TaxTMI 
TaxTMI 
Instructions for deduction of tax at source from salaries during the financial year 1999-2000
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.... not Nil exceed Rs. 50,000 2. Where the total income exceeds 10 per cent, of the amount Rs. 50,000 but does not exceed by which the total income Rs. 60,000 exceeds Rs. 50,000 3. Where the total income exceeds Rs. 1,000 plus 20 per cent of Rs. 60,000 but does not exceed the amount by which the total Rs. 1,50,000 income exceeds Rs. 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. The amount of income-tax so computed shall be reduced by the amount of rebate of income-tax calculated under Chapter VIIIA and the income-tax so reduced shall be increased by a surcharge @ 10% of such income-tax. However, the total amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on a total income of Rs. 60,000 by more than the amount of income that exceeds Rs. 60,000. No surcharge shall be payable by a non-resident. Section 192 of the Income-tax Act, 1961 : Broad Scheme of tax deduction at source from Salaries etc. 3.1 Every....
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....s and of any tax deducted at source therein, in the prescribed Form (No. 12C) vide Annexure IV. 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 the effect of reducing the tax deductible except where the loss under the head Income from house property has been taken into account, from income under the head Salaries below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account. In other words, the DDO can take into account the loss from house property only for working out the amount of total tax to be deducted. While taking into the account the loss from house property, the DDO shall ensure that the assessee files declaration in Form No. 12C and encloses therewit....
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...., 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 including the principal officer thereof. 4.2 The tax determined as per para 7 should be deducted from the salary under section 192 of the Act. 4.3 Section 197 enables the taxpayer to make an application in Form No. 13 to his Assessing Officer, and, if the Assessing Officer is satisfied that the total income of the taxpayer justifies the deduction of income-tax at any lower rate or no deduction of income-tax, he may issue an appropriate certificate to that effect which should be taken into account by the Drawing and Disbursing Officer while deducting tax at source. In the absence of such a certificate from th....
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....icate is to be issued on the tax deductors own stationery. 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. (TAN) in the Challans, TDS-certificates, returns etc. Detailed instructions in this regard are available in this Departments Circular No. 497 [F. No. 275/118/87-IT(B), dated 9-10-1987]. If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty, under section 272BB, a sum of upto Rs. 5,000. 4.8 According to the provisions of section 206 of the Income-tax Act, read with rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and ....
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.... 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 Pension Circular (Central Series) No. 7/C.D.R./1992, (Ref.Co:DGBA: GA(NBS) No. 60/GA.64 (11CVL)-91/92), dated the 27th April, 1992, and, these instructions should be followed by all the branches of the Banks, which have been entrusted with the task of payment of pensions. Further all branches of the banks are bound under section 203 to issue certificate of tax deducted in Form No. 16 to the pensioners also vide CBDT Circular No. 761, dated 13-1-1998. 4.12 Where non-residents are deputed to work in India and taxes are borne by the employer, if any refund becomes due to the employee after he has already left India and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the tax has been borne by it : Circular No. 707, dated 11-7-1995. 4.13 TDS certif....
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....ncashment 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 in the employee, along with interest applicable, shall be included in the income of the assessee for the previous year. Other items included in salary, profits in lieu of salary and perquisites are described in section 17 of the Income-tax Act. The scope of term profit in lieu of salary has been amended so as not to include interest on contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. For the purposes of this sub-clause, the expression Keyman insurance policy shall have the meaning assigned to it in clause (10D) of section 10. It may be noted that, since salary includes pensions, tax at source would have to be deducted from pension also, if otherwise called for. However, no tax is required to be deducted from the commuted portion of pension as explained in clause (3) of para 5.2 of this Circular. (4) The value of perqu....
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....eat equity shares means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions by whatever name called; and (d) value means the difference between the fair market value and the cost for acquiring specified securities. In order to clarify it further, in case any such share, security is directly or indirectly, offered to any assessee by the company or any other person on behalf of such company, the difference between the market value of stock and the cost at which it is offered to the employee shall be taxed as perquisite. This benefit shall be taxed in the year in which the right for such option is exercised by the employee or is exercised and transferred in the name of any other person by him. It is further provided that the difference between the market value on the date of exercise of option and the sale consideration in the event of sale by the employee would be taxed as capital gains in his hands. Section 79 of the Companies (Amendment) Act, 1999 (21 of 1999) provides that a company m....
