TaxTMI 
TaxTMI 
TaxTMI 
Deduction of tax at source-Income-tax deduction from salaries during the financial year 1989-90 under section 192 of the Income-tax Act, 1961
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.... provisions of sub-section (3) of the said section are intended for making adjustment for excess or shortfalls of inadvertent nature and/or due to unforeseen circumstances. The aggregate tax thus calculated on the estimated income divided by 12 and rounded off to the nearest rupee is required to be deducted from the monthly salary. 3. The Finance Act, 1989, has reduced the rate of tax for individuals in the entry slab of Rs. 18,000 to 25,000 from 25% to 20%. There is no change in the rates of tax for the other slabs of income. An extract of Sub-Paragraph (1) of Paragraph "A" of Part III of the First Schedule to the Finance Act, 1989, is at Annexure-I. Some of the other important changes brought about by the Finance Act, 1989, are: (a) Increase in the rate of surcharge from 5% to 8% in the case of every person having a total income exceeding Rs. 50,000. (b) Amendment of section 16 so as to remove the restriction on standard deduction to persons provided with conveyance by the employer. Further, with a view to providing relief to the salaried employees provision of a separate deduction on account of professional tax paid by them has been made. (c) For purposes of deduction under ....
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....62. Further, the value of other benefits or amenities provided free of cost or at concessional rates to the employees like supply of gas, electric energy, water for household consumption, educational facilities, etc., should also be taken into account for the purpose of computing the estimated salary income of the employees during the current financial year (Example III at Annexure-II illustrates computation of some such perquisites.). Further, the value of any benefit or amenity granted or provided free of cost or at concessional rate by an employer to an employee (not being a director of the company or a person who has substantial interest in the company) is not regarded as perquisites received by the employee unless the employee's income under the head "Salary" exclusive of the value of any benefit or amenity not provided for by way of monetary payment exceeds Rs. 24,000. In cases where salary is received from more than one employer, the aggregate salary from these employers will have to be taken into account for the purpose. 5. Exemptions/deductions in computing total income: (i) (a) Clause (10) of section 10 provides exemption of death-cum-retirement gratuity from inclusion....
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.... 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 Government may by notification specify in the Official Gazette, whichever is less. These limits shall not apply in the case where the compensation is paid under any scheme which is approved in this behalf by the Central Government, having regard to the need for extending special protection to the workman in the undertaking to which the scheme applies and other relevant circumstances. It may be added that a number of public sector undertakings have formulated voluntary retirement schemes for their employees. Any payment received by an employee, whether a workman or executive, of a public sector company at the time of his voluntary retirement in accordance with any scheme which the Central Government may approve having regard to the economic viability of the public sector undertaking/company and other relevant circumstances will be exempt under section 10(10C) of the Income-tax Act. (iii) Under section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure i....
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....o meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty; (b) Composite hill compensatory allowance; (c) Any special compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance or disturbed area allowance; (d) Tribal area allowance; (e) Any allowance granted to an employee working in a transport system to meet his personal expenses during his duty performed in the course of running of such transport from one place to another; (f) Children education allowance; (g) Any allowance granted to an employee to meet the hostel expenditure of his child; and (h) Any allowance granted to meet the expenditure incurred on conveyance in the performance of duties of an office or employment of profit. It may be noted that the dearness allowance, city compensatory allowance and house rent allowance granted to an employee are not covered by the aforesaid notifications; these allowances will clearly be part of income and will have to be taken into account in the computation of income for the purpose of deduction of tax at source. (v) The Finance Act, 1989, has inserted a new item (i) in....
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.... aforesaid clause are fulfilled. (vii) (a) Under section 80C of the Act, while computing the taxable income, the disbursing officer should allow deduction of the whole of the first Rs. 6,000, 50% of the next Rs. 6,000 and 40% of the balance of the qualifying amount of payment made by the employee, out of his income chargeable to tax, towards life insurance premium, contributions to provident fund set up by the Central Government or to which the Provident Funds Act, 1925, applies (including contribution to public provident fund constituted under the Public Provident Fund Act, 1968) contributions for participation in the Unit Linked Insurance Plan, 1971 made under section 19(1)(CC) of the Unit Trust Act, 1963, deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, and subscription to the National Savings Certificate (VIII Issue). The interest on National Savings Certificates (VI Issue) is deemed to be reinvested, and, therefore, the holder thereof is entitled to the benefits of section 80C. (b) In respect of contributions to "recognised provident fund", there is another monetary ceiling limit laid down in clause (....
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....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 repayment of loans borrowed by the taxpayer 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 house 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 university. The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. Payment towards the cost of house property, however, will not include, admission fee or cost of share of initial deposit or the cost of the land (except where the consideration for the purchase of house property is a composite amount and the cost of land cannot be separately ascertained) or the cost of any addition or alteration. Payments towards any expenditure in respect of which the deducti....
