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Income-tax deduction from salaries during the financial year 1995-96 under section 192 of the Income-tax Act, 1961
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.... does not Nil exceed Rs. 40,000. 2. Where the total income exceeds 20 per cent. of the amount by which Rs. 40,000 but does not exceed the total income exceeds Rs.40,000. Rs. 60,000. 3. Where the total income exceeds Rs. 4,000 plus 30 per cent. of the Rs. 60,000 but does not exceed amount by which the total income Rs. 1,20,000 exceeds Rs. 60,000. 4. Where the total income exceeds Rs. 22,000 plus 40 per cent. of the Rs. 1,20,000 amount by which the total income &n....
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....l take such other income and tax, if any, deducted at source from such income, into account for the purpose of computing tax deductible under section 192 of the Income-tax Act, 1961. However, if such aggregation results in tax deductible which is less than in the case where income under the head "Salaries" alone is taken into account for computing tax deductible, then such aggregation under sub-section (2B) is not permissible. In other words, a loss from any other source cannot be adjusted by the DDO against salary income. To meet the requirements of these provisions, the Central Government have enacted rule 26B in the Income-tax Rules. Detailed instructions in this regard were issued by the Department vide Circular No. 504 [F.No.275/138/87-IT(B)], dated 8th February, 1988. 3.5 The provisions of sub-section (3) of section 192 are intended for making adjustment for any excess or shortfall in the deduction of tax made during the financial year. 3.6 The trustees of recognised provident funds, or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedu....
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.... 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 the prescribed time the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be within 3 months and 7 years and with fine. 4.6 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 the Board's Notification No. S.O. 148(E), dated 28th February, 1991. A specimen of the certificate is enclosed as a....
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....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. 4.10 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. 4.11 In the case of pensioners who receive 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 deduction from the amount of pension on account of standard deduc....
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....eable to tax under rule 6 of Part A of the Fourth Schedule of the Income-tax Act. Other items included in salary, profits in lieu of salary and perquisites are described in section 17 of the Income-tax Act. It may be noted that, since salary includes pensions, tax at source would have to be deducted from pension also, if otherwise called for. However, no tax is required to be deducted from the commuted portion of pension as explained in clause (3) of para 5.2 of this circular. (4) The value of perquisites by way of free or concessional residential accommodation, or motor car provided by employers to their employees shall be determined under rule 3 of the Income-tax Rules, 1962. It is, however, clarified that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work or from such office or place to his residence shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purpose. (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 consum....
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.... services, or, to the employees of a local authority or a corporation established by a Central, State or Provincial Act, is exempt under sub-clause (i) of clause (10A) of section 10. As regards payments in commutation of pension received under any scheme of any other employer, exemption will be governed by the provisions of sub-clause (ii) of clause (10A) of section 10. (4) Any payment received by an employee of the Central Government or a State Government, as cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement on superannuation or otherwise, is exempt under sub-clause (i) of clause (10AA) of section 10. In the case of other employees, this exemption will be determined with reference to the leave to their credit at the time of retirement on superannuation, or otherwise, subject to a maximum of eight months' leave. This exemption will be further limited to the maximum amount specified by the Government of India Notification No. S.O. 553(E) (F.No.142/11/88-TPL), dated 8th June, 1988, at Rs.79,920. (5) Under section 10(10B), the retrenchment compensation received by a workman is exempt from income-t....
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.... 1925 (19 of 1925), applies (or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette). (9) Under section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of the 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 the expenditure on payment of rent shall be :- (a) The actual amount of such allowance received by an employer in respect of the relevant period; or (b) The actual expenditure incurred in payment of rent in excess of one-tenth of the salary due 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 ....
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....s related to his place of posting or residence. The Central Board of Direct Taxes has prescribed guidelines for the purpose of clauses (i) and (ii) of section 10(14), vide Notificiation No. S.O. 617(E), dated 7th July, 1995 (F. No. 142/9/95-TPL). These guidelines are effective from 1st July, 1995. This is enclosed as annexure "III". (11) 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 7th June, 1989, as amended by Notification No.F.2/14/89-NS-II, dated 12th October, 1989, the Central Government has notified a scheme called Deposit Scheme for Retiring Employees, 1989, for the purpose of the said clause. (12) Under section 17 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 main....
