The Central Board of Direct Taxes(CBDT) today clarified that tax will be deducted at source (TDS) on the 40 per cent of the arrear to be paid to central government servants in 2008-09.
On the balance 60 per cent arrear, tax would be deducted in 2009-10 during which these pay arrears will actually be paid.
Following the Sixth Pay Commission’s recommendation, the central government has revised the pay scales of its employees from January 1, 2006. Accordingly, the government has decided to pay 40 per cent of the arrear for the period January 1, 2006 to August 31, 2008 in 2008-09 and the balance in 2009-10.
A number of representations have been received by the Board seeking clarification as to whether TDS need to be deducted on 40 per cent of arrear to be paid during 2008-09 or on the entire arrear payable to the government servant.