Sharma (Manager) 22 February 2013

Income tax calculation for government employees

Dear Sir / Madam,

I have observed in Central Government Salary Tax Calculation, the calender month followed for arriving at Tax Slab is from - March to February; Instead of April to March, which is regularly followed in the commercial entities.

I assume that they were following 'cash basis of accounting' to follow the model of tax calculation months.

But I have the following clarification:

1. Is there any specific notification from the IT to follow March to February salary cycle for Tax Calculation specifically for Central Government Salary. If there is no Notification.... is the method adopted by Government Institutes right?

2. What should be the cycle followed if the central government Institutes have started Accrual basis of accounting.

Thanking you in advance.

Sharma

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2 Replies

R RAJAGOPALAN (ADVOCATE) 27 February 2013

Query-1. Is there any specific notification from the IT to follow March to February salary cycle for Tax Calculation specifically for Central Government Salary. If there is no Notification.... is the method adopted by Government Institutes right?

Ans: For Govt employees, the salary for the month of March falls due in April only, even if their salaries for the earlier months are paid on the last working day of the respective month. Therefore, on accrual as well as cash bases, their salaries for the month of March is always assessable in thenext Assessment Year only. There is no need for any Notification as the law in this regard is very clear.

Query- 2. What should be the cycle followed if the central government Institutes have started Accrual basis of accounting.

Ans: Even on accrual basis the the cycle would be the same, for the reasons stated above.