governance.
“Unless Indian firms come to be recognised worldwide for good corporate governance, they will not be able to compete globally in an increasingly inter-dependent integrated world,” he said.
“In the era of protectionism, few bothered about corporate governance and transparency in accounting and in management. Such laxity, however, is no longer possible. Shareholder democracy has come to stay,” he added.In this regard, the prime minister said chartered accountants were the watchdogs of this new corporate world that is full of opportunities, but also not without challenges.
The prime minister also said that while governance was being decentralised with more administrative powers to the village-level bodies, also called Panchayati Raj institutions, there was an equal need to ensure proper utilisation of funds.“A proper accounting system for funds received and spent by Panchayati Raj institutions will be critical to making this innovative experiment in decentralisation a success,” he said.
“With the presence of chartered accountants even in the remotest part of our country, you can also facilitate financial inclusion and access to finance for the rural poor, through micro finance and other innovative measures.”