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RELIEF ON INCOME TAX FOR ARREARS - RECEIVED IN FY 2016-17

Krishna Moorthi's picture
Submitted by Krishna Moorthi on Sun, 16/04/2017 - 05:58
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WE CAN CLAIM RELIEF ON INCOME TAX ON ARREARS OF OROP-ll & lll ,  7 CPC & PMR PAID IN THE LAST FY - (2016-17)  UPTO THE EXCESS OF TAX, WE ARE TO PAY NOW (ASS YR 2017-18) ON THESE, THAN WHAT WE WOULD HAVE OTHERWISE PAID IN THE PAST FIN YRS  TO WHICH THEY PERTAIN.
    During the last year our team brought out for you a detailed post on this very subject, where in we had attempted to reduce this complicated process into a "PRIMARY SCHOOL SOLUTION" in working out the Relief on Income Tax on such like Arrears and to prepare and submit FORM 10-E on line while e-filing your ITR under Sec 89(I) of the IT ACT. This post had benefitted a large number of pensioners in saving their Income Taxes in thousands. Do read the old post accessible at the web page -  http://signals-parivaar.blogspot.com/2016/05/relief-on-income-tax-for-arrears.html  for detailed explanations on the methodology. 
     This endeavour helped a large number of officers who made efforts to "DO IT YOURSELF" in claiming their relief, the max being Rs 80,000/- and lowest as much as Rs 1650. We received abundance of encouraging words from them.  Some Veterans even resorted to filing their REVISED RETURNS to claim the IT relief after reading our web-post. 

             We were also informed by veterans that they had seen many CAs referring to our Web Site, while filing returns for their customers and charging them something like Rs 2500/- where as the same could have, well been easily done by them on their own based on the simple primary school method given in our post. It was also reported by some Veterans from Meghalaya, Tamil Nadu and Rajasthan  that some Cyber Cafe Walas charged as much as Rs 50/- to Rs 100/-  for providing information on Pension Entitlements and OROP referring to our blog site. The most crucial part being the splitting of arrears to previous years on which no CA has any clue unless you provide them your bank statement for the entire period from Jan 2006 on wards.
       We are thus encouraged to bring out this post which covers the arrears paid during FY 2016-17 on OROP. 7 CPC and Arrears on DL 33 Yrs Rule (PMR Cases) for our Veterans.

WHY THE RELIEF UNDER SEC 89(1).
    Before we proceed further let us understand the principle under which such a relief is entitled. You are receiving these arrears late by a year or more as the Govt could not pay you these amounts during those earlier years for some reasons.   "MOST OF US ARE IN THE 30% BRACKET TODAY BECAUSE OF THE ARREARS RECEIVED BY US, AS SUCH WE WILL PAY HIGHER TAX ON THE ARREARS THAN WE HAD OTHERWISE PAID HAD THESE ARREARS WERE PAID TO US IN THE EARLIER FYs. THIS AMT OF ADDL TAX AS COMPARED TO THE EARLIER YEARS IS YOUR RELIEF UNDER SEC 89(1)".

Important Note -- As a thumb rule 'Other than PMR Cases' No Relief will accrue in case one was taxed at the same or higher IT slabs in the previous two Years (FYs 2014-15 and 2015-16), as for the current year. However, for the PMR cases the relief could be over One lakh of rupees in some cases. अगर आप को PMR का कोई बकाया नहीं मिला है तो पिछले दो सालों की टैक्स return देखें कि आप कौन सी टैक्स स्लैब में थे अगर वेह आज कि लागू स्लैब से कम में है तो टैक्स में बचत मिलेगी. 
       Let us now proceed to deal with the arrears as received during the last Financial years i.e. FY 2016-17 for which we will soon be filing our ITRs for Assessment Year 2017-18.  During this financial year following arrears were received by us :-
    * Second Installment of OROP.
    * Third Installment of OROP.
    * 7 CPC Arrears.>
    * PMR CASES (DL 33 Yrs Rule) - Arrears.

