Clarification regarding deduction of tax from payments of additional pay, allowances and arrears to Central Government employees following the notification based on recommendations of the 5th Pay Commission--Regarding - Income Tax - 756/1997

Clarification regarding deduction of tax from payments of additional pay, allowances and arrears to Central Government employees following the notification based on recommendations of the 5th Pay Commission--Regarding Circular 756 Dated 10/10/1997 The Central Government has recently notified* new scales of pay and allowances for different categories of Government employees based on the recommendations of the 5th Pay Commission. In addition, the employees will be entitled to substantial amounts of arrears. As a result of this increase many employees whose incomes according to the old pay scales were below the taxable limit would now enter the tax net. Many other employees would move to higher brackets for application of the tax rates. 2. As per section 192 of the Income-tax Act, 1961, the person responsible for paying any income under the head "Salaries" is required, at the time of payment, to deduct income-tax on the amount payable, at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee for that financial year. 3. All DDOs must, therefore, ensure that proper and adequate tax is deducted from the disbursement to employees of not only additional pay and allowances but also of arrears payable to Central Government employees as a result of the implementation of the revised pay scales. (Sd.) Anjani Kumar, Director (Budget). [F. No. 275/192/97-IT(B)]