TaxTMI 
TaxTMI 
Income-tax deduction from salaries during the financial year 1998-99 under section 192 of the Income-tax Act, 1961
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....; Rates of income-tax 1. Where the total income does not Nil. exceed Rs. 50,000 2. Where the total income exceeds Rs. 50,000 but does not exceed Rs. 60,000 10 per cent of the amount by which the total income exceeds Rs. 50,000 3. Where the total income exceeds Rs. 60,000 but does not exceed Rs. 1,50,000 Rs. 1,000 plus 20 per cent of the amount by which the total income exceeds Rs. 60,000 4. Where the total income exceeds Rs. 1,50,000 Rs. 19,000 plus 30 per cent of the amount by which the total income exceeds Rs. 1,50,000 3. Section 192 of the Income-....
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....on (2B) of section 192 enables a taxpayer to furnish particulars of income under any head other than "salaries" and of any tax deducted at source thereon, in the prescribed form (No. 12C) vide annexure V. Such income should not be a loss under any such head 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 account the loss from ....
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.... 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 in prescribed manner (vide rule 30 of the Income-tax Rules, 1962). In the case of deductions made by or on behalf of the Government, the payment has to be made on the day of the tax deduction itself. In other cases, the payment has to be normally made within one week of the deduction. 4.5 If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which tax is actually paid. Section 271C lays down that if any 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....
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.... prepare and deliver, by 31st May following the financial year, an annual return of deduction of tax to the designated/concerned Assessing Officer. This return has to be furnished in Form No. 24. If a person fails to furnish in due time the annual return, he shall 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 continues, so, however, that this sum shall not exceed the amount of tax which was deductible at source. 4.9 A return filed on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other computer readable media as may be specified by the Board shall be deemed to be a return for the purposes of section 206 and the Rules made thereunder, and shall be admissible in any proceeding thereunder, without further proof of production of the original, as evidence of any contents of the original or of any fact stated therein. While receiving such returns on computer media, necessary checks by scanning the documents filed on computer media will be carried out and the media may be duly authenticated by the Assessing Officer. 4.10 While making the payment of t....
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....payments by book adjustment, should be accepted by the Assessing Officers if they indicate that credit has been effected to the Income-tax Department by book adjustment and the date of such adjustment is given therein. In such cases, the Assessing Officers may not insist on details like challan numbers, dates of payment into Government account etc., but they should in any case satisfy themselves regarding the genuineness of the certificates produced before them : Circular No. 747, dated December 27, 1996. 4.14 There is a specific procedure laid down for refund of payments made by the deductor in excess of taxes deducted at source, vide Circular No. 285, dated October 21, 1980. 5. Estimation of income under the head "Salaries" : 5.1 Income chargeable under the head "Salaries". (1) The following income shall be chargeable to income-tax under the head "Salaries"- (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not ; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him. (c) any arrears of salary paid o....
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....a benefit or amenity granted or provided to him free of cost or at concessional rate for the purpose of this rule. (5) 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 7 at annexure-I illustrates computation of some such perquisites). The valuation has to be done in accordance with rule 3 of the Income-tax Rules. (6) 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. 5.2 Incomes not included in the head "Salaries" (exemptions) : Any income falling within any of the following clauses shall not be inc....
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....is exemption will be further limited to the maximum amount specified by the Government of India Notification No. S. O. 249(E), dated March 26, 1996, at Rs. 1,35,360. (5) Under section 10(10B), the retrenchment compensation received by a workman 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 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. (6) 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 accordanc....
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....for the relevant period ; or (c) where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50 per cent. of the salary due to the employee for the relevant period ; or (d) where such accommodation is situated in any other place, 40 per cent. of the salary due to the employee for the relevant period, whichever is the least. For this purpose, "salary" includes dearness allowance, i.e., if the terms of employment so provide, but excludes all other allowances and perquisites. 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 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 ....
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....of the Act, 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. (c) premium paid by the employer in respect of medical insurance taken for his employees (under any scheme approved by the Central Government) or reimbursement of insurance premium to the employees who take medical insurance ....