 

HOW TO ACCOUNT FOR OROP INSTALMENTS 

 

    Total Arrears on OROP  so  accrued wef 01 Jul 2014 till 29 Feb 2016, were divided into four installment.  The FIRST one was paid in Feb 2016 (FY 2015-16) , the SECOND one in Aug 2016 (FY 2016-17) and the THIRD too has been paid in March 2017 (FY 2016-17) in most cases. These arrears infect  pertain to the period from 01 July 2014 to 31 Dec 2015 for Relief purposes. These can be easily split for the past two years ie FY 2014-15 and FY 2015-16 to claim relief. 

TABLE No, 1 BASIC SCALES
    HOW?  - One needs to know the increase/Hike in basic pension on OROP from the 6CPC figs to proceed further. The Table No, 1 here gives these figures for various ranks with full QS. In addition one also needs to check whether the relief was claimed on first installment in the last IT-Return for FY 2015-16 (Ass Yr 2016-17), showing it as arrears of the previous FY 2014-15. In case the same was not done as such was obviously included in the Total Taxable Income for the FY 2015-16 and tax paid. 
   SPLITTING OROP ARREARS  - In order to split the arrears for past years we have derived a simple but magic MF (Multiplication Factors) on the hike on basic pension for all ranks. The hike will be different for different pensioners but the MF remains the same as a CONSTANT. Please see the calculations as follows as your guide:- 
* FY 2014-15 (MF=18.81) : For a Lt Col the increase is Rs 34765 minus 26265 = 8500 as can be seen in the table no 1  here. The arrears thus work out for the FY 2014-15 as = 8500X18.81 = Rs 159885/-. 
    Note : In case one had shown the first installment during this FY and had claimed the relief  under Sec 89(1) the same be deducted from this total of Rs 159885. The remaining amt still pertains to this FY and can be claimed for relief out of the second installment.

 * FY 2015-16 (MF - 26.28) ; Here again for a Lt Col the arrears will be = 8500X26.28 = Rs 223380/-. 
     Note : The arrears on OROP received during the last Financial Year can accordingly be claimed for previous arrears if beneficial. The ready reckoner for splitting these arrears to past years for various ranks (Full QS) is placed below in Table No, 2 :-

TABLE No, 2 SPLITTING OF OROP ARREARS
NOTE :   These figs are based on OROP having been received after Mar - 2016. However individual cases should work out differently in case the OROP had been started earlier. The relief will be permitted on the above figures since wef 01 Jan 2016, the 7 CPC had been implemented and arrears paid later in 2016.
         The first installment of OROP as mentioned above was paid mostly in Mar 2016 ie during the FY 2015-16 but actually pertained to FY 2014-15. In case the veterans did not claim any relief on IT on OROP First Installment last year , they can now show the Second Installment and a portion of the third installment as the Arrears pertaining to FY 2014-15 and tax relief worked out and claimed to the extent as worked out for the year.
 
      However in case this instl was shown for FY 2014-15 in last years' ITR for tax relief, then the balance arrears ie a portion of Second  installment still pertains to FY 2014-15. In this case portion of Second installment which may be worked out in individual cases can still be treated as arrears for FY 2014-15 and relief claimed. The remaining portion will fall as arrears for FY 2015-16. Your own figures will vary depending upon the hike in your own OROP.
    
ARREARS OF  7 CPC SCALES. 
     The 7 CPC was implemented wef 01 Jan 2016 while we all were in the receipt of basic scale of OROP Pension plus DR @ 125%. The 7 CPC award for every one for the time being has been fixed at your pension as on 31 Dec 2015 multiplied by a factor of 2.57. The Dearness Relief on this under 7 CPC  was NIL from Jan to Jun 2016 while it has been 2% from Jul to Dec 2016 and 4% from Jan 2017 onwards. It is thus evident that arrears received on 7 CPC award mostly pertain to last FY-2016-17, leaving those for Jan to Mar 2016 which pertains to  FY 2015-16 for claiming relief under Sec 89(1). One can thus easily know this portion of the arrears which pertains to the last year based on your basic OROP scale as on 31 Dec 2015.
 
