Govt to levy tax on salary arrears

NEW DELHI: For lakhs of central government employees looking forward to receiving 40% of the accumulated arrears on their increased salary next month here’s a dampener. The government has decided to levy tax the entire amount of arrears — 60% of which will be paid next year — in the current fiscal itself.

For most employees, the decision will virtually wipe out almost the entire 40% arrears to be paid to them this year. Senior bureaucrats will suffer most as their tax will be topped with a surcharge of 10%, on income of Rs 10 lakh and above.

A senior finance ministry official said the surcharge to be paid by officers of the rank of joint secretary and above ranges between Rs 24,600 and Rs 52,500. The impact will be less on the lower grades.

Last month, the Centre had announced an average increase of 21% in salaries of its employees. The hikes, effective from January 1, 2006, would burden the exchequer by more than Rs 17,500 crore annually while the arrears alone account for more than Rs 29,000 crore.