Netting of recovery of pension related to previous years with commutation arrears paid during the current year, Income Tax

[MANIAN T V]

Excess paid pension related to previous years recovered during current year. I am a Retd Bank officer, retired in June 2013.As per the wage settlement reached between the united forum of bank employees/officers association and IBA( Indian Banks association) in May 2015 with retrospective effect from 01 Nov 2012, Pension of the officers retired on or after November 2012 was REDUCED( A Historical case). Difference in salary for 8 months related to FY 2013-14 was paid in my case in July 2015 and added to income for this FY 2015-16. Due to DA neutralization, pension after commutation was revised downwards (reduced)with retrospective effect Hence, difference in pension approx. ₹ 2600-00( in my case) per month from July 2013 to October 2015 was recovered.( Recovery was done like this, Arrears of difference in commutation (due to old basic pay & revised Basic pay) was credited to my SB account after deducting the recovery of pension for 27 months ).(i.e Recovery of pension was related to FY 2013-14 & FY 2014-15,FY 2015-16. which were already taxed by the employer were deducted from a non taxable of income of commutation arrears.). When I took up the case with HRM department I was replied as below: In respect of pension amount excess paid recovered, there is no provision in the Income Tax Act to consider it as deduction from the pension of the current year. However, any reduction of pension in respect of the current period ie., the net pension income is to be considered for tax computation. In respect of any pension excess paid in respect of any of the earlier years is equivalent to recovery of advances and hence, cannot be reduced from the current year's income. My doubt/question, How this recovery of pension related to FY 2013-14 & FY 2014-15 has to be taken while calculating Income Tax for FY 2015-16? Whether this recovery of pension related previous FY 2013-14 & FY 2014-15 can be deducted from the gross income by the tax payer at the time of filing return for FY 2015-16 as the employer has not considered as a deduction from the gross income of FY 2015-16, even though both Salary & Pension are at par as per Sec 17(1) of IT Act? Income Tax has already been charged/recovered at source for the difference amount of pension related to FY 2013-14 & FY 2014-15.( which is now recovered during FY 2015-16). Whether the assessee/tax payer can claim relief under Sec 89(1) for the recovery of pension related to FY 2013-14 & FY 2014-15? Whether the employer is supposed to furnish the details or furnish a certificate with break up for FY 2013-14 & FY 2014-15 to claim relief under 89(1) in Form 16 for FY 2015-16 as a note or as a separate certificate? Recovery of pension related to previous FY 2013-14 & FY 2014-15 were treated as pension chargeable to Income and TDS recovered. But at the time of recovery during FY 2015-16, it was treated as advance commutation paid, which was non taxable. I request Tax experts to guide me to claim relief for the Income Tax paid on the portion of pension related FY 2013-14 & FY 2014-15 by whatever name called (pension or advance commutation) I have read in this forum, the treatment of excess paid salary(related to previous financial years) in cases like salary paid by mistake, excess paid due to downgrading the basic pay with retrospective effect due to various reasons. I remember, it was mentioned that these recovery can be shown as deduction from the gross income of the current year. Why a similar treatment cannot be given to this recovery of pension also? I request TAX EXPERTS to guide me on the above, which will be helpful to many

Posts / Replies

[Ganeshan Kalyani]

The Income Tax slab and deduction, exemptions differs for different years. The pension paid excess in previous years now recovered cannot be made available as deduction in current year because of the aforesaid reasons. It is therefore seems suitable that refund should be claimed. This can be brought for discussion before the Authority during the time of your Income Tax assessment. If the amount involved in substantial, then I feel an CA or a consultant could help you better to take up the issue and resolve. Thanks.

[MANIAN T V]

Whether the employer will show this recovered pension amount in Form 16 or the employer is supposed to furnish a separate certificate of recovery with year wise break up, without which it will be difficult to claim the refund thru' revised return?

The employer has not furnished any details of recovery with year wise break up so far.

Pension recovery( for which Tax was already deducted in previous years) was netted with a non taxable commutation arrears.That is the issue now.

How to substantiate the recovery amount year wise in the absence of any particulars provided by the employer?

[Ganeshan Kalyani]

Sir,

The employer should show the amount of pension recovered in Form 16, which should help you to claim refund for respective years. You may request you employer accordingly. Thanks.

[MANIAN T V]

I do not found any specific column in Form 16 to mention the amount of income recovered related to the previous years. As Form 16 is menu driven, where this amount of recovery has to be mentioned. Whether a separate certificate with FY break up will be sufficient to file revised returns related to previous years and claim refund.

[KASTURI SETHI]

SH.MANIAN T V Ji,

I am also retd. Govt. Officer. Detailed reply given by Sh.Ganeshan Kalyani, Sir is very much correct and proper. I am of view that for more comprehensive and fool-proof reply, you will have to consult any Expert C.A. in person. Without examination of all the documents, reply on this forum will not be fool-proof.

This is my view and I am not expert in Income Tax.

[Ganeshan Kalyani]

Sri Kasturi Sir, I agree with your views. Only the practising CA or Consultant can help best to resolve the issue. Here study of documents and discussion with the Income Tax Authority is also required which an expert practising can guide better. Thanks.