TaxTMI 
TaxTMI 
Instructions for deduction of tax at source from salaries during the financial year 2000-2001
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.... 2. Where the total income exceeds 10 per cent, of the amount by which Rs. 50,000 but does not exceed the total income exceeds Rs. 50,000 Rs. 60,000 3. Where the total income exceeds Rs, 1,000 plus 20 per cent of the amount Rs. 60,000 but does not exceed by which the total income exceeds Rs. 1,50,000 60,000 4. Where the total income exceeds Rs. 19,000 plus 30 per cent of the Rs. 1,50,000 amount by which the total income exceeds Rs. 1,50,000. Surcharge on income-tax The amount of income-tax so computed shall be reduced by the amount of rebate of income-tax calculated under Chapter VIII-A and the income- tax so reduced shall be increased by a surcharge : (a) @ 10% of such income-tax where the total income exceeds sixty thousand rupees but does not exceed one lakh fifty thousand rupees; (b) at the rate of fifteen per cent of such income-tax where the total income exceeds one lakh fifty thousand rupees. However, the total amount payable as income-tax and surcharge shall not exceed the total amount payable as inco....
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....reupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take into account in making the deduction under Para (3.1) above. Explanation.For this purpose University means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be University for the purpose of the Act. 3.4 Sub-section (2B) of section 192 enables a taxpayer to furnish particulars of income under any head other than Salaries and of any tax deducted at source thereon, in the prescribed Form (No. 12C) vide Annexure II. Such income should not be a loss under any such head or other than the loss under the head Income from house property for the same financial year. The person responsible for making payment (DDO) shall take such other income and tax, if any, deducted at source from such income, and the loss, if any, under the head Income from house property into account for the purpose of computing tax deductible under section 192 of the Income-tax Act. It is, however, provided that this sub-section shall not in any case have ....
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....ent deductions during that financial year itself. 3.6 The trustees of a recognised Provident Fund or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule to the Act applies, at the time when accumulated balance due to an employee is paid, make therefrom the deduction specified in rule 10 of Part A of the Fourth Schedule. 3.7 Where any contribution made by an employer, including interest on such contributions, if any, in an approved Superannuation Fund is paid to the employee, tax on the amount so paid shall be deducted by the trustees of the Fund to the extent provided in rule 6 of Part B of the Fourth Schedule to the Act. 3.8 For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the prescribed rate of exchange. Persons responsible for deducting tax and their duties 4.1 Under clause (i) of section 204 of the Act, the persons responsible for paying for the purpose of section 192 means the employer himself or if the employer is a company, the company itself....
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.... has been deducted and to specify therein the amount deducted and certain other particulars. This certificate, usually called the TDS certificate, has to be furnished within a period of one month from the end of the relevant financial year. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. In the case of employees receiving salary income including pension, the certificate has to be issued in Form No. 16 which has been prescribed under Boards Notification No. S.O. 148(E), dated 28-2-1991. A specimen of the certificate is enclosed as Annexure III. This certificate is to be issued on the tax-deductors own stationery within one month from the close of the financial year, i.e., by April 30 of every year. If he fails to issue the TDS certificate to the person concerned as required by section 203, he will be liable to pay, by way of penalty, under section 272A, a sum which shall be Rs. 100 for every day during which the failure continues. 4.7 According to the provisions of section 203A of the Income-tax Act, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax-deduction Account No. (TA....
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....at source from salaries is No. 9 with Blue colour Band. Where the amount of tax deducted at source is credited to the Central Government through book adjustment, care should be taken to ensure that the correct amount of income-tax is reflected therein. 4.11 In the case of pensioners who receive their pension from a nationalised bank, the instructions contained in this circular shall apply in the same manner as they apply to salary income. The deductions from the amount of pension on account of standard deduction under section 16 and the tax rebate under section 88B (in the case of pensioners, resident in India, who are 65 years of age or more: refer Para 6) will be allowed by the concerned bank at the time of deduction of tax at source from the pension, before making payment to the concerned pensioner. As regards the tax rebate under section 88 on account of contribution to Life Insurance, Provident Fund, NSC, etc., if the pensioners furnish the relevant details to the banks, the tax rebate at the specified rate may also be allowed. Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalised banks vide RBIs Pen....