   * FY 2015-16 (MF = 0.96)  : Multiply the OROP basic pension with this MF to get the arrears. eg Lt Col :: 34765X0.96= 33374. MF is constant and can also be used for all ranks. In some cases it may be better to work out the hike on 7 CPC for three months of jan, Feb and Mar 2016 being the arrears of the past year. To help our readers we are giving a ready reckoner Table No, - 3 below rank wise arrears for three months pertaining to FY 2015-16 to work out and claim rebate.
TABLE No, 3 SPLITTING OF ARREARS ON 7 CPC

NOTE : Add these arrears to OROP arrears as worked out above for the  FY 2015-16 for claiming  relief.

ARREARS  PMR CASES (DL 33 Yrs RULE)
    We received many mails from pensioners specially from Indian Air Force and Indian Navy who took PMR and are now entitled to arrears received during the   last Financial Year 2016-17, asking us to help them with relief by doing special web post for the treatment of arrears received by them on DL33Yrs Rule. This post is specially in response to their desires.
    Most of the PMR Pensioners have received these arrears before 31 Mar 2017. They must have already checked the correctness of their arrears based on many tables which had been circulated on mails by many officers. These arrears pertain to the period from 01 Jan 2006 to 30 Jun 2014, as such the total arrears received on this account should first be broken down Financial Year wise  ie to the years they pertain.


TABLE No, 4 SPLITTIMG OF PMR ARREARS

    The total PMR arrears received by various officers depend on the hike in the basic pension as affected by the provisions, Their full pension is given in Table - 1 above. They may refer to PCDA(P) Circular No 500, (Circular No 24 – Medicos) and check the hike in their basic per month pension and noted.
   One can split the total ARREARS either by taking into account the monthly hike by using MF as shown under Coln 'd' of the Table No, 4 placed alongside or by taking the %ges shown under Coln 'e' of the table. Coln 'f' of the table shows the bk-down for total of PMR Arrears of Rs 325652/- amounting to monthly hike of Rs 2270/- for explanation purposes only.

 
CHARTING  OF DATA
    After splitting the arrears to previous year we should chart the details. We will, therefore need to know the following details for proceeding further for the treatment of arrears along with the above mentioned arrears:- 
 
(a) . Breakdown of arrears received on PMR, OROP and 7 CPC as described above AS PER PREVIOUS YEARS.
 
(b)  The “T.Is”  for the Fin Yrs from 2005-06 on wards till Fin Yr 2015-16, as in your ITRs acknowledgements (ITR-V) of previous years correctly.
(c)   Relief claimed earlier during the previous years, if any, for arrears on Enhanced Pension, OROP Etc for each of the previous year.
(d)  Form 10-E (Table  A) of the previous year where the relief on  earlier arrears had been claimed in ITRs, if any.
   We are now ready to prepare the Form 10-E for which a Primary Class methodology is given in our last years post and to know the Relief.
 
MAGICAL CONSTANTS - MULTIPLICATION FACTORS  (MFs)
     In order to help our readers in their calculations of past pension, arrears etc these Mathematical Constants, we call them "MFs" (Multiplication Factors) have been derived out of complicated calculation tables, based on the Rates of Dearness Relief prevailing from time to time, so as to simplify calculations for various periods, to PRIMARY SCHOOL MATHS. The MFs for various periods are listed below, you donot have to refer any charts of the DA rates or the calendar, just multiply the particulat HIKE by the MF for the period and you get the amount of the arrears, so simple  isn't it.
(a)  01 Jan 06 to 30 Jun 09     -    46-02.
(b)  01 Jul 09 to 23 Sep 12     -    75.62.
(c)  24 Sep 12 to 31 Dec 15    -    78.08.
(d)  01 Jul 14 to 31 Dec 15     -    38.34.
(e)  01 Jan 16 to 29 Feb 16     -     4.50 (DA 125%)
 
 
     Do apply these MFs for calculating your arrears for the periods shown, The error which may be there is only an ignorable fraction in its percentage.

