Tax treatment of arrears received &tds claim

If college has not made TDS the assessee will not be asked to pay penalty and interest.

All the payment even paid during contract period may be  taken as salary and claim u/s 89 may be made by filing return. 

If college wants to make TDS they can do it after treatig all the payments as salary and allowing claim u/s 89.

i have one confusion before answering your query. is tds under 194j for 2005 to 2011 to be deducted on arrear amt????.. if answer is yes, then this tds will be treated for current year and arrear income for period 2005 to 2011 will be treated as income of current year as it cant be treated as salary arrear. so i guess you wont be having any problem now.

Thanks for your replies Seetharaman & Tribhuvan.Pardon me for not able to give arrears related to relevant year for calculation but note that Income distribution after including arrears is in such a way that Avg income for period 2005-2010 will be around 40000 to 50000 after including arrears(i.e Income for year around RS 15000 & arrears around RS 30000 to Rs 35000)&for remaining period(2011-2013) Income for the year is around Rs 4 lac & arrears will be around Rs 3 lakhs. My basic objective behind query is to save the tax payable therefore thinking of alternatives.

@ T A Singh your doubt is correct that is my main confusion also.So my main query is can we treat Income during contract period (2005-2010) as relating to professional work or this Income will be regarded as salary as per view of Seetharaman which primafacie looks correct.

Other query is in calculating relief u/s 89 while calculating tax for relevant year after including arrears can we claim/explore deductions u/s 80C which are on paid basis(Actually paid like Tution fees) as on date?

Thanks & Regards

Deepak Ekbote

i cant support the answer that arrear received for period 2005 to 2011 to be treated as salary arrear. since the person was employed on contract basis and also received payment accordingly, then how can one treat as amount received in arrear as salary for that period even though he has no salary income during this period.

 

also that you say tds u/s 194j will be deducted for arrear received. how are you going to show this income under 192??

so according to me, treat is as arrear income which will be taxed in current year and no relief will be available. arrear for period 2011 to 2013 will be taxed accordingly and relief u/s 89 will be available here.

 

calculation of relief u/s 89 will be after taking deductions of 80c or other sections as was claimed in itr of that relevant year.

Thanks.Actually what I have written in Issue should have been written as background of issue,college accountant has no idea of tax tratment so he has asked my friend (Assessee) to obtain opinion.  You are supporting my view which I have written at start in Issue but according to prevalent practice in education institutes whole income received as arrears (from 2005 to 2013) will be taxed as income from salary.I also wonder why we can not take alternative of 194 j which we have discussed.Thanks a lot for your time.....

Any Expert related to Educational Institutes is requested to shed light on this prevalent practice?pl explain when a person is not employee what is wrong in considering Income of contract period (2005-10) as professional income so tds against it can be adjusted against tax payable.

Thanks & Regards

Deepak Ekbote

 

 

i didnt say it is not professional income. but what i am trying to explain is that during 2005 to 2011 income was not in nature of salary and hence arrear for such period can also not be be treated as arrear of salary.

 

however, if you wish to claim relief of sec 89 for this amt., then include it in income for 2011 to 2013, i.t.dept. is never going to question this as they will not be aware of the fact.

PS: it involves risk.