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.... or before it became due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year. (2) For the removal of doubts, it is clarified that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. Any salary, bonus, commission or remuneration by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as Salary. (3) Salary includes wages, fees, commissions, perquisites, profits in lieu of, or, in addition to salary, advance of salary, annuity or pension, gratuity, payments in respect of encashment of leave, etc. It also includes the annual accretion to the employees account in a recognised provident fund to the extent it is chargeable to tax under rule 6 of Part A of the Fourth Schedule of the Income-tax Act. Contributions made by the employer in excess of 12% of the salary of the employee, along with interest applicable, shall be included in the income o....
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....f any benefit derived as a result of allotment of shares, debentures or warrants directly or indirectly under the Employees Stock Option Plan or Scheme. 5.2 Incomes not included in the head Salaries (Exemptions) : Any income falling within any of the following clauses shall not be included in computing the income from salaries for the purpose of section 192 of the Act : (1) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India, or (b) on retirement from service, or, after termination of service to any place in India is exempt under clause (5) of section 10 subject, however, to the conditions prescribed in rule 2B of the Income-tax Rules, 1962. For the purpose of this clause, family in relation to an individual means : (i) the spouse and children of the individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. It may also be noted that the amount exempt under this clause shall in no case exceed the am....
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.... (6) Under section 10(10C), as amended by the Finance Act, 2000, any payment received by an employee of the following bodies at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation, is exempted from income-tax to the extent that such amount does not exceed five lakh rupees : (a) a public sector company; (b) any other company; (c) an authority established under a Central, State or Provincial Act; (d) a local authority; (e) a Cooperative Society; (f) a university established or incorporated or under a Central, State or Provincial Act, or, an institution declared to be a university under section 3 of the University Grants Commission Act, 1956; (g) any Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institute of Technology Act, 1961; (h) such Institute of Management as the Central Government may by Notification in the Official Gazette, specify in this behalf. It may al....
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....yment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee. Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance up to Rs. 3,000 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent. (10) Clause (14) of section 10 provides for exemption of the following allowances: (i) Any special allowance or benefit granted to an employee to meet the expenses incurred in the performance of his duties as prescribed under rule 2BB subject to the extent to which such expenses are actually incurred for that purpose. (ii) Any allowance granted to an assessee either to meet his personal expenses at the place o....
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....bsp; any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or of any member of his family : (i) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; (ii) in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines : Provided that in a case falling in sub-clause (ii), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital; (c) premium paid by the employer in respect of medical insurance taken for his employees (under any scheme approved by the Central Government, or the reimbursement of insurance premium to the employees who take medical insurance for themselves or for their family members (under any scheme approved by the Central Government); (d) reim....
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....ecified in sub-clause (b) of clause (ii) of section 16 will be given only if the allowance is regularly received by him from his present employer from a date prior to 1st April, 1955. The tax on employment within the meaning of clause (2) of article 276 of the Constitution of India leviable by, or, under any law, shall also be allowed as a deduction in computing the income under the head Salaries. 5.4 Deductions under Chapter VI-A of the Act : The following deductions under Chapter VI-A of the Act are available : (1) As per section 80CCC, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India for receiving pension from the Fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessees account, if any) as does not exceed the amount of ten thousand rupees in the previous year....
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....n such individual of HUF for his support and maintenance and is suffering from permanent physical disability (including blindness or mental retardation, specified in rule 11A of the Income-tax Rules, 1962). The deduction will be available to individuals without any restriction with regard to their total income. The permanent physical disability or mental retardation of the dependent relative has to be certified by a physician, surgeon, occulist or a psychiatrist, as the case may be, working in a Government hospital, including a Departmental dispensary or a hospital maintained by a local authority as per Explanation given below section 80DD. It would be sufficient if the employee furnishes a medical certificate from a Government Hospital and a declaration in writing duly signed by the claimant certifying the actual amount of expenditure on account of medical treatment (including nursing) training and rehabilitation of the handicapped dependent and receipt/acknowledgements for the amount paid of deposited in the specified schemes of LIC or UTI. Therefore, DDOs may not insist production of vouchers/bills by the employees for having incurred expenditure on medical treatment of their ha....
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....on or any approved charitable institution for the purpose of pursuing his higher education, or interest on such loan : Provided that the amount which may be so deducted shall not exceed forty thousand rupees. (ii) The deduction specified above shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the loan referred to above together with interest thereon is paid by the assessee in full, whichever is earlier. For this purpose (a) approved charitable institution means an institution established for charitable purposes and notified by the Central Government under clause (2C) of section 10, or, an institution referred to in clause (a) of sub-section (2) of section 80G; (b) financial institution means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, sp....
