Recovery of pension- how to treat this recovery in it calcul

Tax queries 370 views 2 replies

MANIAN T.V

SENIOR MANAGER(Retd) Nationalised Bank

83 Points Posted on 29 November 2015

Dear Sirs,

I am a retd Bank officer, retired in June 2013.As per the wage settlement reached between the united forum of bank employees/officers association and IBA( Indian Banks association) in May 2015 with retrospective effect from 01 Nov 2012, Pension of the officers retired on or after November 2012 was REDUCED( A Historical case).Difference in salary for 8 months was paid in my case.And difference in pension approx. Rs2600-00( in my case) per month from July 2013 to October 2015 was recovered from me.( Recovery was done like this, difference in commutation was credited to my SB account. Difference of pension for 28 months was immediately recovered from the SB Account).

My doubt/question, how this recovery of pension has to be taken while calculating Income Tax for AY 2016-17.Whether this recovery can be deducted from the gross income. Please clarify.( which will benefit the retired bank pensioners-Officers).

This position is applicable to all the officers retired from Nov 2012 to May 2015.

Replies (2)

Vivek Kurup

355 Points Posted on 01 December 2015

In my opinion, you can deduct it from the gross pension/salary, provided such a recovery was compulsory and you had the legal obligation to return the excess pension you received during the previous years. What is taxed is the salary/pension due and the meaning of the term 'due' has been interpreted differently by different judicial institutions considering the facts and circumstances of each case. Certainly, taxation on recovery of salary/pension is a disputable issue. So its better to seek expert opinion on this issue, giving all the particulars of the case so that they can form an opinion on the treatment of recovered pension. But, I think there is a strong chance that the assessing officer will add back the recovered pension deducted by you from gross salary, considering the pension before recovery as the pension due for the year; unless the department settles the issue by way of any clarification from its side. So I strongly recommend you to opt for expert opinion.