If the 8th Pay Commission recommendations are delayed, employees might get a lump-sum amount as arrears. But don't worry, Section 89(1) of the Income Tax Act offers some relief. We also break down which tax system could be better for you.
There's a lot of buzz around the 8th Pay Commission's recommendations, making employees quite excited. But so far, no final decision has been made. This leaves employees wondering if they'll get a lump-sum payment for any delay and if that means paying more tax.
26
24 months of arrears at once
The recommendations for the 8th Pay Commission are still being discussed. Whatever the final decision, the commission's report will be effective from January 1, 2026. If it's implemented in 2027, employees could get 18 to 24 months of arrears all at once. However, the government has not officially announced this yet.
36
Fitment factor to determine arrears
The amount of arrears an employee gets will depend on the fitment factor decided by the government. A higher fitment factor means a bigger salary and more arrears. The main question now is, if you get the arrears in one go, will it be counted as income for that year?
Many employees are worried that a lump-sum payment could show a higher income, pushing them into a higher tax bracket. The answer to this problem is in Section 89(1) of the Income Tax Act, 1961. This law and its section provide relief to employees.
56
Salary received late from previous year
The main purpose of this section is to make sure employees are not burdened with extra tax just because they received their salary from previous years late. According to experts, whether the old or new tax system is better for you depends on your personal financial situation.
66
Old tax regime is beneficial
If you have deductions like 80C, 80D, HRA, or a home loan, you might find the old tax system more beneficial. But for those with fewer deductions, the new tax regime could be the better option.