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....ause (ii) of section 16 will be given only if the allowance is regularly received by him from his present employer from a date prior to April 1, 1955. 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 under the head "Salaries". 5.4 Deductions under Chapter VI-A of the Act : The following deductions under Chapter VI-A of the Act are available : (1) As per section 80CCC, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee's account, if any), as does not exceed the amount of ten thousand rupees in the previous year. Where a....
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....ysical disability or mental retardation of the dependent relative has to be certified by a physician, surgeon, occulist 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 the 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. (4) Under section 80DDB, where an assessee who is resident in India has, during the previous year, incurred any expenditure on the medical treatment of such disease or ailment as may be specified in the rules made in this behalf by the Board, for himself or a dependent relative, the assessee shall be allowed a deduction of a sum of fifteen thousand rupees in respect of that previous year in which such expenditure was incurred. The listed diseases as per the relevant rule 11DD are specified neurological diseases, and 40 per cent. and above disability caused by cancer, full-blown AIDS, chronic renal failure, haemophilia and thalassaemia : ....
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.... to the previous year, in which the assessee starts repaying the loan or interest thereon. (6) No deduction should be allowed by the D. D. O. from the salary income in respect of any donations made 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 in the return of income. However, DDOs, on due verification may allow donations to the following bodies to the extent of 50 per cent. of the contribution : (i) National Defence Fund, (ii) Jawaharlal Nehru Memorial Fund, (iii) The Prime Minister's Drought Relief Fund, (iv) The National Children's Fund. (v) The Indira Gandhi Memorial Trust, (vi) The Rajiv Gandhi Foundation, and to the following bodies to the extent of 100 per cent. of the contribution : (i) The Prime Minister's National Relief Fund, (ii) The Prime Minister's Armenia Earthquake Relief Fund, (iii) The Africa (Public Contributions-India) Fund, (iv) The National Foundation for Communal Harmony, (v) Chief Minister's Earthquake Relief Fund, Maharashtra, (vi) National Blood Transfusion Council, (vii) State Blood Transfusion Co....
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....total income of a resident individual, who at the end of the previous year, is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability, or mental retardation, specified in rule 11D, of the Income-tax Rules, 1962, which is certified by a physician, surgeon, occulist or psychiatrist as the case may be, working in a Government hospital and which has the effect of reducing considerably such individual's 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). 6. Tax rebate : 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) here....
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.... a contract for such annuity plan of the Life Insurance Corporation as the Central Government may by notification in the Official Gazette, specify ; (9) Any subscription not exceeding rupees ten thousand, made to any units of any mutual fund, notified under clause (23D) of section 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 ....
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....truction of a house property. Where the house property in respect of which deduction has been allowed under these provisions is transferred by the tax payer at any time before the expiry of five years from the end of the financial year in which possession of such property is obtained by him or he receives 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 1998-99, 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 ....
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....ist/musician/actor/sportsman/athlete constitutes twenty five per cent. or more of his total income. The maximum tax rebate allowable will be Rs. 14,000 generally, and Rs. 17,500 in the case of authors, playwrights, 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 and 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/subscriptions/payments made by the employees, by calling for such particulars/information as ....
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.... In case any assistance is required, the Assessing Officer/the local Public Relation 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. 8.4 Copies of this circular are available with the Director of Income-tax (Research, Statistics and Publications and Public Relations) 6th Floor, Mayur Bhavan, Indira Chowk (Connaught Circus), New Delhi-110 001. (Sd.) Jamna Dass, Under Secretary (IT-B) Central Board of Direct Taxes. [F. No. 275/192/98-IT(B)] Annexure I Example 1 Calculation of income-tax in the case of an employee having gross salary income upto Rs. 1,00,000 Particulars (Rs.) (Rs.) (Rs.) Gross salary income (including allowances) 1,00,000 Contribution to GPF 10,000 Central Government Employees Insurance Scheme 920 L.I.C. premium paid 5,000 Computation of total income and tax payable thereon 1. Gross salary 1,00,000 2. Les....