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....ns drawing pension during the financial year at the same rate and subject to the same ceilings. It may be noted that the standard deduction in full will be admissible even to those employees who are entitled to conveyance facilities. Where, in the case of an assessee, salary is due from, or paid or allowed by, more than one employer, the deduction under this clause shall be computed with reference to the aggregate salary due, paid or allowed to the assessee and shall in no case exceed the amount specified under this clause. (ii) A deduction is also allowed under clause (ii) of section 16 in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by his employer subject to certain limits. In the case of a Government employee, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees whichever is less is allowable as deduction. In the case of a non-Government employee, deduction for entertainment allowance to the extent specified in sub-clause (b) of clause (ii) of section 16 will be given only if the allowance is regularly received by him from his present employe....
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....on, 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 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. (3) Under section 80E of the Act, a deduction will be allowed in respect of repayment of loan taken for higher education, subject to the following conditions: (i) In computing the total income of an assessee, being an individual, these shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of chargeable to tax, by way of repayment of loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education, or interest on such loan; Provided that the amount which may be so deducted shall not exceed twenty-five thousand rupees. (ii) The deduction specified above sha....
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.... 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(15A) of the Act; (b) he will be entitled to a deduction in respect of house rent paid by him in excess of 10 per cent. of his total income, subject to a ceiling of 25 per cent. thereof or Rs.1,000 per month, whichever is less. The total 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, any residential accommodation being accommodation in the occupation of the assessee, the value of which is to be de....
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.... 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 outside India. Thus, if the remuneration is paid to the Indian technician, etc., partly in the Indian currency and partly in foreign currency, the amount paid in the Indian currency will not be taken into account for the purposes of deduction under section 80RRA. Likewise, if a part of the remuneration, although paid in foreign currency, relates to service rendered in India, then such part of the remuneration will also not qualify for deduction under section 80RRA. The expression "foreign employer" has been defined in Explanation (b) to section 80RRA to mean (i) the Government of a foreign state; or (ii) a foreign enterprise; or (iii) any association or body established outside India. While allowing the deduction under this section, documentary evidence should be obtained on the following points: (a) In the case of an individual who is in the employment of the Central Government or any State Government, the fact of his service having been sponsored by the Central Government; (b) In the case of any ....
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.... sum deducted does not exceed one-fifth of the salary. (4) Any contribution made: (a) by an individual to any provident fund to which the Provident Fund Act, 1925, applies; (b) to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of an individual, or a minor, or whom he is a guardian; (c) by an employee to a recognised provident fund; (d) by an employee to an approved superannuation fund. It may be noted that "contribution" to any fund shall not include any sums in repayment of loan. (5) Any deposit in a ten year account or a fifteen year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959, as amended from time to time, where such sums are deposited in an account standing in the name of an individual, or a minor, for whom he is the guardian. (6) Any subscription:- (a) to any such security of the Central Government or any such deposit scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf; (b) to any such saving certificates as defin....
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....) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head "Income from house property" (or which would, if it had not been used for the 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, 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 the Life Insurance Corporation, or the 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 or a co-operative society. The stamp duty, r....
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....rally, 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 will be Rs.60,000 and in the case of authors, sportsmen, etc. Rs.70,000. (15) Section 88B provides for special relief to senior citizens (individuals of the age of 65 years and above). The tax rebate in their case is 40 per cent. and the gross total income qualifying limit for this purpose is R.1,00,000/-. Thus, all individuals of, and above, the age of 65 years will be allowed a rebate of 40 per cent. of the amount of income-tax payable by them (as computed before allowing the deduction under Chapter VIII of the Income-tax Act, 1961), subject to the condition that their gross total income does not exceed Rs.1,00,000. 7.Calculation of income-tax to be deducted: 7.1 Salary income for the purpose of section 192 shall be estimated as follows: (a) First compute the gross salary as mentioned in para 5.1 excluding all the incomes mentioned in para 5.2; (b) allow deductions mentioned in para 5.3 from the figure arrived at (a); (c)....
