Rule 35 — GAR
Original Rule Text
# 35. Classification and accounting of recoveries of overpayments
Recoveries of overpayments whether made in cash or by deduction from payment vouchers shall always be taken as reduction of expenditure under the appropriate expenditure head concerned rrespective of the year to which such recoveries relate.
What This Means
Rule 35 establishes a clear and important principle for handling overpayments that are later recovered. When a government officer or department is paid more than they were entitled to — whether due to a calculation error, a misclassification, or any other reason — and that excess amount is later recovered (either by a cash return or by deducting it from a future payment), the recovery must always be treated as a reduction of expenditure. It cannot be treated as a receipt or as income to the government.
This rule applies regardless of whether the original overpayment happened in the current financial year or in a past financial year. If an employee was overpaid three years ago and the recovery is made today, the recovery still reduces the expenditure head — it does not go into a receipts head as a new revenue item. This consistency principle prevents a misleading inflation of both expenditure and receipts figures: without this rule, the same money would appear twice — once as expenditure (the original payment) and once as a receipt (the recovery), making the government's accounts look larger than they really are.
Practically, this means that when a PAO processes a recovery of an overpayment — whether the employee returns a cheque, or whether the amount is deducted from the employee's next salary — the accounts entry must reduce the original expenditure head (such as 'Salaries') by the recovered amount. The accounts will then accurately show only the net legitimate expenditure on that head.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Recoveries of overpayments — whether in cash or by deduction from a payment voucher — must always be treated as reduction of expenditure under the original expenditure head.
- 2They must never be treated as revenue receipts or income.
- 3This principle applies regardless of which financial year the original overpayment occurred — year of recovery does not change the treatment.
- 4The correct entry is a debit to the paying authority (or credit to the cash account) and a credit to the relevant expenditure head, reducing the expenditure.
- 5This prevents artificial inflation of both expenditure and receipts, keeping the net government accounts accurate.
- 6Both types of recovery are covered: cash recoveries (employee returns money) and book recoveries (amount deducted from next payment voucher).
Practical Example
In June 2024, Shri Anil Kumar, a Section Officer in the Ministry of Commerce, was paid a House Rent Allowance of Rs. 28,000 for a month he was not entitled to it (because he had vacated government accommodation but the records were not updated in time). The Rs. 28,000 was charged to head '2052 — Secretariat — General Services — Salaries' in 2024-25.
In December 2025, after the error is detected and confirmed, the Ministry issues a recovery order. Shri Anil Kumar consents to the amount being deducted from his December 2025 salary in two instalments of Rs. 14,000 each. The PAO must apply Rule 35: the recovery is booked as a minus debit (reduction of expenditure) to the same head '2052 — Secretariat — General Services — Salaries' in 2025-26 — not as a receipt under any income head. After both deductions, the net salary expenditure reflected under that head is reduced by Rs. 28,000, correctly reflecting the government's actual expenditure on salaries for that officer.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
▼
▼
▼
▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.