6th Pay Commission: Govt. to tax only 40 percent of arrears

By Khabrein.Info Correspondent,

New Delhi, Sept. 4, 2008: Finally there is good news for 5.5 million central government employees. This year the government will tax only 40 percent of arrears that one would be getting as per 6th Pay Commission recommendations.

Earlier there were reports that government had decided to tax the whole arrear despite the fact that only 40 percent of the arrears was being paid this year.

The news had shattered many a hopes of government employees, but now they are a bit optimistic that they may well at last be able to spend a part of their arrears amount they would be handed over as part of sixth pay commission recommendations.

The government had divided arrears in two installments with central government employees getting 40 percent amount of the arrears this year and the rest 60 percent next year.

Sources in the finance ministry say that the ministry may not deviate from the general practice where tax is charged only on an income from that year and not what he would get next 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.

Had the government decided to go this way it would have wiped out almost the entire amount of 40% arrears to be paid to central government employees this year. Senior bureaucrats will suffer the most as their tax would be topped with a surcharge of 10%, applicable on an income of Rs 10 lakh and above.

The financial implication of Pay Commission on the General Budget would be Rs 15,717 crore and Rs 6414 crore on Railway Budget in 2008-09. The government’s present salary bill is over Rs 70,000 crore and the pension bill is over Rs 30,000 crore.

Courtesy: www.khabrein.info