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Claiming exemption/deduction of amount recovered from salary.

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Bibhash Mitra

3 Points Posted on 20 September 2021

Background:-
I am a Central Govt. employee. I was on leave for 6 months. I got my full salary during my leave. Now my DDO has informed me that I was not entitled for Transport Allowance (TA) during the leave period and it will be recovered from my salary.

Difficulty:-
Since the TA will be recovered from my salary, my gross salary will not reduce and it will reflect in my 26AS. Now, when I will file ITR for AY 2022-23, I will have to enter the enhanced gross salary in my ITR since gross salary lower than 26AS will not be accepted while filing ITR.

My query:-
Under which section shall I claim exemption/deduction for the amount of TA which is recovered from my salary?

Replies (3)

Quick Summary

A Central Government employee received full salary, including Transport Allowance (TA), during a 6-month leave. Their DDO has now informed them that the TA was not permissible during leave and will be recovered from their salary. The employee is concerned about how to correctly report this recovery in their Income Tax Return (ITR), as the gross salary in Form 26AS will include the wrongly paid TA, and the e-filing portal requires ITR gross salary to match or exceed Form 26AS.

CMA Poornima Madhava

CMA

13117 Points Posted on 20 September 2021

Net salary (after recovery) should reflect in form 16. If allowance is wrongly paid by the employer and is being recovered, it is as good as not earned in the hands of the employee. Revised form 16 would be necessary i think.

Bibhash Mitra

3 Points Posted on 20 September 2021

Thank you madam for your reply. But my point is that my gross salary in 26AS will include the allowance which was wrongly paid. From AY 2021-22 e-filing portal is not allowing to submit ITR if gross salary as per ITR is less than gross salary as per 26AS. So in ITR I have to enter the gross salary including the allowance which was wrongly paid.

So, my question is under which section shall I claim exemption/deduction for the wrongly paid allowance which is being recovered now so that my taxable salary is computed correctly.

CMA Poornima Madhava

CMA

13117 Points Posted on 20 September 2021

Transport allowance is exempt under section 10. But if only you avail this deduction and the same is not in the form 16, then it would be a mismatch. Not sure, whether you can file return as such. Just check it up.