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....mmutation of pension received under any scheme of any other employer, exemption will be governed by the provisions of sub-clause (ii) of clause (10A) of section 10. (4) Any payment received by an employee of the Central Government or a State Government, as cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement on superannuation or otherwise, is exempt under sub-clause (i) of clause (10AA) of section 10. In the case of other employees, this exemption will be determined with reference to the leave to their credit at the time of retirement on superannuation, or otherwise, subject to a maximum of ten months leave. This exemption will be further limited to the maximum amount specified by the Government of India Notification No. S.O. 1015(E), dated 27-11-1997 at Rs. 2,40,000. (5) Under section 10(10B), the retrenchment compensation received by a workmen is exempt from income-tax subject to certain limits. The maximum amount of retrenchment compensation exempt is the sum calculated on the basis provided in section 25F(b) of the Industrial Disputes Act, 1947 or any amount not less than Rs. 50,000 as the Central Governm....
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....any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called ) in respect of residential accommodation occupied by the assessee is exempt from income-tax to the extent as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations. According to rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be : (a) The actual amount of such allowance received by an employer in respect of the relevant period ; or (b) The actual expenditure incurred in payment of rent in excess of 1/10 of the salary due for the relevant period; or (c) Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or (d) Where such accommodation is situated in any other place, 40% of the salary due to the employee for the relevant period, whichever is the least. For this purpose, Salary includes dearness allowance, ....
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....th July, 1995 (F. No. 142/9/95-TPL) and S.O. No. 395(E), dated 13-5-1998. These guidelines may refer to in Annexures IV & V enclosed with this circular. (11) Under section 10(15)(iv)(i) of the Income-tax Act, interest payable by the Government on deposits made by an employee of the Central Government or a State Government or a public sector company from out of his retirement benefits, in accordance with such scheme framed in this behalf by the Central Government and notified in the Official Gazette is exempt from income-tax. By Notification No. F.2/14/89-NS-II, dated 7-6-1989, as amended by Notification No. F.2/14/1989-NS-II, dated 12-10-1989, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause. (12) Clause (18) of section 10 provides for exemption of any income by way of pension received by an individual or family pension received by any member of the family of an individual who has been in the service of the Central Government or State Government and has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or such other gallantry award as may be specifically notified by the C....
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....r : in the case of an assessee whose income from salary, before allowing a deduction under this clause : (a) does not exceed one lakh rupees, a deduction of a sum equal to thirty-three and one-third per cent of the salary or twenty-five thousand rupees, whichever is less ; (b) exceeds one lakh rupees but does not exceed five lakh rupees, a deduction of a sum of twenty thousand rupees. No standard deduction is available to an assessee whose income from salary exceeds 5 lakh rupees. Explanation - For the purposes of this clause, where salary is due from, or paid or allowed by, more than one employer, the deduction under this clause shall be computed with reference to the aggregate salary due, paid or allowed to the assessee and shall in no case exceed the amount specified under this clause. A deduction is also allowed under clause (ii) of section 16 in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by his employer subject to certain limits. In the case of a Government employee, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five t....
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....sum paid to effect or to keep in force an insurance on the health of any member of the family. However, the deduction can be allowed for a sum not exceeding Rs. 15,000 per annum where the assessee or his wife or husband, or dependent parents or any member of the family in case the assessee is a Hindu undivided family is a senior citizen which means an individual resident in India who is of the age of sixty-five years or more at any time during the relevant previous year. (3) Under section 80DD an assessee, who is a resident in India being an individual or a Hindu undivided family has during the previous year (a) incurred any expenditure for the medical treatment (including Nursing), training and rehabilitation of a handicapped dependent; or (b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or Unit Trust of India subject to the conditions specified in sub-section (2) and approved by the Board in this behalf for the maintenance of handicapped dependent shall in accordance with and subject to the provisions of this section be allowed a deduction of a sum of forty thousand rupees of the previ....
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....was actually incurred. Such deduction shall be reduced by the amount received, if any, under an insurance from an insurer on the medical treatment of the person referred to above. The listed diseases as per the relevant Rule 11DD are specified neurological diseases, and 40% and above disability caused by cancer, full-blown AIDS, Chronic Renal Failure, Nemophiha and Thalassaemia: Provided that no such deduction shall be allowed unless the assessee furnishes a certificate in such form and from such authority as may be prescribed. The form is Form 10-I, and the prescribed authority is any doctor registered with the Indian Medical Association and holding Post-graduate qualifications. For the purposes of this section, dependent means a person who is not dependent for his support or maintenance on any person other than the assessee. (5) Under section 80E of the Act a deduction will be allowed in respect of repayment of loan taken for higher education, subject to the following conditions: (i) In computing the total income of an assessee, being an individual, these shall be deducted, in accordance with and subject to the provisions of this section, any amount....
