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

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

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.

(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.



TABLE NUMBER 7 - INCOME TAX RATES
 

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.

TABLE - 10 - ANNX 1 OF FORM 10-E FILLED UP FOR ON LINE SUBMISSION

 

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

source SIGNALS -PARIVAAR ( INDIAN MILITARY VETERANS )