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Pension Arrears - Taxation

06 July 2023

Govt. Pensioner, regular IT assessee. Pension arrears from 01.03.2017 to 31.03.2023 received on 18.05.2023.

Accountant General sanctioned arrears on 23.01.2023. District Treasury Officer (Usur) sanctioned payment on 16.03.2023. Disbursement Officer (Sub-Treasury Officer) determined total amount of arrears payable as on 31.03.2023 and paid the amount on 18.05.2023.

Claiming Sec. 89(1) relief. Can I include the arrears in the income of FY 2022-23 on due basis?

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5 Replies

CA Aakarsh Jain (CA) (10216 Points)
Replied 06 July 2023

It will be taxable in FY 23-24, and you will also be allowed to claim deduction under section 89(1). For further details please check your inbox.

2 Like

J Sargunam (5 Points)
Replied 06 July 2023

The law states that 'Salary arrear is taxable in the year of receipt, if not taxed on due basis already'. Can we choose to pay it on due basis or on receipt basis whichever is earlier as per sec. 15 of IT Act?

CA Aakarsh Jain (CA) (10216 Points)
Replied 06 July 2023

We need to tax it on receipt basis only.

1 Like

J Sargunam (5 Points)
Replied 06 July 2023

Thanks for the clarification. The clause 'If not taxed on due basis already' seems to give us discretion to pay tax on arrear pension on due basis in the FY 2022-23 (AY 2023-24). Can I take advantage of that discretion to pay tax on due basis which will result in considerable tax savings?