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....orial Trust, v. The Rajiv Gandhi Foundation, and to the following bodies to the extent of 100% of the contribution: i. National Defence Fund or the Prime Ministers National Relief Fund, ii. The Prime Ministers Armenia Earthquake Relief Fund, iii. The Africa (Public Contributions-India) Fund, iv. The National Foundation for Communal Harmony, v. Chief Ministers Earthquake Relief Fund, Maharashtra, vi. National Blood Transfusion Council, vii. State Blood Transfusion Council, viii. Army Central Welfare Fund, ix. Indian Naval Benevolent Fund, x. Air Force Central Welfare Fund, xi. The Andhra Pradesh Chief Ministers Cyclone Relief Fund - 1996. xii. The National Illness Assistance Fund, xiii. The Chief Ministers Relief Fund or Lieutenant Governors Relief Fund, in respect of any State or Union Territory as the case may be, subject to certain conditions, xiv. The university or educational institution of national eminence approved by the prescribed aut....
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....sychiatrist as the case may be, working in a Government hospital and which has the effect of reducing considerably such individuals capacity for normal work or engaging in a gainful employment or occupation. The expression Government hospital will include a departmental dispensary or a hospital maintained by a local authority as specified in the Explanation given below section 80DD(4). Tax rebate 6. An assessee, being an individual, will be entitled to tax rebates under Chapter VIII of the Act as given below: (1) Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the wife or husband or any child of the individual; (2) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (8) hereinbelow on the life of the individual, the wife or husband or any child of the individual, provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity; (3) Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a....
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....n 10, by the Unit Trust of India established under the Unit Trust of India Act, 1963, under any plan formulated in accordance with any scheme as the Central Government, may, by notification in the Official Gazette, specify in this behalf; (10) Any contribution made by an individual to any pension fund set up by any Mutual Fund notified under clause (23D) of section 10, or, by the Unit Trust of India established under the Unit Trust of India Act, 1963, as the Central Government may, by notification in the Official Gazette, specify in this behalf; (11) Any subscription made to any such deposit scheme of, or, any contribution made to any such pension fund set up by, the National Housing Bank, as the Central Government may, by notification in the Official Gazette, specify in this behalf; (12) Any subscription made to any such deposit scheme (not being a scheme the interest on deposits whereunder qualifies for deduction under section 80L), as the Central Government may, by notification in the Official Gazette, specify for the purpose of being floated by (a) public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residen....
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....back, by way of refund or otherwise, any sum specified in section 88(2)(xv), no deduction under these provisions shall be allowed in respect of such sums paid in such previous year in which the transfer is made and the aggregate amount of deduction of income-tax so allowed in the earlier years shall be added to the tax on the total income of the assessee with which he is chargeable for such assessment year. It may be noted that the amount which will qualify for tax rebate in respect of this item will not exceed Rs. 10,000. In respect of repayment of loans taken for the purchase or construction of a new residential house property the construction of which does not get completed by the end of the financial year 1999-2000, no tax rebate in respect of these items shall be admissible to the employees. (14) Subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company or as subscription to any eligible issue of capital by any public finance institution in the prescribed form : Provided that where a deduction is claimed and allowed under this clause with reference to the cost of any equity s....
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....rights, artists, musicians, actors, sportsmen and athletes. There will, therefore, be an overall limit for savings which will qualify for tax-rebate. In the case of individuals, the limit on investments made as above, excluding that mentioned in paras 14 & 15, will be Rs. 60,000 and in the case of authors, sportsmen etc. Rs. 70,000. (17) An assessee, being an individual resident in India, who is of the age of sixty five years or more at any time during the previous year shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, with which he is chargeable for any assessment year, of an amount equal to one hundred per cent of such income-tax or an amount of ten thousand rupees, whichever is less. (18) The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/subscription/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 n....
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....lation Officer of the Income-tax Department may be contacted. 8.3 These instructions may please be brought to the notice of all disbursing officers and undertakings including those under the control of the Central/State Government. Circular : No. 781, dated 5-11-1999. Annexure I For Assessment year 2000-2001 Example 1 Calculation of Income-tax in the case of an employee having gross salary income upto Rs. 1,00,000 Particulars (Rupees) Gross salary income (including allowances) 1,00,000 Contribution to G.P.F. 10,000 Central Govt. Employees Insurance Scheme 920 LIC premium paid 5,000 Computation of Total Income and tax payable thereon Rs. 1. Gross salary 1,00,000 2. Less : Standard deduction (Rs. 25,000 or 33.33% whichever is less) 25,000 75,000 Tax on Rs. 75,000 4,000 Less : tax rebate under section 88 (20% on Rs.) &....