IN ORDER TO HELP OUR VETERANS WE ARE GIVING HERE A LIVE EXAMPLE IN CALCULATING RELIEF. PLEASE FOLLOW THE EXAMPLE STEP WISE STEP WITH YOUR OWN FIGURES OF PENSION AND AREARS AND PROCEED WITHOUT MISSING A STEP. WE ARE ABSOLUTELY SURE THAT ANY ONE OF YOU WILL BE ABLE TO DO IT ON ONE'S OWN.

 
 
LIVE EXAMPLE - LT COL XY ZULU (PMR 22.5 YRS QS) '
 

 

Let us now see how our friend Lt Col (TS) XY Zulu, has worked on his relief. He noted his details as under:-

(a). Date of Birth = Apr 1947, (Hence becomes Sr Ctz wef in FY 2011-12)
(b). PMR after 22.5 yrs of service,
(c). Initial pen fixed as on 01/01/06 = Rs 21417/- against Rs 25700/-.
(d). Pen under Cir No 500 =Rs 21888/- against full Rs 26265/- wef 23/09/12 which was later made applicable vide Cir No 548 wef 01/01/06.
(e). OROP entitled wef 01/07/14 = Rs 32428/- against full QS OROP of Rs 34765/-, HIKE of Rs 8500 per month.

(f).   Pension fixed 7 CPC (2.57 times of OROP) = Rs 83340/- wef 01/01/16.
(g). Total Arrs recd = Rs 892437/- along with his pension making his Total Taxable Income (T.I) after all deductions under Sec 80-C etc to Rs 1907517/-.

Income Tax on Rs 1907517/- will be Rs 4,04,023/- if relief is not being claimed)

Sub-Details of Arrears recd in FY 2016-17 totaling as Rs 892437/- :-
* Sec installment of OROP = Rs116823/-
* Third Installment of OROP = Rs 116823/-
* 7 CPC Arrears for Jan, Feb & Mar 2016 = 31131/-
* PMR Arrears = Rs 627661/-.

LT COL ZULU CLAIMS THAT HE SHOULD BE GETTING A RELLIEF OF ONE LAKH RUPEES , LET US SEE HIS WOR OUT, IF IT IS SO.

Summary of Arrears & Period:-
(a).  OROP-ll & OROP-lll each = Rs 116823/- (TOTAL =233646) for Pd Jul 14 to Dec 15.
(b).  7 CPC  = Rs 31130/- FY 2015-16
(c).  PMR  = Rs 627661/- for Pd Jan-06 to Jun-14
(d)   Normal Pension 2016-17 = 1015080 & Arrs above = 892437/-
       TOTAL =    1907517/-
 
 
These arrears are to be  further be split into year wise to which they pertain in accordance with the method explained above as under:-

(a).  OROP FY - 2014-15  -   HIKE(10540)*18.81= Rs 198258/- (We presume that First Installment of Rs 116823 was claimed for relief FY 2014-15 thereby remaining Rs 81438/- out of the two installments amounting to Rs 233646/- will be claimed again this year.

(b).  OROP FY - 2015-16  -   HIKE(10540)*26.88= Rs 276991/-. Of this only two installments amounting to Rs 233646 were received in current year as such they less Rs 81438 ie Rs 152208/- be shown against FY 2015-16.
(c).  7CPC   FY - 2015-16 -    OROP(32428)*0.96 = Rs 31130/-.
(d).  PMR Arrs Ttl  HIKE (26265-21888)*143.404 = Rs 627661/-.
NOTE - The PMR arrears as above should now be broken down FY wise by method of percentage as explained above under breakdown (TABLE No, 4). The figs worked out are shown below. You are now ready to proceed for knowing the relief if any. Red Figs are inserted in the final chart (TABLE No, 6).

BREAKING DOWN OF PMR ARREARS (TOTAL = Rs 627661) FY wise. 

