Pension arrears

Pension arrears are the lump sum that becomes payable to a central government pensioner when a pension for a past period was underpaid or not paid, and is later made good. They arise whenever the pension actually drawn falls short of the pension due, for a stretch of months, and the shortfall is then paid in one payment: most often when a pension is revised at a pay commission with effect from an earlier date, when dearness relief is revised with retrospective effect, when a pension is sanctioned after the retirement date, or when an under-fixed pension is corrected. The arrears are simply the difference between what should have been paid and what was paid, accumulated over the intervening period.

Arrears are a routine feature of the pension system rather than an exception, because the pension changes more often than it can be implemented on the day the change takes effect. A pay-commission revision is effective from a date years before the revised orders issue; a dearness-relief revision is effective from 1 January or 1 July but is notified months later; and a correction of a fixation reaches back to when the error began. In each case the pensioner is owed the shortfall for the past period, and that shortfall is the arrears. Understanding pension arrears means understanding where they come from, how they are paid, when interest attaches, how far back they can be claimed, and how they are taxed.

This article sets out the main sources of pension arrears, how they are computed and paid by the disbursing bank, the distinction between arrears and the interest that is payable only on an administrative delay, the limitation that the courts apply to a belated claim, the Section 89 income-tax relief and the mandatory Form 10E, the treatment of tax deducted at source, and the position of family pension arrears. Every load-bearing point is tied to the CCS (Pension) Rules, 2021, the Income-tax Act, or the governing case law.

The main sources of pension arrears

Pension arrears come from a handful of recurring situations. The first and largest is a pay-commission revision of pension: when a pay commission revises the pension of existing pensioners with effect from a past date, the revised pension is implemented only after the orders and the concordance tables issue, so the pensioner is owed the difference from the effective date. The 7th Central Pay Commission revision was effective from 1 January 2016, so a revision implemented later carried arrears back to that date. The second is a dearness-relief revision, which is effective from 1 January or 1 July but notified some months later, generating a few months of dearness-relief arrears each time.

The other sources are less frequent but no less real. A pension sanctioned after the date of retirement, where the case was not settled in time, carries arrears from retirement, though a provisional pension, the payment older instructions call an anticipatory pension, usually bridges that gap so the arrears are small. A correction of an under-fixed pension, where the qualifying service or the emoluments were understated, carries arrears from when the error began. A court or tribunal order in the pensioner’s favour carries arrears for the period it covers. And a delayed restoration of commuted pension, where the restoration after 15 years is given effect late, carries arrears of the restored portion. These are the main sources; the common thread is a pension due for a past period that was not paid at the time.

How arrears are computed and paid

The arrears are computed as the difference, month by month, between the pension that should have been paid and the pension actually paid, summed over the period, with dearness relief applied on the revised basic pension for each month at the rate then in force. For a revision, the revised authority issued under the existing Pension Payment Order number carries the arrears figure, and for a correction the re-fixation does the same. The disbursing bank then credits the arrears as a lump sum, along with the higher monthly pension going forward.

For a central civil pensioner, the authority to pay the arrears is routed to the bank through the Central Pension Accounting Office, which authorises the revised or corrected figure to the bank’s processing centre. Dearness-relief arrears are handled more simply: on receiving the dearness-relief order, the disbursing bank computes and pays the arrears automatically, without the pensioner having to apply, usually in the month it implements the revised rate. So a pensioner does not generally have to claim dearness-relief arrears, which the bank pays as a matter of course, though arrears from a revision or a correction follow the authorisation of the revised pension.

Arrears and interest are different

It is important to separate the arrears from interest on them, because the two are governed by different rules. The arrears are the principal, the pension due for the past period, and they are paid whenever a revision, a correction, or a late sanction makes a past pension good. Interest on the arrears is a separate matter, and it is not automatic. Under Rule 65 of the CCS (Pension) Rules, 2021, interest is payable on delayed pension, family pension, or gratuity only where the delay is clearly attributable to administrative reasons or a lapse, and it is then paid at the rate applicable to the General Provident Fund.

