Clause/reference No.in DTC : Income from Employment
Sub. of the clause:Income from Employment
Provisions as per existing section :Section :10(10C) & 89(1)
Provisions as per Direct Taxes Code Bill, 2010:There is no provision in respect of amount received under the Voluntary Retirement Scheme. Further, no relaxation is also given for the relief equivalent to the relief contained in Section 89 of the present Income tax Act.
Suggestions made by ICAI :It is suggested that a relief similar to Section 89 may be provided for covering cases of arrears of salary and also compensation like VRS Payments. Further, a provision should also be made for computing the additional tax payable by considering the contribution to the provident fund / pension fund, etc. as if these contributions were made in the respective years and therefore an employee who was deprived of taking the complete advantage of the monetary limit of the respective years due to lower salaries, is able to take the benefit on receipt of the arrears of salary.
Justification for the suggestion :In case of an assessee, where the payments are received in lump sum, he would be liable to be taxed much higher than the person who would have received the remuneration as and when it becomes due. This puts an employee at a disadvantage as compared to other employees.
If an employee has contributed sum to the PF, which is lower than the limit fixed U/s. 80 C or Section 69 of the DTC and is therefore has not taken complete advantage of these incentives in a year. Subsequently, his salary is revised with retrospective effect and he is given arrears, a major portion of the same is credited to his PF Account. However, in the year in which he receives the arrears, he has already exhausted the limit U/s. 69 and is therefore unable to take advantage of the additional contribution.
It is suggested, that if the contribution is made out of the arrears, then the appropriate relief should be given to the employee as of the contribution is made during the year to which the arrears pertain. Please note that the concept of giving relief in case of receipt of arrears of income is accepted in respect of interest received on compensation for last several years. Attention is drawn to section 59 (4) read with section 58 (2)(c) of the Code.
so salaried Person, please wake up and do something so that simplification of act may not able to eat your exemption Like standard deduction .Please comment .