DA Arrears and Income Tax Returns: What Employees Need to Know for FY 2025–26

DA Arrears and Income Tax Returns: What Employees Need to Know for FY 2025–26

DA Arrears and Income Tax Returns: What Employees Need to Know for FY 2025–26 Conflicting messages circulating on social media regarding the tax treatment of Dearness Allowance (DA) arrears credited in January 2026 have created confusion among employees. Tax experts and treasury rules clarify that the treatment depends on when the arrears were taxed earlier and how they appear in Form 16 . Which Financial Year Do January 2026 DA Arrears Belong To? DA arrears credited in January 2026 are generally considered income of Financial Year 2025–26 . Accordingly, such income is normally required to be reported in the Income Tax Return for Assessment Year 2026–27 . This principle follows the standard income tax rule that salary income is taxable in the year in which it is received or credited, unless already taxed earlier. When DA Arrears Need Not Be Shown Again If DA arrears were already included in taxable income in an earlier financial year—based on the year in which the …