TABLE No, 5 -SPLITTING OF PMR ARREARS FOR COL ZULU

        Now chart out your preliminary data based on above figures as per the format (TABLE No, 6). DONOT BE AFRAID OF TOO MANY COLNS IN THIS TABLE, SPECIALLY IN CASE YOU DID NOT CLAIM ANY RELIEF EARLIER. Finally you need just the two columns 'H' & 'M' to proceed. Fill up details and your T.I's for the previous years as per your ITRs filed in earlier years in this  chart/table (TABLE No, 6):-  
TABLE No, 6 (YOUR DATA CHART)


TABLE NUMBER  - 6 - YOUR DATA CHART

NOTE :: Ignore the columns of earlier claims ie coln "D" to "G" in case arrears were not claimed earlier as such "C" & "H" will have same values.
     
     You are now ready to prepare your FORM 10-E which will be submitted on line while filing your return. In this you need to calculate Income Tax year wise on the Original/Modified Taxable Incomes with and without the Arrears. For this purpose to your convenience we have placed here the income tax rates and the slabs pertaining to the earlier years in Table No, 7.

 
FORM 10 E -Preparation and Submission
 
While the relief amount will be reflected by you in the appropriate field in the ITR Form where the amount of relief will get deducted from the total Tax, the pensioners are required to submit FORM 10 E on line in support of their relief claimed from the arrears.  
 

 

This form is of two pages as shown below (TABLES 8, 9 & 10). 
      Page one is the summary and verification from the pensioner. 
      Page two is "Annx -1" which contains Particulars and Table 'A' which simply tabulates the calculations made by you on a piece of paper as mentioned earlier. These are shown below in TABLES  8, 9 and 10 reflecting the case of Lt Col Zulu.
 
   Let us help you with one of the previous years ROW say FY 2011-12 for Table 'A' of the Form 10E, you will be able to work for other years without any hassle.
     Till  FY 2010-11 Col Zulu (Apr 1947 born) was under 65 yrs of age as such not yet a senior citizen. The Sr Ctz age was reduced to 60 yrs wef  FY 2011-12. Our friend therefore is Sr Ctz for Tax purposes wef FY 2011-12 onwards as such his Income Tax slabs & rates for the FY  2011-12 applicable will be as for a S Ctz given in Table No, 7.  i.e.    No Tax upto 2.5 Lakh of TI,    10% 2.5 L to 5 Lakh,   20% 5 to 8 Lakh &  30 above 8 Lakh.
     The  T.I (Ref Table 6) for FY 2011-12  is Rs 464996/- and the arrs assigned for this year are Rs 82988/-. Now calculate the Income Tax first for Rs 464996/- (w/o arrs) which works out to Rs 22145/- and then for Rs 547984/- (with arrs) (464996+82988= 547984) which works out to be  Rs 35635/- i.e Rs 13494/- more than what it is without arrears.  These values  are inserted in Table 'A' of Annx-1 of Form 10 E (TABLE-9) placed below.   
  Similarly work out the Taxes and difference  for all other years and complete the Table 'A' of Annx-1.  Once done You have won the battle for yourself.
 
INCOME TAX RATES - TABLE No,  7  For your convenience we are giving here ready made chart of Income Tax Rates for the previous years. 




TABLE NUMBER 7 - INCOME TAX RATES
 

NOTE  ; Save this table  as it will be of tremendous use to you even in future,

FORM 10-E - PAGE 1  This is the beginning part of the Form 10 E which will appear on line once you ae in the process of on line submission of this form.  Here one only needs to specify the Total Arrears being assigned for earlier year. This can be even less than the total arrears received by you as you are at liberty to claim for arrears which are more beneficial to you.


TABLE NUMBER - 8 - FORM 10 E PAGE 1

TABLE 'A'- Part of Annx - 1

        This table is by far the most important showing the additional income tax that you would have paid for all the previous years for the arrears had they been received by you during the previous year rather than the current year. The details of working out has been explained above. The figures given in this table by you must be accurate, since these are checked in the Dept with your earlier ITRs.
     Prepare this \Table and use the same for on line completion while submitting the Form 10-E along with your ITR.

