19 January 2019
The assessee was drawing pension along with DA arrears from his previous employment as well as salary from his new employment.Now he has been told to refund the DA which was apparently incorrectly paid to him in the earlier years and on which he has already paid income tax.He has already refunded about Rs 12 lakhs in the F Yr 2018-19 How can he claim relief-can it be shown as a deduction under the head salary in this year(F yr 2018-19)?
19 January 2019
The words given in section 15 plays a role. Section 15 states “salary due” and not “salary accrued” salary is not taxable on “accrual” under section 15 since section 15 uses the words “salary due”. The salary is not to be taxed on the basis of “accrual” since, in it’s conscious choice of words, legislature has chosen the taxability on due basis or payment basis – whichever is earlier. The amount which constituted “salary due from an employer” was only the amount net of recovery, which the employer was legally empowered to make, in respect of excess payments made on account of wrong pay fixation. i.e.,if the assessee was entitled to receive only the net salary, net of recovery in respect of excess salaries received earlier, then salary due will mean entire salary for the year minus salary refunded on account of excess received for earlier period
There is no direct provision in act which provides for reduction for excess salary received. However, considering the words used in Section 15 as discussed n above paras, the salary which actually becomes due to be received after reduction refund of excess salary is chargeable to tax.
Ahmedabad ITAT in ITA no. 1512/Ahd/2014 in case of Vrajeshwari B Parikh v. ITO has held that salary due to the assessee would be salary for the year minus refund of excess salary of earlier years.
19 January 2019
Thank you. However the excess paid was not deducted from the assessee's salary but repaid directly by him. Still ,can this amount can be reduced and if so how will it be shown in the ITR?
19 January 2019
Yes still this amount can be reduced. Employer also should reduce the repayment and reflect in TDS return. Show it only net salary after deducting repayment in ITR.
19 January 2019
If the total salary paid for FY 2018-2019 is say Rs.14 lakhs out of which the assessee paid Rs12 lakhs to the employer then salary taxable to shown as Rs.2 lakh only in the return of income. there is no space for any deduction in the ITR or in the Act. If you file the ITR with Rs.2 lakhs is salary income there is possibility that you will receive notice for mismatch in form 26AS and ITR. In that case you can file a written reply to the jurisdictional AO.
The AO might object at his level, but, however at appellate level the case can be decided in favour of assessee.
Alternatively, show income of Rs.14 lakhs as salary and show Rs.12 lakhs in other allowance in ITR. immediately after filing the ITR, submit a letter before AO stating the facts and circumstances and informing him that Rs.12 lakhs is not allowance but it is salary repaid back to employer and hence reduced from the income. Similarly as told, AO may or may not accept but relying on decision of ITAT, CIT(A) or ITAT may allow the reduction.
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