TaxTMI 
TaxTMI 
Income-tax deduction from salaries during the financial year 1994-95 under section 192 of the Income-tax Act, 1961
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....,20,000 and of 40 per cent. will apply to incomes above Rs. 1,20,000. The surcharge of 12 per cent. has been abolished by the Finance Act, 1994, in the case of individuals from the financial year 1994-95 onwards. An extract of Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1994, containing the tax rates applicable, is given at annexure I. 3. 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 1994-95 is given hereunder : (i) 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 under this head. The provisions of sub-section (3) of the said section are intended for making adjustment for any excess or shortfall in the deduction of tax made during the financial year. The aggregate tax thus calculated on the esti....
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....ny 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. (vi) 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 of tax deduction at source. Exemption/deductions in computing total income : 4. 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 conditions prescribed in rule 2B of the Income-tax Rules, 1962. For the purpose of this clause, "family" in relation to an individual means-- (1) The spou....
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....ntral 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 workmen in the undertaking to which the scheme applies and other relevant circumstances. (vi) Under section 10(10C), as amended by the Finance Act, 1994, any payment received by an employee of the following bodies at the time of his voluntary retirement is exempted from income-tax to the extent of Rs. 5 lakhs, provided the scheme of voluntary retirement has been framed in accordance with the guidelines prescribed under rule 2BA of the Income-tax Rules, 1962 : (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 co-operative society ; (f) a university established or incorporated by 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) an Indian Institute of....
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....ves in this regard by insisting on production of evidence of actual payment 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. 600 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. (viii) Clause (14) of section 10 provides for exemption of the following allowances : (a) Any special allowance or benefit granted to an employee to meet the expenses incurred in the performance of his duties, which the Central Government may specify by notification in the Official Gazette ; (b) any allowance granted to an assessee either to meet his personal expenses at the....
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....h and any other professional pursuit ; any allowance granted to meet the expenses incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit. It may be noted that the dearness allowance and city compensatory 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. The reimbursement of tuition fee is also not exempt from tax. (ix) 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 (see [1990] 182 ITR (St.) 63), as amended by Notification No. 2/14/89-NS-II, dated 12-10-1989 (see [1994] 209 ITR (St.) 72), the Central Government has noti....
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.... (xi) Under section 17, as amended by the Finance Act, 1994, exemption from tax will also be available in respect of _ (a) the value of any medical treatment provided to an employee or any member of his family, in any hospital maintained by the employer ; (b) 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. It may be noted that the benefit in respect of the perquisite mentioned in (b) above is allowable retrospectively with effect from the 1st day of April, 1993. (c) premium p....
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....ion or body or on the health of the dependent children of the members of such an association or body. (xiii) Under section 80DD, deduction of Rs. 15,000 is allowed in the case of resident individuals who incur expenditure on the medical treatment (including nursing), training and rehabilitation of a handicapped dependent relative, 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 all assessees 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, oculist 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. The drawing and disbursing officers should, therefore, call for such particulars/certificates/information from the employees as they deem necessary to verify the genuineness of the claim before they allow this deduction. (xiv) Under section 80E which has been introduced into....
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....xpayer in the return of income. However, in cases where contributions are made to the National Defence Fund, the Jawaharlal Nehru Memorial Fund, the Prime Minister's Drought Relief Fund, the National Children's Fund, the Indira Gandhi Memorial Trust or the Rajiv Gandhi Foundation, 50 per cent. of such contributions may be deducted in computing the total income of the employee. Similarly, the donations to the Prime Minister's National Relief Fund, the Prime Minister's Armenia Earthquake Relief Fund, the Africa (Public Contributions_India) Fund, the National Foundation for Communal Harmony, and the Chief Minister's Earthquake Relief Fund, Maharashtra, will be eligible for 100 per cent. deduction. The existing restriction in section 80G that deduction will be allowed only if the aggregate of donations made in a year is Rs. 250 or more, has been removed by the Finance Act, 1994. Now, all eligible donations, without any lower limit, will be deductible under the provisions of section 80G with effect from 1-4-1994 (i.e., for the assessment year 1994-95 and subsequent years). (xvi) Under section 80GG of the Act, an assessee is entitled to a deduction in respect of house rent paid by him....
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....(xvii) 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 Regulation Act, 1973, and any rules made thereunder, whichever is higher. 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 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 sa....
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....a hospital maintained by a local authority as specified in the Explanation given below section 80DD. Tax rebate : 5. According to section 88, an assessee will be entitled to a rebate (subject to the specified limits) in respect of the amounts invested or deposited in the following items, during the previous year, out of his income chargeable to tax, 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 payment made on a policy as is not in excess of 10 per cent. of the 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 is referred to in item (viii) 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 ; (iii) any sum deducted from the salary payable ....
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....India Act, 1963, under any plan formulated in accordance with any such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf ; (x) 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 ; (xi) 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 ; (xii) any subscription made to any such deposit scheme (not being a scheme the interest on deposits whereunder qualifies for deduction under section 80-L), 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 residential purposes, or, (b) any authority constituted in India by,....
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....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 1994-95, no tax rebate in respect of these items shall be admissible to the employees. 5.1 Subject to the limits mentioned for the various items, the entitlement to tax rebate will be calculated at the rate of 20 per cent. of the total amount of the aforesaid savings, etc., in the case of individuals, and, at the rate of 25 per cent. in the case of an author or playwright or artist or musician or actor or sportsman (including an athlete) whose income derived from the exercise of his profession as such author/playw....
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....he tax rebate provided for in section 88 and section 88B (wherever applicable) should be allowed as a deduction. The balance amount is the tax payable by the employee which is required to be deducted from the monthly salary in equal instalments. It may be noted here that the tax rebate under sections 88 and 88B shall not in any case exceed the amount of income-tax on the total income of the assessee with which he is chargeable. (b) Rounding off. _ It may also be noted that 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 less than five rupees and increasing the fraction which is five rupees or more, to ten rupees. Similarly, the net amount of tax deductible should be rounded off to the nearest rupee by ignoring the fraction less than 50 paise and increasing the fraction which is fifty paise or more, to one rupee. Miscellaneous provisions for information/guidance of DDOs : 7. As stated in para 3 above, sub-section (1) of section 192 makes the person responsible for paying salary, also responsible for deducting income-tax at source from the payment of salary. The scope ....
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....(see [1988] 171 ITR (St.) 7). 7.1 Section 197 further 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. 7.2 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, and whose gross total income does not exceed Rs. 1,00,000) 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 the Life Insurance, Provident Fund, NSC, etc., if ....
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....t 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. 8.2 According to 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 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, in the case of employees receiving salary income. The certificate has to be issued in Form No. 16 which has been prescribed under Board's Notification No. S.O. 148(E), dated 28-2-1991 (see [1991] 188 ITR (St.) 89). A specimen of the certificate is enclosed as annexure-III. This certificate is to be issued on the tax deductor's 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 not be less than Rs. 100 but which may extend to Rs. 200, for every day during which the failure co....