TABLE NUMBER - 9 - TABLE A OF ANNX-1 OF FORM 10-E FOR ON LINE SUBMISSION

इस का मतलब हुआ कि अगर यह arrears इन सालों में मुझे  मिले होते तो मुझे 172342 रुपए का और टैक्स देना होता. याद रहे कि यह मेरी  liability है. अब देखें कि चालू साल के साथ कैसे इस को compare किआ जाए .

 

SLABS TAKEN      In the above Form for the years shown are the Financial Years . The subject assessee became senior citizen during the FY 2011-12 as such his calculations from the said FY  on wards are based on  slabs prescribed  for a Senior Citizen and calculations before 2012-13 are for MALE Assessee.
Once the above table has been made, your battle stands won by you, what remains is minor completion of columns of Annx-1 on line as below.
 
ANNX - 1 OF FORM 10-E , GIVING THE AMOUNT OF RELIEF UNDER SEC 89(1) - TABLE NUMBER -10  
 
      Here on Table- 10 we insert the income (1015080) and the arrears (892437 ie Only up to the extent being assigned to previous years) of current year. The total becomes 1907517 (Tax Calculated on this amount is Rs 404023/-) while the Tax on income w/o arrs ie Rs 1015080/-  is calculated as 128260/- . Hence the diff in Tax on income with and w/o arrs for the current year (Ass Year 2017-18) is equal to Rs 275763/- जो कि मुझे arrears के कारण बनता है परन्तु मेरी कुछ ऊपर 172345 रुपए की liability भी है जो कि मुझे देनी ही है . इस लिए बाकि की जिआदा रकम जो कि  टोटल 275763 रूपए में से मेरी liability निकाल  कर  बनता है वह ही मेरा रिबेट है,  जनि कि मुझे उतना ही टैक्स देना पडा जितना मुझे  पिछले सालों में ही देना था .  Deduct from this the total difference as calculated in Table 'A' (Table No, 9) to obtain the amount of relief which is Rs 1,03,418/- a substantial amount for Zulu to take his family for a Holiday.
 

 

 

 

TABLE - 10 - ANNX 1 OF FORM 10-E FILLED UP FOR ON LINE SUBMISSION
ON LINE UTILITIES -  
           There are many on line utilities available on line to wok out Form 10 E They are simple to use and need only filling up the arrears spitted as per past years and the applications does all calculations for you and also produces Form 10 E. One can make use of them as well if one can however care should be taken that the calculations are for the age of the assessee. Any mistake if made in the Form the responsibility will be of the assessee and the Income Tax Department may not admit the Relief because of these errors. It will be worthwhile to recheck the outputs by manually calculating as well. 
E-FILING OF ITR AND  ON LINE SUBMISSION OF FORM 10

   ITR - First after you have calculated your data you may prepare your ITR for efiling based on On line Forms ITR-1 or as applicable. These forms has a field to insert the Total amount of Relief claimed. This amount gets reduced from the over all tax liability.

    FORM - 10 E - The E-filing site   https://incometaxindiaefiling.gov.in  caters for on line filling of the form and submission. One can prepare the form on line and save it as draft while you are partially ready and finalise later. After you have logged in with your PAN number and password to your account with them Click on "e-File"   (Refer to following screen shot) select prepare and submit Form on line from drop down, the screen as below will appear. Put in details and continue thereafter as per instructions which pop out,


 
FIGURE NUMBER-11 - SCREEN SHOT OF E-FILING SITE

   NOTE:-   Once again its a simple affair, the form can be opened on line on e-filing site of the IT Dept after your own logging in, filled up with your data as worked above page wise page  and submitted on line. You get a confirmation of submission.  However please note that the years as they appear there on their site on line  are assessment years and not Fin Years.
 
 We will appreciate your inputs on the above POST.
 
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