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....Government, xvii.The Fund for Technology Development and Application set up by the Central Government. (7) Under section 80GG of the Act, an assessee is entitled to a deduction in respect of a house rent paid by him for his own residence. Such deduction is permissible subject to the following conditions : (a) the assessee has not been in receipt of any House Rent Allowance specifically granted to him which qualifies for exemption under section 10(13A) of the Act; (b) the assessee files the declaration in Form No. 10BA (Annexure-VII). (c) He will be entitled to a deduction in respect of house rent paid by him in excess of 10 per cent of his total income, subject to a ceiling of 25 per cent thereof or Rs. 2,000 per month, whichever is less, the total income for working out these percentages will be computed before making any deduction under section 80GG. (d) The assessee does not own : (i) any residential accommodation himself or by his spouse or minor child or where such assessee is a member of a Hindu undivided family, by such family, at the place where he ordinarily resides or performs duti....
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.... for his wife or children, insofar as the sum deducted does not exceed 1/5th of the salary. (4) Any contribution made : (a) by an individual to any Provident Fund to which the Provident Fund Act, 1925 applies; (b) to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of an individual, or a minor, or of whom he is a guardian; (c) by an employee to a recognised provident fund; (d) by an employee to an approved superannuation fund. It may be noted that contribution to any fund shall not include any sums in repayment of loan. (5) Any deposit in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959, as amended from time to time, where such sums are deposited in an account standing in the name of an individual, or a minor, or of whom he is the guardian. (6) Any subscription : (a) to any such security of the Central Government or any such deposit scheme as the Central Government may, by notification in the Official....
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....ying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. (13) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head Income from house property (or which would, if it has not been used for the assessees own residence, have been chargeable to tax under that head) where such payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board, etc. The deduction will also be allowable in respect of re-payment of loans borrowed by an assessee from the Government, or any bank or Life Insurance Corporation, or National Housing Bank, or certain other categories of institutions engaged in the business of providing long-term finance for construction or purchase of houses in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, public sector company or a university established by law or a college affiliated to such universi....
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..... Explanation : For the purposes of this clause (i) eligible issue of capital means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the purposes of developing, maintaining and operating an infrastructure facility or for generating, or for generating and distributing, power or for providing telecommunication services whether basic or cellular; (ii) infrastructure facility shall have the meaning assigned to it in clause (ca) of sub-section (12) of section 80-IA; (iii) public company shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (iv) public financial institution shall have the meaning assigned to it in section 4A of the Companies Act, 1956. (15) Subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form: Provided that where a deduction is claimed and allowed under this clause with reference to the cost of units, the cost of such units shall not be taken into account for the purposes....
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....bout the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information as they deem necessary before allowing the aforesaid rebate. In case the DDO is not satisfied about the genuineness of the employees claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the Assessing Officer. Calculation of income-tax to be deducted 7.1 Salary income for the purpose of section 192 shall be estimated as follows : (a) First compute the gross salary as mentioned in para 5.1 excluding all the incomes mentioned in para 5.2; (b) Allow deductions mentioned in para 5.3 from the figures arrived at (a); (c) Allow deductions mentioned in para 5.4 from the figure arrived at (b) ensuring that aggregate of the deductions mentioned in para 5.4 does not exceed the figure of (b) and if it exceeds, it should be restricted to that amount. This will be the amount of income under the head Salaries on whi....
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....0 C.G.E.I.S. 920 LIC Premium Paid 5,000 5,000 10,000 C.T.D. 2,500 36,000 N.S.C. 2,000 5,000 P.P.F. 5,000 Contribution to Mutual Fund 10,000 Computation of total income and tax payable thereon 1. Gross Salary 1,00,000 5,00,000 6,00,000 2. Less : Standard deduction under section 16 25,000 20,000 Nil Taxable Income 75,000 4,80,000 6,00,000 Tax thereon 4,000 1,18,000 1,54,000 Less : Tax rebate under section 88 (20% on Rs. ......) GPF 10,000 20,000 ....