So the ordinary arrears on a pay-commission revision or a dearness-relief revision do not carry interest, because the delay in those cases is inherent in the process, not an administrative lapse: the revision simply could not be implemented on the day it took effect. Interest attaches only where a specific administrative failure delayed a pensioner’s due, in which case the interest on delayed pension is sanctioned at a senior level and the responsibility fixed on the defaulting official. A pensioner should therefore not expect interest on the arrears of a routine revision, but is entitled to it where a lapse in their own case caused the delay.

The limitation on a belated claim

A pension is a continuing right, and this shapes how far back arrears can be claimed. Because the pension falls due month after month, a wrong in the pension is a continuing wrong that gives a fresh cause of action each month, so the entitlement to a correctly fixed pension is not defeated merely because the pensioner was slow to raise it. This principle, established in M.R. Gupta v. Union of India, means a pensioner can always seek the correct fixation prospectively, however long the delay.

The arrears, though, are treated differently from the entitlement. Where a pensioner makes a belated claim, the courts normally restrict the arrears to a period of about three years preceding the date of the writ petition, rather than allowing arrears all the way back to when the wrong began. This rule was laid down in Union of India v. Tarsem Singh, and it rests on the doctrine of delay and laches under Article 226 of the Constitution: it is a judicial rule of prudence against stale claims, not a statutory limitation, so there is no fixed statute barring a pension claim. The three-year restriction is the general position, but it is not absolute; where the government’s own order fixes a different cut-off date for the arrears, the courts have declined to confine the arrears to three years, and accrued arrears have been protected as property under Article 300A. So a pensioner with a genuine but old grievance can secure the correct pension going forward, and usually about three years of arrears, but not always the whole backlog.

Section 89 relief and Form 10E

Pension arrears are taxable in the year they are received, but because they relate to earlier years, receiving them in a lump sum can push the pensioner into a higher tax slab than if the pension had been received on time. Section 89(1) of the Income-tax Act corrects for this. It gives relief by recomputing the tax as if the arrears had been received in the years they relate to, and allowing the pensioner the difference, so the bunching of several years’ arrears into one year does not cost extra tax. The Section 89 relief is the standard mechanism for any arrears of salary or pension.

The relief is not automatic; it must be claimed, and the claim has a strict procedural requirement. Form 10E must be filed online, on the income-tax portal, before the income-tax return for the year is filed. Where the pensioner claims the Section 89 relief in the return without having filed Form 10E, the relief is disallowed at processing, and the pensioner receives an intimation denying it, which can be put right only by filing Form 10E and revising the return. The Form 10E requirement applies to a pension and a family pension alike, so a family pensioner receiving arrears claims the relief the same way. Filing Form 10E before the return is therefore the one step a pensioner must not miss when arrears are received.

Tax deducted at source on arrears

The disbursing bank, as the payer of a service pension, deducts tax at source on the pension under Section 192 of the Income-tax Act where the pensioner’s income is taxable, and this extends to the arrears of a service pension. The bank can give effect to the Section 89 relief in its tax deduction, but only after the pensioner submits Form 10E to the bank, and it does so at its discretion; a pensioner who prefers can instead let the bank deduct on the gross and claim the Section 89 relief in the return, having filed Form 10E. Either way the relief runs through Form 10E.

The family pension is treated differently for tax deduction, because it is taxed as income from other sources rather than as salary, so Section 192 does not apply to it and the disbursing bank does not ordinarily deduct tax at source on family pension arrears. The family pensioner accounts for the arrears in their return and claims the Section 89 relief there, again through Form 10E. The income tax for pensioners article sets out the taxation of a pension and a family pension in full; for arrears, the point is that the service pensioner may see tax deducted at source while the family pensioner usually does not, but both get the Section 89 relief on the same basis.

A worked example

Suppose a pensioner’s pension is corrected upward by Rs. 4,000 a month of basic pension with effect from a date 30 months earlier, and dearness relief runs on it. The arrears are the Rs. 4,000 a month for 30 months, which is Rs. 1,20,000 of basic-pension arrears, plus the dearness relief on that Rs. 4,000 for each of the 30 months at the rate in force in each month, which adds a further amount rising with the dearness-relief rate over the period. The bank credits the total as a lump sum and pays the higher pension going forward.