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....30,000 LIP 10,000 CTD 36,000 76,000 or Rs. 12,000 whichever is less 12,000 Tax payable 1,42,000 Add : Surcharge @ 10% 14,200 Total tax payable 1,56,200 Note - Where a person makes investment as per section 88(2)(i) to 88(2) (xv) the qualifying amount is Rs. 60,000. However whereas further investment of Rs. 10,000 and above is made in the shares, debentures or units of Mutual Fund as per section 88(2)(xvi) and section 8(2)(xvii) the qualifying amount becomes Rs. 70,000 and a maximum rebate of Rs. 14,000 (20% of 70,000) is allowable. For Assessment year 2000-2001 Example 4 Calculation of Income-tax in the case of assessee having handicapped dependent Particulars (Rupees) (i) Gross salary 3,20,000 (ii) amount spent on treatment of dependent who is handicapped 7,000 (iii) Amount paid to LIC with regard to annuity for the maintenance of handicapped dependent 40,000 (iv) GPF contribution 25,000 (v) LIP paid 10,000 Computation of Tax 1....
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.... For Assessment year 2000-2001 Example 6 (Illustrating Calculation of House Rent Allowance under section 10 (13A) in respect of residential accommodation situated in Delhi) Particulars (Rupees) 1. Salary 49,500 2. Dearness Allowances 43,680 3. House Rent Allowance 9,600 4. C.C.A. 1,200 5. House rent paid 18,000 6. General Provident Fund 24,000 7. Life Insurance Premium 2,500 8. Cumulative Time Deposit 2,400 9. Contribution to Mutual Fund 12,000 Computation of Total Income and tax payable thereon for Assessment year 1999-2000 Rs. 1. Salary + D.A. + C.C.A. 94,380 House rent allowance 9,600 2. Total Salary Income 1,03,980 3. Less : House Rent allowance exempt under section 10(13A): Least of (a) Actual amount of HRA received = 9600 (b) Expenditure on rent in excess of 10% of salary (including D.A. as presumed that D.A. is taken for retirement benefit) &....
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....including bonus 12,000 (b) Add : Excess of (FRV) over 60% of salary including bonus i.e. Rs. (7800072000 = 6000) 6,000 (c) Add : Perquisite of the furniture (10% of cost i.e. 10% of Rs. 50,000) 5,000 23,000 Less : Rent recovered by Co. 12,000 11,000 1,31,000 (d) Add : Perquisite of free gas, electricity etc. 6,000 Gross total income 1,37,000 Less : Standard deduction under section 16(i) 20,000 1,17,000 Tax on total income of Rs. 1,17,000 12,400 Tax Rebate u/s 88 Provident Fund 24,000 Subscription to NSC VIII Issue 18,000 LIP 3,000 Subscription to Mutual Fund 10,000 Contribution to Infrastructural Bond 15,000 70,000 ....
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....xvi) 5,000 (vi) Subscription to units of mutual fund under section 88(xvii) 5,000 70,000 @ 20% 14,000 Net tax payable 2,960 Add : Surcharge @ 10% 296 Total tax payable 3,256 For assessment year 2000-2001 Example 9 (Income-tax calculation in the case of an employee whose Medical Treatment Expenditure was borne by the employer) Particulars (Rupees) 1. Gross annual salary 1,95,000 2. Medical expenditure directly paid by employer to private practitioner 25,000 3. Medical expenditure directly paid to hospital approved by Chief Commissioner of Income-tax 50,000 4. Reimbursement of medical expenses incurred by the employee in a hospital approved by Chief Commissioner 10,000 5. Expenditure on Travelling abroad (including that of attendant) 1,00,000 6. Expenditure incurred on stay and treatment abroad 1,50,000 7. Out of (6) amount permitted by....
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....a new residential house property the construction of which does not get completed by the end of the financial year 1999-2000, no tax rebate in respect of these items shall be admissible to the employees. Annexure II Form for sending particulars of income under section 192(2B) for the year ending 31st March, 19....... 1. Name and address of the employee 2. Permanent Account Number 3. Residential status 4. Particulars of income under any head of income other than Salaries (not being a loss under any such head other than the loss under the head Income from house property) received in the financial year (i) Income from house property ......................... (in case of loss, enclose computation thereof) (ii) Profits and gains of business or profession ......................... (iii) Capital gains ............