Income Tax Refund by Splitting Arrears Received in Jun 2023 into Previous Financial Years 2019-20 to 2022-23 for Majors

Dear Sir,

1.      I already tried to inform you how to get income tax (IT) refund of your OROP arrears from Jul 2019 to Mar 2023 by splitting arrears you received in Jun 2023 into the four previous years 2019-20 to 2022-23. Since your bank deducted very high income tax in fin yr 2023-24 due to arrears, by splitting the arrears to the previous four financial years, you will get income tax refund under Sec 89(I) of IT Act 1961.  Yet some of you complain to me that your Chartered Accountant (CA) is reluctant to do so. This is because he has to put in some extra work which he wants to avoid.

2.      When you get arrears of previous years, the Min of Finance has given you a benefit under Sec 89(1) of Income Tax (IT) Act 1961 to distribute the arrears received in current year to previous years which will get your IT refund when you file IT Return (ITR) by 31 Jul 2024. The CA needs some time to enter the details of income of pension received, IT deducted by the bank to put these data into Form 10 (E). So to get IT refund you must insist your CA to take some more time to get your IT refund.

3.      I became a Major only after I put in 13 years of service. Then I went through No 4 selection board in 1989 and got cleared to become Lt Col when I put in 19 years of service. These ranks of Maj and Lt Col are backbone of the units and I have a lot of sympathy for these two ranks.

4.      I tried to work out how much IT refund these ranks of some length of service so that you get some relief.

5.      Modus Operandi.. This you have to do it in steps as explained below:-

(a)    Step 1. Take out the form 16 your bank gave for the financial years 2019-20, 2020-21, 2021-22, 2022-23 and 2023-24. This tells you how much was your pension and how much of IT has been deducted by banks at rates of IT of that financial year.

(b)    Step 2. You add the additional IT you have to pay on your (annual pension + arrears) for each of these four years(2019-20 to 2022-23) Also add IT for the year 2023-24 without arrears.

(c)     Step 3. Now you deduct the additional IT of previous years as explained in Step 2 which will be generally less from the IT deducted by your bank for the financial year 2023-24 which is generally high. That gives you the IT refund when you file ITR by 31 Jul 2024. Since time is running out, I thought, I must help you so that you get some IT refund. Take this message to your CA and tell him to work out the way I have done for Majors of selected length of service. It is not possible for me to work out the IT refund for all lengths of services. So take my detailed calculations and tell your CA to follow the way I have done my calculations for the rank of Major. You have to give your CA Form 16 for the five years from 2019-20 to 2023-24 which gives the income received and IT deducted by your bank / SPARSH.

 

Majors with  Qualifying Service (QS) of 20 to 21.50 Years.

6.      Basic Pension without DR (BP) in Jul 2014 due to OROP-1 as given in Circular 555 = Rs 22,830 pm

7.      BP in Jan 2016 due to 7^th CPC = 22830 x 2.57 = Rs 58,673

8.      BP in Jul 2019 due to OROP -II from Jul 2019 to Mar 2023 as given in Circular 666 = 51,700 (pension in Circular 666 is only Rs 51,700 hence it is less than pension already pension being drawn in Jul 2019 of 7^th CPC of Rs 58,673). There is no arrears for such Majors. Therefore, there will no IT refund.

 

Majors : QS of 22 to 33 years.

9.      Basic Pension without DR (BP) in Jul 2014 due to OROP-1 as given in Circular 555 = Rs 23,815 pm

10.    BP in Jan 2016 due to 7^th CPC = 23815x 2.57 = Rs 61,205

11.     BP in Jul 2019 due to OROP -II from Jul 2019 to Mar 2023 as given in Circular 666 = 68,550. Arrears  for such Majors= Rs 68550-61205 = Rs 7,345 per month. Therefore, there will some IT refund which we have to work out in detail.

 

Note :  Please ignore errors due to rounding of a figure to next higher figure. i.e. 50 paisa and above is taken as Rs 1.

 

Total Annual Income on Pension only as per 7^th CPC on which your Bank deducted IT (TDS)  

 

12.    Period Jul 2019 to Mar 2020 (9 months) without Arrears,

(a)  BP from Jul to Dec 2019 = Rs 61,205 + DR 17% = 73,349 pm x 6  months= 4,29, 659

(b)  BP from Jan to Mar 2020 with DR of 17% x 3 months  = 2,14,830.

©    Total Income for the period Jul 2019 to Mar 2020 without Arrears  of fin yr 2019-20 = Rs 440091+220046 = Rs 6,44,489

Note. We will workout arrears later.