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....000 only) 40,000 Taxable Income 2,60,000 Rs. Income-tax thereon 52,000 Rebate under section 88 GPF 25,000 LIP 10,000 Total 35,000 Rebate @ 20% on Rs. 35,000 7,000 Tax payable 45,000 Add : Surcharge @ 15% 6,750 Total Tax payable 51,750 Example 3 Calculation of income-tax in the case of an employee where Medical Treatment expenditure was borne by the employer Particulars (Rupees) 1. Gross salary 3,00,000 2. Medical reimbursement by employer on the treatment of self and dependent family member 30,000 3. Contribution to GPF 20,000 4. LIP 20,000 5. Repayment of House Building Advance 25,000 6. Investment in infrastructure Bond under section 88(xvi) 20,000 Computation of Tax Gross Salary 3,00,000 Add : Perquisite in respect of reimbursement of Medical Expenses in excess of R....
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.... off) 70,300 Tax on Total Income 3,060 Rebate under section 88 Rs. GPF 24,000 LIP 2,500 CTD 2,400 Contribution to Mutual Fund 10,000 39,900 @ 20% 7,980 Tax on Total Income 3,060 Less : Tax rebate restricted to 3,060 Tax payable Nil Note: Tax rebate is restricted to tax on total income. Example 5 Illustrating valuation of perquisites and calculation of tax in the case of an employee of a private company, posted at Delhi Particulars (Rupees) 1. Salary 1,08,000 2. Bonus 12,000 3. Free gas, electricity, water etc. (actual bills paid by Company) 6,000 4. Furnished flat provided to the employee for which actual rent paid by the Company 78,000 5. Rent received from the employee 12,000 6. Furniture at cost (including television, fridge washing....
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....otal Income 12,400 Tax rebate (restricted) 12,400 Tax Payable Nil Example 6 Illustrating valuation of perquisite and calculation of tax in the case of an employee of a Private Company posted at Delhi and repaying Housing Building Loan Particulars (Rs.) 1. Salary 1,18,000 2. Dearness allowance 36,000 3. House Rent Allowance 12,000 4. Special Duties allowance 2,400 5. Provident Fund 20,000 6. L.I.P. 10,000 7. Deposit in NSC VIII Issue 20,000 8. Rent paid by the employee for house hired by him 24,000 9. Repayment of House Building loan taken by the employee from LIC 12,000 10. Subscription to eligible issue of capital of a Co. approved under section 88(xvi) 5,000 11. Subscription to units of mutual fund under section 88(xvii) 15,000 Computation of total income and tax payable thereon 1. Gross Salary 1,68,400 Less : House rent allowance exempt under section 10(13A) (a) Actua....
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....id 5,000 10. Contribution to PPF 3,000 11. Purchase of NSC (VIII) 10,000 12. Repayment of Principal of HBA* 12,000 13. Subscription to UTIs MEP 8,000 Computation of total income and tax payable thereon Rs. Gross Salary 1,95,000 Add - Medical expenditure directly paid by Employer to a private practi-tioner is not to be added as perquisite only to the extent of Rs. 15,000 in view of proviso (v) to sub-clause (v) of clause (2) of section 17. Hence the balance to be added back as perquisite. 10,000 - Medical expenditure directly paid by employer to a hospital approved by Chief Commissioner and reimbursement of such expenditure in respect of any ailment as prescribed in Notification No. 9107, dated 7-10-1992 is exempt under section 17(2)(v)(ii). Hence, there will be no perquisite in respect of amounts of Rs. 50,000 and Rs. 10,000 as mentioned in item No. 3 and item No. 4 respectively. - Expenditure on travelling for the purpose of treatment abroad (including expenditure on travelling and of one attendent). This is not to be available in this case as a....
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....alue Nil Interest payable on loan under section 24 90,000 Loss from house property (-) 90,000 Gross Total Income 2,90,000 Less : Deduction under section 80G 50% of Rs. 5,000 2,500 Net Taxable Income 2,87,500 Tax thereon 41,250 Less : Rebate under section 88 G.P.F. 20,000 N.S.C. 10,000 Housing Loan repaid (maximum) 20,000 Total 50,000 Rebate @ 20% of Rs. 50,000 10,000 Tax payable 31,250 Add : Surcharge @ 15% 4,688 Total Tax payable 35,938 Example 9 Income-tax calculation in the case of a women assessee who is less than age of 65 years Particulars (Rs.) Gross Salary 1,20,000 G.P.F. 10,000 N.S.C. purchased 10,000 Computation of Taxable Income and Tax thereon ....