TaxTMI 
TaxTMI 
Deduction of tax at source-Income-tax deduction from salaries during the financial year 1983-84 under section 192 of the Income-tax Act, 1961
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....f even number dated the 14th September, 1982 [printed at [1982] 137 ITR (St.) 37], wherein the rates of income-tax deduction during the financial year 1982-83, from the payments of income-tax chargeable under the head "Salaries" under section 192 of the income-tax Act, 1961, were intimated. 2. Sub-section (1) of the said section provides that the person responsible for paying any income chargeable under the head "Salaries" shall, at the time of making payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee for that financial year. The provisions of sub-section (3) are intended for making adjustments of excess or shortfalls of inadvertent nature and/or due to unforeseen circumstances. Thus, the aggregate tax calculated on the estimated income divided by twelve and rounded to the nearest rupee is required to be deducted from the monthly salary. 3. In the Finance Act, 1983, some modifications have been made. An extract of Sub-Paragraph 1 of Paragraph A of Part III of the First Schedule is at Annexure I. 4. The subs....
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....t of principal sum will be regarded as salary paid during the relevant financial year and assessed to tax accordingly, the interest element qualifies for deduction in accordance with section 80L of the Income-tax Act, 1961. (v) The amount of deposit made by a taxpayer under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, is not allowable as deduction in computing his taxable income. Accordingly, such deposit has to be ignored for the purpose of determining the amount of income-tax deductible at source. (vi) Under section 16 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the taxable salary is to be computed after providing standard deduction. The standard deduction is to be allowed of an amount equal to 25 per cent. of the salary subject to a maximum of Rs. 6,000. For this purpose, the term "salary" will include fees, commission, perquisites or profits in lieu of or in addition to salary, but will not include any payments received by the employees which are specifically exempt from tax under clause (10), (10A), (10AA), (10B), (11), (12) and (13A) of section 10 of the Act. Thus, house rent allowance to the extent exempt under section 10(13A) of....
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....t the employee's own contribution to his individual account in the fund will not exceed 1/5th of his salary during the financial year or Rs. 10,000, whichever is less. "Salary" for this purpose would include dearness allowance if the terms of employment so provide but will exclude all other allowances or perquisites. The expression "recognised provident fund" has been defined in section 2(38) of the Act to mean a provident fund which has been and continues to be recognised by the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule to the Act and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952. (c) The additional monetary ceiling of 1/5th of salary or Rs. 10,000, whichever is less, will not be applicable to the contributions to the provident funds referred to in sub-clauses (iii) and (iv) of clause (a) of sub-section (2) of section 80C. Such provident funds are:- A. Government Provident Fund and Railway Provident Fund; B. Provident Fund established by such local authorities and institutions as are mentioned in the Schedule to the Provident Fund Act, 1925, and those notified by the Go....
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....uch accommodation is situated and other relevant considerations. Rule 2A of the Income-tax Rules, 1962, prescribes the limits in respect of the amount which is not to be included in the total income of the assessee for the purpose of section 10(13A) of the Act. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding house rent allowance from the total income of the employee. However, the Hon'ble Punjab and Haryana High Court has held in the case of Commissioner of Income-tax v. Justice S.C. Mittal [1980] 121 ITR 503, that even in the case of an assessee occupying his own house, the house rent allowance received from the employer is not liable to tax subject to the limits imposed under section 10(13A) of the Act and rule 2A. That judgme....
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....l income for working out these percentages will be computed before making any deduction under section 80GG; (c) 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 duties of his office or carries on his business or profession; or (ii) at any other place, being accommodation in the occupation of the assessee, the value of which is to be determined under clause (i) or, as the case may be, clause (ii) of sub-section (2) of section 23; and (d) The accommodation occupied by him for the purpose of his own residence is situated in any of the following places, namely:- (i) Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior (Laskhar), Hyderabad, Indore, Jabalpur, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Pune (Poona), Srinagar, Surat, Vadodara (Baroda) or Varanasi (Banaras) or the Urban agglomeration of each of such places, and (ii) Bombay, Calicut, Cochin, Ghaziabad, Hubli-Dharwar, Madras, Sholapur, Trivandrum or Visha....
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.... granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties. This may be kept in view while deciding whether any expenditure from the special allowance has been actually incurred, and if so, the extent to which it has been incurred to meet the expenses wholly, necessarily and exclusively in the performance of duties of an office or employment of profit. (xii) Section 80RRA provides that where the gross total income of an individual who is a citizen of India, includes any remuneration received by him in foreign currency from any employer (i.e., a foreign employer of an Indian concern) for any services rendered by him outside India, 50 per cent. of such remuneration will be deducted in computing the taxable income. It also provides that where the assessee renders continuous service abroad for more than 36 months, the remuneration received by him for any period of service after the expiry of the said 36 months will not qualify for any deduction. In the case of an employee of the Central Government or any State Government or a person who was immediately before taking up the service outside India, in the employment of the Central Governmen....
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....he employer subject to the production of a certificate from the ITO in favour of the employer as laid down in this Ministry's Circular No. 272 dated 27-5-1980 [printed at [1980] 124 ITR (St.) 3]. The certificate once issued will continue to be in force till it is withdrawn by the ITO. (xiv) The total income computed in accordance with the provisions of the Act should be rounded off to the nearest multiple of ten rupees by ignoring the fraction which is less than five rupees and increasing the fraction which amounts to five rupees or more, to ten rupees. The net amount of tax deductible should be similarly rounded off to the nearest rupee. (xv) Section 201 provides:- (1) If any such person and in the cases referred to in section 194 the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he is or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax: Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Income-tax O....