Can judges be taxed on allowances under new income tax regime? Delhi High Court to decide

The Delhi High Court is set to examine whether allowances received by Supreme Court and High Court judges can be taxed under the new income-tax regime. [Delhi Tax Bar Association Vs Union of India and another]

The Delhi Tax Bar Association (DTBA) has challenged a September 12, 2025 office memorandum of the Central Board of Direct Taxes (CBDT), which states that the tax benefit available to judges would continue only under the old tax regime.

The case came up before Justices Dinesh Mehta and Rajneesh Kumar Gupta on Tuesday. The hearing was adjourned midway after Delhi High Court Bar Association (DHCBA) president N Hariharan intervened and urged the petitioner’s counsel not to argue the matter during the ongoing the lawyers’ strike.

The petition concerns Section 22D of the High Court Judges Act, 1954 and corresponding Section 23D of the Supreme Court Judges Act, 1958.

These provisions state that rent-free official accommodation, conveyance facilities, sumptuary allowance and leave travel concession provided to judges shall not be included while computing their income under the head “salaries”.

The dispute arose after a High Court judge wrote to the CBDT on August 12, 2025. The representation said the utility for tax deducted at source statements, form 16 and the online income-tax returns did not allow judges to report these statutory exclusions under the new regime.

The CBDT said the Section 22D benefit remained available under the old regime. Since the new regime offers lower rates and higher rebates, further exemptions would give judges a “double benefit”.

The DTBA argued that the CBDT had incorrectly treated a statutory exclusion as an income-tax exemption. An exemption applies after an amount enters the computation of taxable income. The allowances covered by Sections 22D and 23D never form part of taxable salary income, it contended.

The association also argued that the memorandum violates Articles 125 and 221 of the Constitution, which prohibit judges’ allowances from being varied to their disadvantage after appointment.

The DTBA has sought the quashing of the memorandum and modification of form 24Q, form 16, ITR-1 and ITR-4 to enable judges to report the exclusions. Its interim application seeks an extension of the July 31 deadline for filing returns for assessment year 2026-27.

During Tuesday’s hearing, Senior Advocate Sachit Jolly, appearing for DTBA, proposed an alternative interim arrangement. He suggested that judges could report the amounts under “receipts not in the nature of income” and file their returns, and Income Tax department should refrain from processing the issue until the petition gets decided.

Hariharan then intervened and appealed to Jolly to defer the hearing in view of the DHCBA’s decision to abstain from work in protest against the recent proposal to increase the pecuniary jurisdiction of district courts in Delhi.

“Please don’t abandon the cause, because this is going to create issues within the Bar. We are with folded hands making a request to you. It is in your interest,” Hariharan said.

Hariharan clarified that he could not interfere with the Court’s functioning and was only making a request to a member of the bar to cooperate with the strike. He suggested that the matter could be heard the following day instead.

Jolly responded that he was appearing pro bono and not pursuing a personal matter.

“I am appearing pro bono for a cause. There’s an urgent issue because there is a threat to the judges’ salary,” Jolly said.

He urged Hariharan to understand.

Hariharan acknowledged that the case concerned judges and was important. However, he maintained that the bar’s collective decision should be respected.

Jolly then assured Hariharan that he supported the bar’s cause and agreed not to press the matter that day. After a brief discussion on the next date, the Court posted the case for hearing on July 16. No interim order was passed.

Jolly was instructed by advocate Sohum Dua.