TaxTMI 
TaxTMI 
Income-tax deduction from salaries during the financial year 1991-92 under section 192 of the Income-tax Act, 1961
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....0-91, will apply. An extract of sub-paragraph (1) of Paragraph A of Part III of the First Schedule to the Finance (No. 2) Act, 1991, giving the tax rates applicable, is at Annexure 1. 3. Sub-section (1) of section 192 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) of the said section are intended for making adjustment for excess or shortfall 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. 1 4. The substance of the main provisions of law in so far as they relate to income chargeable under the head "Salaries" on which tax is to be deducted at source during the financial year 1991-92 is given hereunder and in the succeeding paragraphs. ....
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....nto account for the purpose of tax deduction at source. (vii) Hitherto, the! value of medical facility provided to employees and members of their families was required to be included in the taxable income of the employees, except to the extent it was exempted under the administrative circulars issued by the Central Board of Direct Taxes. The Finance (No. 2) Act, 1991 has, however, now provided in the Income-tax Act itself, the extent, and the conditions, relevant for exemption from tax, of the medical facilities provided by the employer. The relevant details are given in para 5 (ix) of this circular. Exemptions/Deductions in computing total income : 5. The exemptions/deductions which can be taken into account for computing the total income of an employee are discussed hereunder : (i) 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 co....
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....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. (v) Under section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet the 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 employee in respect of the relevant period ; or (b) the actual expenditure incurred in payment of rent in excess of 1/10th of the salary due for the relevant period ; or ....
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....esaid clause. "Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence". By Notification No. S. 0. 143(E), dated 21-2-1989 ([1989] 176 ITR (St.) 132), S. 0. 144(E), dated 21-2-1989 ([1989] 176 ITR (St.) 133) [as amended by Notification No. 259(E), dated 27-3-1990 ([1990] 183 ITR (St.) 3), GSR. 606 (E), dated 9-6-1989 ([1989] 178 ITR (St.) 43) and S. 0. 267 (E), dated 29-3-1990 ([1990] 183 ITR (St.) 94), the Central Government have specified the following allowances as exempt from tax to the extent and subject to the conditions indicated therein :-- (a) Any allowance granted to meet cost of travel on tour or on transfer, including any allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty ; (b) Any Special Compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance or disturbed area a....
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....12,000, whichever is less. For this purpose the term "Salary" will include fees, commissions, perquisites or profits in lieu of or in addition to salary, but will not include any payment received by the employees which is specifically exempt from tax under clauses (10), (10A), (10AA), (10B), (10C), (10D), (11) (12) and (13A) of section 10 of the Act. Thus, house rent allowance to the extent exempt under section 10 (13A) of the Act will not be taken into account for the purpose of computing the amount of the standard deduction. This deduction will be available also to persons drawing pension during the current financial year at the same rate and subject to the same ceiling as to the employees in actual service. It may be noted that the standard deduction in full will be admissible even to those employees who are entitled to conveyance facilities. (b) 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 of the salaried taxpayers under the head "Salaries". (c) A deduction is also allowed under clause (ii) of section 16 in resp....
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.... does not exceed Rs. one lakh, and subject to such further conditions as the Central Board of Direct Taxes may prescribe. (x) Under section 8OCCA of the Income-tax Act, 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. 40,000 in respect of - (1) any amount deposited under such schemes (e.g., National Savings Scheme (NSS)) as the Central Government may, by notification in the Official Gazette, specify in this behalf ; (2) any amount paid to effect or keep in force a contract for such annuity plan of the L. I. C. as the Central Government may specify by notification. By Notification No. G.S.R. 903 (E), dated 6-9-1988 ([1998] 173 ITR (St.) 130), the Central Government have specified "Jeevan Dhara" and "Jeevan Akshay" plans of the Life Insurance Corporation of India for the purpose of section 80CCA. It may be noted that the aforesaid deduction will be allowed only in respect of deposits/payments made out of the employee's income chargeable to tax. Also, such deposits/payments made up to 31st March of the financial year will qualify f....