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....ibution to GPF 30,000 LIP 10,000 CTD 36,000 Computation of total income and tax payable thereon (Rs.) (Rs.) 1. Gross salary 6,00,000 2. Less : Standard deduction Nil 6,00,000 Income-tax on Rs. 6,00,000 1,54,000 Rebate u/s 88 20% of GPF 30,000 LIP 10,000 CTD 36,000 76,000 or Rs. 12,000 whichever is less 12,000 Tax payable 1,42,000 Note : Where a person makes investment as per sections 88(2)(i) to 88(2)(xv) the qualifying amount is Rs. 60,000. However where as further investment of Rs. 10,000 and above is made in the shares, d....
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.... Particulars Rs. Rs. (i) Gross Salary 2,40,000 (ii) Medical reimbursement by employer on the treatment of self and dependent family member 25,000 (iii) Contribution to GPF 30,000 (iv) LIP 20,000 (v) Repayment of house building advance 10,000 (vi) Investment in infrastructure Bond under section 88(2)(xvi) 15,000 Computation of tax Gross salary 2,40,000 Add : Perquisite in respect of reimbursement of medical expenses in excess of Rs. 15,000 in view of section 17(2)(v) 10,000 2,50,000 Less : Standard deduction 20,000 2,30,000 Tax on Rs. 2,30,000 43,000 Rebate under section 88 GPF 30,000 LIC 20,000 Repayment of House Building advance 10,000 Invest....
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.... 24,000 LIP 2,500 CTD 2,400 Contribution to Mutual Fund 10,000 39,900 @ 20% 7,980 Tax on total income 3,060 Less : Tax rebate restricted to Rs. 3,060 Tax Payable Nil Note : Tax rebate is restricted to tax on total income. Example 7 (Illustrating valuation of perquisites and calculation of tax in the case of an employee of a private company, posted at Delhi) Particulars (Rs.) (Rs.) (Rs.) 1. Salary 1,08,000 2. Bonus 12,000 3. Free gas, electricity, water, etc. (actual bills paid by company) 6,000 4. Furnished flat provided to the employee for which actual rent paid by the company 78,000 5. Rent received from the employee ....
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....p; Contribution to Infrastructure Bond 15,000 70,000 Tax rebate @ 20% 14,000 Tax on total income 12,400 Tax rebate (restricted) 12,400 Tax payable Nil Example 8 (Illustrating valuation of perquisites and calculation of tax in the case of an employee of a private company posted at Delhi and repaying housing building loan) Particulars (Rs.) (Rs.) (Rs.) 1. Salary 1,18,000 2. Dearness allowance 36,000 3. House rent allowance 12,000 4. Special duties allowance 2,400 5. Provident Fund 20,000 6. LIP 10,000 7. Deposit in NSC VII issue 20,000 8. Rent paid by the employee for 24,000 house hired by him &nbs....
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....; 1,95,000 2. Medical expenditure directly paid by employer 25,000 to private practitioner 3. Medical expenditure directly paid to hospital 50,000 approved by Chief Commissioner of Income-tax 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 Reserve Bank of India 1,00,000 8. Contribution to PF 12,000 9. LIC premium paid 5,000 10. Contribution to PPF 3,000 11. Purchase of NSC (VIII) 10,000 12. Repayment of Principal o....
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....)] Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source from income chargeable under the head 'Salaries' Name and address of the Employer Name and Designation of the Employee .................................................................................. ............................................................................... .................................................................................. ............................................................................... .................................................................................. ............................................................................... PAN/GIR NO. TAN PAN/GIR NO TDS Circle where annual return/statement under section 206 is to be filed Period Assessment Year 19 - 19 From To Details of salary paid and any other income and tax deducted 1. Gross Salary* Rs...... &nb....
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.... Rs...... Rs...... (e) Rs...... Rs...... (f) Total (a) to (e) Rs...... Rs...... Rs...... II. Under section 88A (please specify) Gross Qualifying Amount Amount (a) Rs...... Rs...... (b) Rs...... Rs...... (c) Total (a)+(b) Rs...... Rs...... Rs...... ....