13.    The year 2020-21 without Arrears

 

(a)  BP from Apr to Jun 2020 = Rs 61205 + DR 17% = 73,349 pm x 3 months = 2,14,830

(b)  BP from Jul to Dec 2020 with DR of 17% x 6 months  = 4,29, 659.

©    BP from Jan to Mar 2021 with DR of 17%  of 3 months  = 2,14,830

(d)  Total Annual Income without Arrears = Rs 8,59,318

14.    The year 2021-22 without Arrears.

(a)  BP from Apr to Jun 2021 = Rs Rs 61205  + DR 17% = 73,349 pm x 3 months = 2,14,830

(b)  BP from Jul to Dec 2021 with DR of 31% x 6 months  = 4,81,071.

©    BP from Jan to Mar 2022 with DR of 34%  of 3 months  = 2,46,044

(d)  Total Annual Income without Arrears = Rs 9,41,945

15.    The year 2022-23 without Arrears.

(a)  BP from Apr to Jun 2022 = Rs 61,205+ DR 34% = 73,349 pm x 3 months = 2,46,044

(b)  BP from Jul to Dec 2022 with DR of 38% x 6 months  = 5,06,777.

©    BP from Jan to Mar 2023 with DR of 42%  of 3 months  = 2,60,733

(d)  Total Annual Income without Arrears = Rs 10,13,554

Arrears of OROP from Jul 2019 to Mar 2023

16.    Arrears per month = Rs 7,345 (see para 8).

17.    Arrears from Jul 2019 to Mar 2020 = 9 months x 7345 = Rs 66,105.

18.    Arrears from Apr 2020 to Mar 2021 = 12 months x 7345 = Rs 88,140 .

19.    Arrears from Apr 2021 to Mar 2022 = 12 months x 7345 = Rs 88,140.

20    Arrears from Apr 2022 – Mar 2023 = 12 months x 7345 = Rs 88,140.

21.    Total Income with Arrears in Fin yr 2023-24

(a)  BP from Apr to Jun 2023 = Rs 68550 + DR 42% = 73,349 pm x 3 months = 2,92,023

(b)  BP from Jul to Dec 2022 with DR of 46% x 6 months  = 600498.

©    BP from Jan to Mar 2023 with DR of 50%  of 3 months  = 3,08,475

(d)  Total Annual Income without Arrears = Rs 12,00,996

Additional Income due to OROP Arrears

 

Fin Yr	Total Income without Arrears	Arrears	Total Income with Arrears
2019-20	6,44,489	66,105	7,10,594
2020-21	8,59,318	88,140	9,47,458
2021-22	9,41,945	88140	10,30,085
2022-23	10,13,554	88140	11,01,694
2023-24	12,00,996	0
		3,30,525
2023-24 with Arrears of previous years	15,31,521

 

Income Tax Deducted

22.    Your bank / SPARSH must have deducted income tax on the pension without arrears in the previous financial years. This is reflected in Form 16 or you can see it from pension slips your bank or SPARSH would have given you every year by May or Jun of that financial year.

IT Refund :

23.    The Income Tax Dept has a Tax Calculator. This gives you the income based on your age, gender and assessment year (one year after the financial year). I could only get Income Tax one has to pay assuming you are in the age group of 60 to 79, you are Male, you are permanent resident and you opted to come under New Tax Regime without claiming any deduction for only three years from fin yrs 2021- 22 to 2023-24 For the fin yrs 2019-20, 2020-21, you got to ask your  CA  the income tax and fill up form 10(E ) to arrive at the income tax refund when you file your ITR by 31 Jul 2024.

 

Financial Year	IT on Pension Deducted by Bank / SPARSH	IT on Pension + Arrears	Additional IT due to Arrears
2019-20
2020-21
2021-22	28,025	34,901	6,876
2022-23	56,052	69,802	13,750
2023-24 with Arrears	1,65,834
2023-24 without Arrears	93,806
Total	Say Rs X		Say Rs Y
IT Refund	Rs 1,65,834-(Rs Y+ Rs 93,806)

 

Note. The Income Tax Refund = Income Tax Deducted by your bank in Fin yr 2023-24 with Arrears of Rs 1,65,834 – (Additional IT now to be paid due to arrears added to the previous four financial years 2019-20 to 2022-23 + IT on Income in Fin yr 2023-24 without Arrears).

Note.: Please go to Income Tax Web site

 https://eportal.incometax.gov.in/iec/foservices/#/TaxCalc/calculator and select IT Calculator. The data, I have taken  is made on the assumption the pensioner has opted for New Tax Regime without Claiming any Deductions and his age is above 60 but below 80. I could not get the IT for the financial years 2019-20 &  2020-21. You got to find out from your CA as to what are the IT for those two years.

By

Brig CS Vidyasagar (Retd)