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....alary income (including allowances)75,000 2. Contribution to G.P.F.12,000 ) ) 3. Central Government Employees Insurance 720 ) ) 4. Payment towards LIC 1,000 ) ) 5. Subscription to an approved mutual fund 5,000 ) ) 6. Subscription to an NSC (VIII) issue 3,000 ) 21,720 Computation of total income and tax payable thereon 1. Gross salary income75,000 2. Less: Standard deduction 18,000 ----------- 57,000 Tax on Rs.57,000 3,400 Tax rebate at 20% on Rs.21,7203,400 --- ----- Income-taxN i l ====== EXAMPLE 2 (Illustrating calculation of house rent allowance under section 10(13A) in respect of residential accomodation situated in Delhi) (Rs.)(Rs.) 1. Salary 49,500 2. Dearness allowance 43,680 3. House rent allowance 9,600 4. CCA 1,200 5. House rent paid 18,000 6. General Provident Fund 24,000 7. Life insurance premium 2,500 8. Cumulative Time Deposit 2,400 9. Contribution to mutual fund 12,000 Computation of ....
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....tional Savings Certificates (VIII Issue) 6,000 11.Contribution to recognised provident fund 24,000 ------------ 57,000 ======= Computation of total income and tax payable thereon (Rs.)(Rs.) 1. Salary1,08,000 2. Bonus 12,000 ------------- 3. Total of salary and bonus1,20,000 1,20,000 4. Valuation of perquisites: (a) Furnished flat at concessional rent (please see section 17(2) of the I.T.Act) 10% of salary including bonus 12,000 (b) Add: Excess of (FRV) over 60% of salary including bonus (i.e., Rs.78,000 - 72,000) 6,000 (c) Add: Perquisite of the furniture (10% of cost, i.e., 10% of Rs.50,000) 5,000 ------------ 23,000 Less:Rent recovered by co. (-) 12,000 -....
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.... 8,140 Tax rebate under section 88 (i) Unit mutual fund 6,000 (ii) Provident fund 12,000 (iii) LIP 2,000 (iv) NSS 6,000 (v) Repayment of HRA 10,000 ----------- 36,000 Tax rebate at 20% 7,200 ----------- Net tax payable 940 ======== EXAMPLE 5 (Illustrating calculation of income-tax in the case if a handicapped employee) Name of the assessee:X.Y.Z. Assessment year :1996-97 Status:Individual INCOME FROM SALARY : Salary 83,890 INCOME FROM HOUSE PROPERTY: ARV/Rent received @ 3,000 p.m. 36,000 Less: Municipal taxes 6,000 ---------- 30,000 (i) One-fifth for repairs ....
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.... 5,600 ----------- 3. Total salary income 69,900 4. Less: Standard deduction Rs.18,000 or 33-1/3% whichever is less 18,000 ---------- (in respect of a woman where total income (i.e., taxable income) before51,900 deducting standard deduction does not exceed Rs.75,000) ----------- 5. Net taxable total income51,900 6. Tax on total income (i) Up to Rs.60,000 2,380 7. Tax rebate under section 88 (a) Total of savings: (i) Contribution to PF 3,600 (ii) Deposit to PPF 5,000 (iii) NSC 10,000 (iv) Repayment to HB loan 6,000 ----------- 24,600 (b) Tax rebate 20% of 24,600 = 4,920 but maximum to Rs.2,380 2,380 Net tax payableNil EXAMPLE 7 (Illustration of calculation of HRA under section 10(13A) in respect of an employee situate....
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....that of attendant)1,00,000 6. Expenditure incurred on stay and treatment abroad1,50,000 7. Out of (6) amount permitted by Reserve Bank of India1,00,000 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 of HRA 12,000 13. Subscription to UTI's MFP 8,000 Computation of total income and tax payable thereon Gross salary1,95,000 Add -Medical expenditure directly paid by employer to a private practitioner is not to be added as perquisite only to the extent of Rs.10,000 in view of proviso(v) to clause (v) of sub-section (2) of section 17. Hence the balance to be added back as perquisite 15,000 - Medical expenditure directly paid by employer to a hospital approved by Chief Commissioner and reimbursement of such expenditure in respect of any of ailment as prescribed in Notification No.9107, dated October 7, 1992, ....