As per income tax rules, salaried employees do not have to pay tax on a significant part of the house rent allowance (HRA) — the part that exceeds 10 per cent of the basic salary and dearness allowance (DA). This exemption applies to private as well as public-sector employees annually. However, in Bihar, government employees have not been paying any tax on HRA at all, for several years. The employees who have been earning a sizeable amount as HRA every month have not been paying the TDS on this amount for ages.
A Hindi daily has reported that investigations by the income tax department revealed the staff of the state government has been flouting rules and no action has been taken till date.
This year, however, the IT department has instructed all the departments of the state government to pay tax on HRA and those who do not will have to face action from the IT department. The drawing and dispersion officers (DDOs) have been given the responsibility of ensuring that the instructions of the IT department are followed, or else the DDOs themselves will have to face action.
This financial year, nearly six lakh government employees of Bihar will end up paying tax on HRA.