For tax, the pensioner receives the whole lump sum in one year, but it relates to the 30 months across earlier years, so the pensioner files Form 10E, spreading the arrears over those years under Section 89, and is taxed as if the arrears had been received then. Where the correction followed a belated claim rather than a departmental revision, the arrears might have been restricted to about three years before the claim in any event, which in this example covers the whole 30 months. The example shows the two things a pensioner does with arrears: check the computation of the shortfall and the dearness relief on it, and claim the Section 89 relief through Form 10E.

What a pensioner should check

When an arrears payment is credited, a pensioner has a few things worth checking, because errors in an arrears calculation are common. The first is the effective date: the arrears should run from the date the revision or the correction takes effect, and a shortened period understates them. The second is the monthly shortfall: the difference between the revised and the old basic pension should be right for each month, and where the revision itself changed over the period, the shortfall should change with it. The third is the dearness relief: the arrears should include dearness relief on the revised basic pension for each month at the rate in force in that month, not a single flat rate, because the dearness relief rose over the period.

Where the figures look short, the pensioner can trace them against the revised authority and, for a pay-commission revision, against the concordance table for their pre-revised pay, and take up any discrepancy through the grievance channel of the Department of Pension and Pensioners’ Welfare. Because an under-computed arrears is itself a shortfall in a due pension, it can be corrected, with the further arrears paid, though the three-year rule on belated claims is a reason not to sit on a discrepancy. Checking the arrears when they are paid, rather than years later, is the way to secure the full amount.

Pension arrears and the 8th Central Pay Commission

The next large tranche of pension arrears will follow the 8th Central Pay Commission. When it reports and the pension is revised, the revision will take effect from a date, and the arrears will run from that effective date to the date the revised pension is implemented, exactly as they did on the 7th Central Pay Commission revision from 1 January 2016. A pensioner should expect, on the next revision, both a higher monthly pension going forward and a one-time arrears payment for the intervening period, with the Section 89 relief available on the arrears.

No figure for the 8th Central Pay Commission arrears can be stated until the Commission reports, the revision is notified, and the effective and implementation dates are known. What can be said is the shape of it: a revised pension from an effective date, arrears for the gap before implementation, no interest on those arrears as they arise from the process rather than a lapse, and Section 89 relief on the lump sum through Form 10E. The mechanics described in this article will apply to that revision as they apply to any other.

Related Articles

• Revision of pension
• Central government pension
• Central government pension calculation
• Dearness relief
• Concordance table
• Section 89 relief
• Income tax for pensioners
• Pension sanction process and timeline
• Interest on delayed pension
• Provisional pension
• Restoration of commuted pension
• Commutation of pension
• Family pension
• PPO and life certificate
• Central Pension Accounting Office
• Dearness allowance
• TDS on salary
• Old Pension Scheme
• CCS (Pension) Rules, 2021
• 8th Central Pay Commission

External references

• Department of Pension and Pensioners’ Welfare
• Central Pension Accounting Office
• Income Tax Department
• CCS (Pension) Rules, 2021 (pensionersportal.gov.in)

References

1. Central Civil Services (Pension) Rules, 2021, Rule 65, interest at the General Provident Fund rate on pension, family pension, or gratuity delayed for administrative reasons, and Rule 62 (provisional pension bridging a delay in sanction).
2. Union of India v. Tarsem Singh, (2008) 8 SCC 648, restricting arrears on a belated claim to about three years preceding the writ petition, and M.R. Gupta v. Union of India, (1995) 5 SCC 628, on the continuing wrong and the right to correct fixation prospectively.
3. Income-tax Act, 1961, Section 89(1) and Rule 21A of the Income-tax Rules, relief on arrears of salary and pension received in a lump sum, claimed by filing Form 10E before the return.
4. Central Board of Direct Taxes instructions on tax deducted at source under Section 192 by the disbursing bank on a service pension, and the treatment of family pension as income from other sources.
5. Department of Expenditure and Department of Pension and Pensioners’ Welfare Office Memoranda revising dearness relief, effective 1 January and 1 July, generating dearness-relief arrears.
6. Ministry of Finance, Department of Expenditure, Resolution F. No. 01-01/2025-E.III(A), dated 3 November 2025, constituting the 8th Central Pay Commission.