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....g an athelete) sixty thousand rupees; (2) in the case of any other individual or a Hindu undivided family or any such association of persons or a body of individuals as is referred to in clause (g) of sub-section (2), forty thousand rupees. (f) It may be noted that the deduction provided under section 80C will be available to the taxpayer in respect of such sums paid up to 31st March of the financial year towards the purchase of National Savings Certificates, etc. (viii) Under section 80CCA of the Income-tax Act, as amended by the Finance Act, 1988, 100% deduction will be allowed to an individual, a Hindu undivided family, and certain categories of persons or bodies of individuals, subject to a ceiling of Rs. 30,000 per annum in respect of: (1) any amount deposited under the National Savings Scheme; and (2) any amount paid to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may specify by notification. By Notification No. G.S.R. 903(E), dated September 6, 1988$, the Central Government have specified "Jeevan Dhara" and "Jeevan Akshay" plans of the Life Insurance Corporation of India for the purpose of section 8....
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....e wife or husband, dependent parents or dependent children of the assessee: (b) where the assessee is a Hindu undivided family, any sum paid to effect or to keep in force an insurance on the health of any member of the family; (c) where the assessee is an association of persons or a body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union Territories of Dadra and Nagar Haveli and Daman and Diu, any sum paid to effect or to keep in force an insurance on the health of any member of such association or body or on the health of the dependent children of the members of such an association or body. (x) No deduction should be made from the salary income in respect of any donations for charitable purposes. The tax relief on such donations as admissible under section 80G of the Act will have to be claimed by the taxpayer separately at the time of finalisation of the assessment. However, in cases where contributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, the Prime Minister's Drought Relief Fund, the National Children's Fund or the Indira Gandhi Memorial Trust a....
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....rivandrum or Vishakapatnam. Explanation.-"Urban agglomeration" in relation to a place means the area for the time being included in the urban agglomeration of such place for the purpose of grant of house rent allowance by the Central Government to its employees under the orders issued by it from time to time in this regard. The disbursing authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessees. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. (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 or an Indian concern) for any services rendered by him outside India, an amount equal to the following shall be allowed as deduction in computing the total income of the individual: (i) fifty per cent. of the remuneration; or (ii) seventy-five per cent. of such remuneration as is brought into India, by, or on behalf of, the assessee in accordance with the Foreign Exchange....
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....ved in foreign currency in respect of the period of service outside India. The fact that deduction is admissible only in relation to the first 36 months of continuous service outside India should also be kept in view). (xiii) Under section 80U in computing the total income of a resident individual who is totally blind or suffers from a permanent physical disability, a deduction of Rs. 15,000 is allowed. The Board has by Notification No. S. O. 529(E), dated July 17, 1985$$, specified the physical disabilities which will be reckoned as permanent physical disabilities for purposes of deduction under this section. According to the said Notification, a permanent physical disability shall be regarded as a permanent physical disability for the purpose of clause (ii) of sub-section (i) of section 80U, if it falls in any one of the categories specified below, namely:- (a) permanent physical disability of more than 50 per cent. in one limb, or (b) permanent physical disability of more than 60 per cent. in two or more limbs. (c) permanent deafness with hearing impairment of 71 decibels and above; or (d) permanent and total loss of voice. The deduction of Rs. 15,000 from the total incom....
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....ese provisions, the Central Government have notified necessary amendments in the Income-tax Rules, 1962, vide Notification No. S.O. 963(E), dated October 29, 1987@. Detailed instructions in this regard were issued by the Department, vide Circular No. 504 [F. No. 275/138/87-IT(B)], dated February 8, 1988@@. 7. 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 amount to five rupees or more, to ten rupees. The net amount of tax deductible should be similarly rounded off to the nearest rupee. The amount of income-tax computed in accordance with the preceding provisions of this sub-paragraph shall, in the case of every person having a total income exceeding fifty thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of eight per cent. of such income-tax: Provided that no such surcharge shall be payable by a non-resident. 8. (a) According to the provisions of section 203 of the Income-tax Act, every person responsible for deducting tax at source is required to furnish a certif....
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.... from "salaries" in Form No. 24 prescribed under rule 37 of the Income-tax Rules. It may be noted that the third copy of the TDS Certificate issued to the employees should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall, on an order passed by the income-tax authority, pay, by way of penalty a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees during which the failure continues. (d) According to the provisions of section 200 of the Income-tax Act, any person deducting any sum in accordance with the provisions of section 192 shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government. If he fails to deduct tax at source or after deducting fails to pay the tax to the credit of the Government, he shall be liable to action in accordance with the provisions of section 201. In this connection attention is also invited to the provisions of section 276B of the Income-tax Act, according to which if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a te....