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.... return shall be deemed to be the income of the recipient. The Drawing and Disbursing Officers should satisfy themselves about the fact of investment made by the employees by calling for such information/particulars as they may deem necessary before allowing the deduction. Similarly, the Drawing and Disbursing Officers should ascertain from the employees about the return of the investment either by way of repurchase of the units by the Fund, etc., or on the termination of the Plan. In the case of such repurchase, etc., the amount returned should be included in the computation of the employee's income and charged to tax accordingly. (xii) Under section 80D, introduced with effect from 1-4-1987, in the case of the following categories of persons, a deduction can be allowed for a sum not exceeding Rs. 3,000 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in force an insurance on the health of the categories of persons mentioned below provided that such insurance is in accordance with the scheme framed by the General Insurance Corporation of India as approved by the Central Government, popularly known as " Mediclaim ". The ....
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....ntributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, Prime Minister's Drought Relief Fund, National Children's Fund, Indira Gandhi Memorial Trust or Rajiv Gandhi Foundation, are made, 50 per cent. of such contributions may be deducted in computing the total income of the employee. The donations to the Prime Minister's National Relief Fund, the Prime Minister's Armenia Earthquake Relief Fund and the Africa (Public Contributions-India) Fund will, however, be eligible for 100% deduction. Deduction will not be admissible where the aggregate of all contributions during the financial year is less than Rs. 250. (xv) Under section 80GG of the Act, an assessee is entitled to a deduction in respect of house rent paid by him for his own residence at the places specified under rule 11B of the Income-tax Rules, 1962. 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) he will be entitled to a deduction in respect of house rent paid by him in excess of 10 p....
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....uting 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 Regulation Act, 1973, and any rules made thereunder, whichever is higher. In the case of an employee of 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 Government or any State Government, the deduction will be allowed only if the service of the employee is sponsored by the Central Government. In the case of any other individual, the deduction will be allowed only if he is a "technician" and the terms and conditions of his service outside India are approved for the purpose of the said section by the Central Government or the prescribed authority. It is pertinent to note that the deduction is to be allowed with reference to the remuneration received by the individual in foreign currency for services rendered outside India. Thus, if the remuneration is paid to the Indian technician, etc., partly in Indian currency and pa....
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....mployer on the basis of a certificate from a physician, a surgeon, an oculist or a psychiatrist, as the case may be, working in a Government hospital, as stated above. Tax rebate : 6. According to section 88, an assessee will be entitled to a deduction of 20% of the amount invested or deposited in the following items during the previous year from the income-tax payable by him on his total income : - (i) 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. It may be noted that any premium or other payments made on a policy as is not in excess of 10% of the actual capital sum assured, will alone qualify for deduction. (ii) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as has been referred to in section 80CCA(1)(ii), 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. (iii) Any sum deducted from the salary pa....
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....n used for assessee's 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 repayment 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 university, or a local authority. 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 or initial deposit or the cost of any addition or alteration to or renovation or repair of the house property which is carried out aft....
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....enerally and Rs. 14,000 in the case of authors, playwrights, artists, musicians, actors, sportsmen and athletes. The Drawing and Disbursing Officers should satisfy themselves about 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 employee's 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. It may also be mentioned here that the deposits/subscriptions/payments towards the items qualifying for the tax rebate should be made out of the employee's income chargeable to tax. Calculation of income-tax and surcharge : 7. (a) The net salary income in the case of each employee arrived at after allowing the applicable deductions from the gross salary is liable to income-tax during the financial year 1991-92, at the rates referred to in paragraph 2 above....
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....loyer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). (b) Sub-section (2A) of section 192 provides that in respect of salary payment of employees of Government, company, co-operative society, local authority, university, institution, association or Body, deduction of tax at source may be made after allowing relief under section 89(1), whenever salary, etc., is paid in arrears or in advance. (c) Sub-section (2B) enables a taxpayer to furnish particulars of income other than salaries to his employer who shall deduct out of the salary payment, the tax due on the total income subject to the condition that the total amount of tax deducted shall not be less than the amount deductible from income from salaries only. To meet the requirements of these provisions the Central Government have notified the necessary amendments in the Income-tax Rules, 1962, vide Notification No. S. 0. 963(E) dated 29-10-87 (See [187] 168 ITR (St.) 156). Detailed instruct....
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....ny person fails to deduct tax at source, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted by him. Further, section 276B lays down that if a person fails to pay to the credit of the Central Government within the prescribed time the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine.While making the payment of tax deducted at source to the credit of the Central Government, it may kindly be ensured that the correct amount of income-tax is recorded in the relevant challan. It may also be ensured that the right type of challan is used. The relevant challan for making payment of tax deducted 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. (b) According 11o the provisions of section 203 every person responsible for deducting tax at source is required to furnish a certificate to the payee to the effect that tax has been ....