Income tax

This query is : Resolved

Arunava (Querist)
Follow

02 February 2012 The CA Club 23/01/2012

Dear Sir,

Bank wage revision
Clarification on taxability of
Contribution to Pension Fund

During the wage revision last year for Public Sector Banks, 2.8 times the salary for Nov’2007 was deducted from the computed arrears of new pension optees to meet the shortage in creation of Pension Funds. The Income Tax deducted by the Bank on this contribution has been kept in Suspense Account by the bank and not remitted to Income Tax authorities in accordance with a High Court order.

I retired from the Bank in December, 2010. Income Tax of about Rs 30,000 on the Pension fund contribution in my case has not been deducted by the bank in my case as the exercise was done in March, 2011, when I had already retired. Till date, there is no clarification on the taxability of the amount. In case the tax has to be paid, the interest payable on it at 2% p.m is mounting. If the amount is not taxable, getting such a large amount as refund will be delayed. Can you please advise me on the subject? This will benefit many Bank employees who may be in a similar situation.

Yours truly,
Arunava Sen Gupta
B 22/15, ECTP Phase IV
Kasba Gold Park
Kolkata 700 107
98361 85928

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

02 February 2012 It is a settled law that arrears are taxable in the hands of employee on receipt basis.
.
The amount deducted for adjustment towards pension fund corpus by the employer, can not be said as receipt in the hands of employees, more particularly when the pension receivable from such corpus fund will going to be taxable.
.
Suppose Rs 100000/ has been deducted out of arrears. Under an agreement , say this amount has to be deposited by the employer to the pension fund.The receipt to the employee arises when he will actually receive the pension and not earlier.
.
In my view, the decision will come in favour of such bank employees and the amount will not be liable to tax in their hands at this stage.
.
From the revenue point of view, it may be argued that as the Banks have claimed expenditure, but the beneficiary is not immediately paying any tax against this.
.
However, in the light of provisions of Section 36(1) (iv), and newly inserted Section 36(1)(iva), intention of the law sounds clear that such type of contributions leading towards employees welfare are allowable.
.
Vide Section 36(1) (iv) CBDT has been empowered to consider certain such contributions and looking to the other deductions available to the employers -like RPF, Approved Superannuation Fund contributions etc this may also be favourably considered by following a similar line.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok