TaxTMI 
TaxTMI 
TaxTMI 
Tax Deduction at Source – Income Tax deduction from Salaries under section 192 during the Financial Year 2008-2009
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation dated 12.1.2004 (Form No. 16AA) 59-63 V. Boards's Notification dated 26.8.2003 64-66 VA. Deptt. Of Eco. Affairs Notification dated 22.12.2003 67 VIA. Boards's Notification dated 24.11.2000 68 VIB. Boards's Notification dated 29.1.2001 69 VII. Form No. 10BA 70 CIRCULAR NO. 9/2008, DATED 29-9-2008 [F.No. 275/192/2008-IT(B)] SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2008-2009 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961. .................. Reference is invited to Circular No. 08/2007, dated 5-12-2007 whereby the rates of deduction of income-tax from the payment of income under the head "Salaries" under section 192 of the Income-tax Act, 1961, during the financial year 2007-08, were intimated. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2008-09 and explains certain related provisions of the Income-tax Act. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income-tax Department - 2. Finance Act, 2008 As per the Finance Act, 2008, income-tax is required to be deducted under section 192 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amount payable as income-tax on a total income of Rs. 10,00,000 by more than the amount of income that exceeds Rs. 10,00,000. Additional surcharge on Income-tax (Education Cess on Income-tax): The amount of income-tax as increased by surcharge, if any, mentioned above shall be further increased by an additional surcharge (Education Cess on Income-tax) at the rate of two per cent of the income-tax and surcharge. Additional surcharge on Income-tax (Secondary and Higher Education Cess on Income-tax): From Financial year 2007-08 onwards, an additional surcharge is chargeable at the rate of one per cent of income-tax and surcharge (not including the Education Cess on income-tax). Surcharge, Education Cess, and Secondary and Higher Education Cess are payable by both resident and non-resident assessees. 3. Section 192 of the Income-tax Act, 1961: Broad Scheme of Tax Deduction at Source from "Salaries". Method of Tax Calculation: 3.1 Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial year 2008-09. The income- tax is required to be calc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head "Salaries" due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). Relief when salary paid in arrear or advance: 3.5 Under sub-section (2A) of section 192 where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E duly verified by him, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take the same into account in making the deduction under Para (3.1) ab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....BA. (Annexure-III). Form No. 12BA along with Form No. 16, as issued by the employer, are required to be produced on demand before the Assessing Officer in terms of section 139C of the Income-tax Act. Conditions for claim of deduction of interest on borrowed capital for computation of income from house property 3.7 (i) For the purpose of computing income/loss under the head 'income from house property' in respect of a self-occupied residential house, a normal deduction of Rs. 30,000 is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs. 1,50,000 is available if such loan has been taken on or after 1-4-1999 for constructing or acquiring the residential house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest up to Rs. 1,50,000, the employee should furnish a certificate from....
X X X X Extracts X X X X
X X X X Extracts X X X X
....perannuation fund is paid to the employee, tax on the amount so paid shall be deducted by the trustees of the fund to the extent provided in rule 6 of Part B of the Fourth Schedule to the Act. Salary paid in foreign currency: 3.11 For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the prescribed rate of exchange. 4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: 4.1 Under clause (i) of section 204 of the Act the "persons responsible for paying" for the purpose of section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof. 4.2 The tax determined as per para 6 should be deducted from the salary under section 192 of the Act. Deduction of tax at lower rate: 4.3 Section 197 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 D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount 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. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. In the case of employees receiving salary income (including pension), the certificate has to be issued in Form No. 16. However, in the case of an employee who is resident in India and whose income from salaries does not exceed Rs. 1,50,000, the certificate of deduction of tax shall be issued in Form No. 16AA (Specimen Form 16AA enclosed as Annexure-IV). It is, however, clarified that there is no obligation to issue the TDS certificate (Form 16 or Form 16AA) in case tax at source is not deductible/deducted by virtue of claims of exemptions and deductions. As per section 192, the responsibility of providing correct and complete particulars of perquisites or profits in lieu of salary given to an employee is placed on the person responsible for paying such income, i.e., the person responsible for deducting tax at source. The form and manner of such particulars are prescribed in Rule 26A, Form....
X X X X Extracts X X X X
X X X X Extracts X X X X
....culars mentioned in the certificate. It has been decided for the proper administration of this Income-tax Act to allow the deductors, at their option, in respect of the tax to be deducted at source from income chargeable under the head 'Salaries' to use their digital signatures to authenticate the certificates of deduction of tax at source in Form No. 16. The deductors will have to ensure that TDS certificates in Form No. 16 bearing digital signatures have a control No. with log to be maintained by the employer (deductor). The deductor will ensure that its TAN and the PAN of the employee are correctly mentioned in such Form No. 16 issued with digital signatures. The deductors will also ensure that once the certificates are digitally signed, the contents of the certificates are not amenable to change by anyone. The income-tax authorities shall treat such certificate with digital signatures as a certificate issued in accordance with rule 31 of the Income-tax Rules, 1962. (Circular No. 2/2007, dated 21-5-2007). Mandatory quoting of PAN and TAN: 4.8 According to the provisions of section 203A of the Income-tax Act, it is obligatory for all persons responsible for deducting tax at sou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... statement for the last quarter filed in Form 24Q (as amended by Notification No. S.O. 704(E), dated 12-5-2006) shall be treated as the annual return of TDS. It is now mandatory for all offices of the Government and all companies to file quarterly statements of TDS on computer media only in accordance with the "Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003" as notified vide Notification No. S.O. 974(E), dated 26-8-2003. (Annexure-V). The quarterly statements are to be filed by such deductors in electronic format with the e-TDS Intermediary at any of the TIN Facilitation Centres, particulars of which are available at www.incometaxindia.gov.in and at http://tin.nsdl.com. If a person fails to furnish the quarterly statements in due time, he shall be liable to pay by way of penalty under section 272A(2)(k), a sum which shall be Rs. 100 for every day during which the failure continues. However, this sum shall not exceed the amount of tax which was deductible at source. The Quarterly Statements are be filed on computer media only in accordance with rule 31A of the Income-tax Rules, 1962. These Quarterly Statements compulsorily require quoting of the Tax Deduction ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnish the relevant details to the banks, may be allowed. Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalized Banks vide RBI's Pension Circular (Central Series) No. 7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No. 60/GA.64(11CVL)-/92), dated the 27th April, 1992, and, these instructions should be followed by all the branches of the Banks, which have been entrusted with the task of payment of pensions. Further all branches of the banks are bound under section 203 to issue certificate of tax deducted in Form 16 to the pensioners also vide CBDT Circular No. 761, dated 13-1-1998. Important Circulars: 4.14 Where Non-Residents are deputed to work in India and taxes are borne by the employer, if any refund becomes due to the employee after he has already left India and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the tax has been borne by it : Circular No. 707, dated 11-7-1995. 4.15 TDS certificates issued by Central Government departments which are making payments by book adjustment, should be accepted by the Assessing Officers if they indicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er rule 6 of Part A of the Fourth Schedule of the Income- tax Act. Contributions made by the employer to the account of the employee in a recognized provident fund in excess of 12 per cent of the salary of the employee, along with interest applicable, shall be included in the income of the assessee for the previous year. Any contribution made, in excess of 10 per cent, by the Central Government or any other employer to the account of the employee under the New Pension Scheme as notified vide Notification No. F.N. 5/7/2003-ECB&PR, dated 22-12-2003 (enclosed as Annexure-VA) and referred to in section 80CCD [para 5.4(C) of this Circular] shall also be included in the salary income. 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 which is exempt, as explained in clause (3) of para 5.2 of this Circular. (4) Section 17 defines the terms "salary", "perquisite" and "profits in lieu of salary". Perq....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee. For furnished accommodation, the value of perquisite as determined by the above method shall be increased by- (i) 10 per cent of the cost of furniture, appliances and equipments, or (ii) where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable. - as reduced by any charges paid by the employee himself. "Accommodation" includes a house, flat, farm house, hotel accommodation, motel, service apartment guest house, a caravan, mobile home, ship etc. However, the value of any accommodation provided to an employee working at a mining site or an onshore oil exploration site or a project execution site or a dam site or a power generation site or an off-shore site will not be treated as a perquisite. However, such accommodation should either be located in a "remote area" or where it is not located in a "remote area", the accommodation should be of a temporary nature having plinth area of not more than 800 square feet and should not be located within 8 kilometers of the local limits of any municipality or canton....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee supply of gas, electricity and water for household consumption, the rules provide that the amount paid by the employer to the agency supplying the amenity shall be the value of perquisite. Where the supply is made from the employer's own resources, the manufacturing cost per unit incurred by the employer would be taken for the valuation of perquisite. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. IV. Free or concessional education: Perquisite on account of free or concessional education shall be valued in a manner assuming that such expenses are borne by the employee, and would cover cases where an employer is running, maintaining or directly or indirectly financing the educational institution. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. However, where such educational institution itself is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r cent of such original cost for every completed year of use of the asset. Owing to a higher degree of obsolescence, in case of computers and electronic gadgets, however, the value of perquisite shall be worked out by reducing 50 per cent of the actual cost by the reducing balance method for each completed year of use. Electronic gadgets in this case means data storage and handling devices like computer, digital diaries and printers. They do not include household appliance (i.e. white goods) like washing machines, microwave ovens, mixers, hot plates, ovens etc. Similarly, in case of cars, the value of perquisite shall be worked out by reducing 20 per cent of its actual cost by the reducing balance method for each completed year of use. VIII. Medical Reimbursement by the employer exceeding Rs. 15,000 p.a. under section 17(2)(v) is to be taken as perquisites It is pertinent to mention that benefits specifically exempt under section 10(13A), 10(5), 10(14), 17 etc. would continue to be exempt. These include benefits like travel on tour and transfer, leave travel, daily allowance to meet tour expenses as prescribed, medical facilities subject to conditions. 5.2 Incomes not included i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f his retirement, whether 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 ten months' leave. This exemption will be further limited to the maximum amount specified by the Government of India Notification No. S.O. 588(E), dated 31-5-2002 at Rs. 3,00,000 in relation to such employees who retire, whether on superannuation or otherwise, after 1-4-1998. (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 extend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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 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 employer in respect of the relevant period; or (b) The actual expenditure incurred in payment of rent in excess of 1/10 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 (d) Where such accommodation is situated in any other place, 40 per cent of the salary due....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) and (ii) of section 10(14) vide Notification No. S.O. 617(E), dated 7th July, 1995 (F.No. 142/9/95-TPL) which has been amended vide Notification S.O. No. 403(E), dated 24-4-2000 (F. No. 142/34/99-TPL). The transport allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of duty is exempt to the extent of Rs. 800 per month vide Notification S.O. No. 395(E), dated 13-5-1998. (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 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, as amended by notification No. F. 2/14/89-NS-II, dated 12-10-1989, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause. (12) Clause (18) of section 10 provides for exemption of any income by way of pension received by an in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpenditure incurred on travel abroad by the patient/attendant, shall be excluded from perquisites only if the employee's gross total income, as computed before including the said expenditure, does not exceed Rs. 2 lakhs. For the purpose of availing exemption on expenditure incurred on medical treatment, 'hospital' includes a dispensary or clinic or nursing home, and 'family' in relation to an individual means the spouse and children of the individual. Family also includes parents, brothers and sisters of the individual if they are wholly or mainly dependent on the individual. 5.3 Deductions under section 16 of the Act Entertainment Allowance: 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 by an employer to the assessee, who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees whichever is less. No deduction on account of entertainment allowance is available to non-government employees. Tax On Employment The tax on employment (Professional Tax) within the mea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 defined under section 2(c) of the Government Saving Certificate Act, 1959 as the Government may, by notification in the Official Gazette, specify in this behalf. [The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E), dated 3-11-2005.] (6) Any sum paid as contribution in the case of an individual, for himself, spouse or any child, (a) for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India; (b) for participation in any unit-linked insurance plan of the LIC Mutual Fund referred to in clause (23D) of section 10 and as notified by the Central Government. [The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E), dated 3-11-2005.] (7) Any subscription made to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notific....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No. 37(E), dated 11-1-2007, for the purposes of section 80C(2)(xvi)(a)]. (12) 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 has not been 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, or a public sector company, or a university established by law, or a college affiliated to such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fees or payment of similar nature. (14) Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution. (15) Subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company. (16) Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes. [The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E), dated 28-7-2006] (17) Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf. (18) Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004. (19) Any investment as five year time deposit in an account under the Po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y in the previous year. Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any financial year,- (a) on account of closure or his opting out of such pension scheme; or (b) as pension received from the annuity plan purchased or taken on such closure or opting out, the whole of the amount referred to in clause (a) or clause (b) above shall be deemed to be the income of the assessee or his nominee, as the case may be, in the financial year in which such amount is received, and shall accordingly be charged to tax as income of that financial year. For the purposes of deduction under section 80CCD, "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. The aggregate amount of deduction under sections 80C, 80CCC and 80CCD shall not exceed Rs. 1,00,000 (Section 80CCE). D. Section 80D of the Income-tax Act provides for a deduction of up to fifteen thousand rupees....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oposed new section. Further, in the above example, if cost of insurance on the health of the parents is Rs. 30,000, out of which Rs. 17,000 is paid (by any non-cash mode) by the son and Rs. 13,000 by the father (who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs. 17,000 (in addition to the deduction of Rs. 12,000 for the medical insurance on self and family) and the father will get a deduction of Rs. 13,000. E. Under section 80DD, where an assessee, who is a resident in India, has, during the previous year,- (a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or (b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions specified in this regard and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability, the assessee shall be allowed a deduction of a sum of fifty thousand rupees from his gross total income of that year. However, where such dep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e for the assessment year relating to the previous year; (c) "disability" shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) and includes "autism", "cerebral palsy" and "multiple disability" referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999); (d) "Life Insurance Corporation" shall have the same meaning as in clause (iii) of sub-section (8) of section 88; (e) "medical authority" means the medical authority as referred to in clause (p) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) or such other medical authority as may, by notification, be specified by the Central Government for certifying "autism", "cerebral palsy", "multiple disabilities", "person with disability" and "severe disability" referred to in clauses (a), (c) , (h) , (j) and (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cereb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf; (c) "higher education" means full-time studies for any graduate or post-graduate course in engineering, medicine, management, or, for post-graduate course in applied sciences or pure sciences, including mathematics and statistics; (d) "initial assessment year" means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan. G. 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 tax payer in the return of income. However, D.D.O. on due verification may allow donations to following bodies to the extent of 50 per cent of the contribution: (i) Jawaharlal Nehru Memorial Fund. (ii) The Prime Minister's Drought Relief Fund. (iii) The National Children's Fund. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y him in excess of 10 per cent of his total income, subject to a ceiling of 25 per cent thereof or Rs. 2,000 per month, whichever is less. The total income for working out these percentages will be computed before making any deduction under section 80GG. (d) 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 determined under clause (a) of sub-section (2) or, as the case may be, clause (a) of sub-section (4) of section 23: The Drawing and Disbursing Authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessee. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. I. Under section 80U, in computing the total income of an individual, being a residen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it exceeds, it should be restricted to that amount. This will be the amount of income from salaries on which Income-tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees. 6.2 Income-tax on such income shall be calculated at the rates given in para 2 of this Circular keeping in view the age and gender of the employee. 6.3 The amount of tax payable so arrived at shall be increased by surcharge (if applicable) and additional surcharge (Education Cess) at the prescribed rate to arrive at the total tax payable. 6.4 The amount of tax as arrived at para 6.3 should be deducted every month in equal instalments. Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year. 7. Miscellaneous 7.1 These instructions are not exhaustive and are issued only with a view to helping the employers to understand the various provisions relating to deduction of tax from salaries. Wherever there is any doubt, reference may be made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962 and the Finance Act, 2008. 7.2 I....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issued by the Department of Expenditure that 60 per cent of the pay arrears neither fall in the category of due nor are allowed. Moreover, section 192 of Income-tax Act, 1961, inter alia, requires any person responsible for paying any income chargeable under the head "Salaries" to deduct income-tax on the amount payable at the stipulated rate at the time of payment. Therefore it is clarified that income-tax at source would be deducted under section 192 only from the arrears of salary actually paid during financial year 2008-09. On the balance, tax would be deducted during the financial year in which these pay arrears are actually paid. To 1. All State Government /Union Territories. 2. All Ministries / Departments of Government of India etc. 3. President's Secretariat 4. Vice-President's Secretariat 5. Prime Minister's Office 6. Lok Sabha Secretariat 7. Rajya Sabha Secretariat 8. Cabinet Secretariat 9. Secretary, U.P.S.C., Dholpur House, New Delhi 10. Secretary, Staff Selection Commission, Lodhi Complex, New Delhi 11. Supreme Court of India, New Delhi 12. Election Commission, New Delhi 13. Planning Commission, New Delhi 14. Secretariat at Governors/ Lt.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Of Economic Affairs, New Delhi 58. Manager, Reserve Bank of India, Public Dept Office, Ahmedabad, Bangalore/ Bhubaneswar/ Mumbai /Kolkata/ Hyderabad/ Kanpur/ Jaipur/ Chennai/ Nagpur/ New Delhi/ Patna/ Guwahati/Trivandrum. 59. Accountant General, Post & Telegraph, Simla. 60. Controller General of Defence Accounts, New Delhi. 61. Directorate of Audit, Defence Services, New Delhi 62. World Health Organisation, New Delhi 63. International Labour Office, India Branch, New Delhi 64. Secretary, Indian Red ross society, New Delhi 65. Atomic Energy Deptt, Mumbai 66. Secretary, Development Board, Ministry of Commerce & Industry 67. Natyional Saving Organisation, Nagpur 68. Deputy Accountant General, Post & Telegraph, Kolkata. 69. The Legal Adviser, Export-Import Bank of India, P.B. No. 19969, Mumbai 4000021. 70. The Deputy Finance Manager (Hqdr.) Indian Airlines, New Delhi. 71. Manager, State Bank of India, Local Head Office:- (i) Jeevan Deep Building, 1 Middleton Street, Kolkata. (ii) Circle Top House, Rajai Salai, Chennai-600001. (iii) Lucknow Uttar Pradesh (iv) Bank Street, Hyderabad-500001 (v) Hamida Road, Bhopal-462001 (vi) Shop Nos. 101 to 105, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,000 and (iii) Rs. 10,00,000 Particulars (Rupees (i)) (Rupees) (ii) (Rupees) (iii) Gross Salary Income 2,00,000 5,00,000 10,00,000 (Including allowances) Contribution to G.P.F. 20,000 50,000 1,00,000 Computation of Total Income and tax payable thereon Gross Salary 2,00,000 5,00,000 10,00,000 Less : Deduction U/s 80C 20,000 50,000 1,00,000 Taxable Income 1,80,000 4,50,000 9,00,000 Tax thereon 3,000 45,000 1,75,000 Add : Surcharge Nil Nil Nil Education Cess @2% 60 900 3,500 Secondary and Higher Education Cess @1% 30 450 1,750 Total tax payable 3,090 46,350 1,80,250 Note 1 : Surcharge at the rate of 10 per cent of the tax payable is to be charged only if taxable income exceeds Rs. 10,00,000. Note 2 : Additional surcharge (Education Cess on Income-tax) is to be charged at the rate of 2 per cent of the Income-tax and surcharge, if any. Note 3 : Additional surcharge (Secondary and Higher Education Cess on Income-tax) is to be charged at the rate of one per cent of the Income-tax and surcharge, if any (not including the Education Cess on Income-tax). Note 4 : Surcharge, Education....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; Surcharge Nil Education Cess @2% 130 Secondary and Higher Education Cess @1% 65 Total Income-tax payable Rs. 6,695 Rounded off to Rs. 6,700 EXAMPLE 4 For Assessment Year 2009-10 Illustrative calculation of House Rent Allowance under section 10(13A) in respect of residential accommodation situated in Delhi in case of a female employee: Particulars 1. Salary Rs. 2,50,000 2. Dearness Allowance Rs. 1,00,000 3. House Rent Allowance Rs. 1,40,000 4. House rent paid Rs. 1,44,000 5. General Provident Fund Rs. 36,000 6. Life Insurance Premium Rs. 4,000 7. Subscription to Unit-Linked Insurance Plan Rs. 50,000 Computation of total income and tax payable thereon 1. Salary + D.A. + C.C.A. Rs. 3,50,000 House Rent Allowance Rs. 1,40,000 2. Total Salary income Rs. 4,90,000 3. Less: House Rent allowance exempt U/s 10(13A): Least of: a. Actual amount of HRA received = 1,40,000 b. Expenditure of rent in excess of 10% of salary (including D.A. presuming that D.A. is taken for retirement benefit) (1,44,000 - 35,000) = 1,09,000 c. 50% of Salary (Basic + DA) = ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 1,02,000 Rs. 1,00,000 Total Income Rs. 8,78,600 Tax Payable Rs. 1,68,580 Add: Surcharge Nil Education Cess @ 2% 3,372 Secondary and Higher Education Cess @ 1% 1,686 Total Income-tax payable Rs. 1,73,638 Rounded off to Rs. 1,73,640 EXAMPLE 6 For assessment year 2009-10 Illustrating Valuation of perquisite and calculation of tax in the case of a female employee of a Private Company posted at Delhi and repaying House Building Loan. Particulars: 1. Salary Rs. 3,00,000 2. Dearness Allowance Rs. 1,00,000 3. House Rent Allowance Rs. 1,80,000 4. Special Duties Allowance Rs. 12,000 5. Provident Fund Rs. 60,000 6. LIP Rs. 10,000 7. Deposit in NSC VIII issue Rs. 30,000 8. Rent Paid by the employee for house hired by her Rs. 1,20,000 9. Repayment of House Building Loan (Principal) Rs. 60,000 10. Tuition Fees for three children (Rs.10,000 per child) Rs. 30,000 Computation of total income and tax payable thereon 1. Gross salary (Basic+DA+HRA+SDA) 5,92,000 Less: House rent allowance exempt u/s 10(13A) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Deductions under Chapter VI-A Rs. 92,500 Total Income Rs. 1,57,500 Tax Payable Rs. 750 Add: Surcharge Nil Education Cess @ 2% 15 Secondary and Higher Education Cess @ 1% 8 Total Income-tax payable Rs. 773 Rounded off to Rs. 770 EXAMPLE - 8 For assessment year 2009-10 Income-tax calculation in the case of a male employee who claims loss under the head 'Income' from self-occupied house property, and has taken house building loan before 1-4-1999. 1. Gross Salary 4,00,000 2. Housing Loan repaid (Principal) 30,000 3. Interest payable on housing loan (Loan taken before 1-4-1999) 1,00,000 4. Donation paid to National Children's Fund 6,000 5. N.S.C. purchased 10,000 6. G.P.F. 20,000 Computation of Taxable Income and tax thereon 1. Salary Income Rs. 4,00,000 2. Income from House Property Annual value Nil Interest payable on loan under section 24 30,000 (Maximum allowable for loans taken before 1-4-1999) (-)Rs. 30,000  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.......................................................... Signature of the employee Verification I, .............................................................................., do hereby declare that what is stated above is true to the best of my knowledge and belief. Verified today, the ............................day of........................................ 2002. Place ............................ Date ............................ ............................................................ Signature of the employee F.No. 142/47/98-TPL NOTIFICATION NO. 10722 Sd/- (SUNITI SRIVASTAVA) Under Secretary to the Govt. of India The principal rules were published vide notification No. S.O. 969(E) dated 26.3.1962 and were last amended vide notification No. SO. 897 (E) dated 12.10.98. ANNEXURE -III Form No. 12BA {See rule 26A (2)(b)} Statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary with value thereof 1) Name and address of employer : 2) TAN 3) TDS Assessment Range of the employer : 4) Name, designation and PAN of employee : 5) Is the employee a director or a person with : substantial interest in the comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
........... ANNEXURE IV ANNEXURE V [TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY PART-II SECTION 3, SUB-SECTION (ii)] GOVERNMENT OF INDIA MINISTRY OF FINANCE (DEPARTMENT OF REVENUE) (CENTRAL BOARD OF DIRECT TAXES) ****** New Delhi, the 26th August, 2003 NOTIFICATION INCOME-TAX S.O. 974 (E)- In exercise of the powers conferred by sub-section (2) of section 206 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby specifies the following Scheme for electronic filing of return of tax deducted at source, namely:- 1. Short title, commencement and application. - (1) This Scheme may be called the "Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003". (2) It shall come into force on the date of its publication in the Official Gazette. (3) It shall be applicable to all persons filing returns of tax deducted at source on computer media under sub-section (2) of section 206 of the Income-tax Act, 1961. 2. Definitions. - In this Scheme, unless the context otherwise requires,- (1) "Act" means the Income-tax Act, 1961 (43 of 1961); (2) "Board" means the Central Board of Direct Taxes constituted under the Central Board of Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on computer media to the e-TDS Intermediary duly supported by a declaration in Form No.27A, as prescribed in the Rules, in paper format: Provided that in case any compression software has been used by the e-deductor for preparing the e-TDS Return, he shall also furnish such compression software alongwith the e-TDS Return on the same computer media. (2) In case the e-deductor has on-line connectivity with the server of the e-TDS Intermediary, as may be designated by e-filing Administrator for this purpose, he may transmit the electronic data of the e-TDS Return directly to such server and send Form No. 27A on paper format separately to the e-TDS Intermediary. 5. Procedure to be followed by e-TDS intermediary. - (1) The e-TDS Intermediary shall receive the e-TDS Return from e-deductors alongwith the declaration in Form No. 27A in paper format. (2) The e-TDS Intermediary shall perform format level validation and control checks on the e-TDS Returns received by him and on successful completion of the same, the e-filing Administrator shall issue provisional receipt to the e-deductor. (3) The e-TDS Intermediary shall upload the data on e-TDS Return on the server designated by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....diary shall ensure accurate transmission of the e-TDS Return to the e-filing Administrator: Provided that the e-TDS Intermediary shall not be responsible for any errors or omissions in the return of tax deducted at source prepared by the e-deductor. (2) The e-TDS Intermediary shall retain for a period of one year from the end of the relevant financial year in which the return is required to be filed, the electronic data of the TDS Return in the format as specified by the e-filing Administrator. (3) The e-TDS Intermediary shall retain for a period of one year from the end of the relevant financial year in which the return is required to be filed, the information relating to deficiency memo and provisional receipts issued in respect of the returns filed through it. (4) The e-TDS Intermediary shall ensure confidentiality of information that comes to his possession during the course of implementation of this scheme, save with the permission of the e-deductor, Assessing Officer or e-filing Administrator. (5) The e-TDS Intermediary shall ensure that all his employees, agents, franchisees, etc., adhere to all provisions of this scheme as well as all directions issued by the e-fili....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o contribution into this account. These assets would be managed through exactly the above procedures. However, the employee would be free to withdraw part or all of the 'second tier' of his money any time. This withdrawable account does not constitute pension investment, and would attract no special tax treatment. (iii) Individuals can normally exit at or after age 60 years for tier-I of the pension system. At the exit the individual would be mandatorily required to invest 40 per cent of pension wealth to purchase an annuity (from an IRDA-regulated life insurance company). In case of Government employees the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirement. The individual would receive a lump sum of the remaining pension wealth, which he would be free to utilize in any manner. Individuals would have the flexibility to leave the pension system prior to age 60. However, in this case, the mandatory annuitisation would be 80 per cent of the pension wealth. Architecture of the new Pension System (iv) It will have a Central Record Keeping and Accounting (CRA) infrastructure, several Pension Fund Ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....New Delhi, the 29th January, 2001 S.O. 81(E)- In exercise of the powers conferred by sub-clause (i) of clause (18) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, hereby specifies the gallantry awards for the purposes of the said section and for that purpose makes the following amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) Number S. O. 1048(E), dated the 24th November, 2000, namely :--- In the said notification, in the Table, against serial numbers 1, 2 and 3 under column (3) relating to 'circumstances for eligibility', the words 'to civilians' shall be omitted. (Notification No. 22/F. No. 142/29/99-TPL) T.K. SHAH Director ANNEXURE-VII FORM No. 10BA (See rule 11B) DECLARATION TO BE FILED BY THE ASSESSEE CLAIMING DEDUCTION UNDER SECTION 80GG I/We ------------------------------------------------------------------------------------------------------ (Name of the assessee with Permanent Account Number) do hereby certify that during the previous year ------------------------ I/we had occupied the premises ------------------------------ (f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owance c) Tax on Employment 5. Aggregate of 4 (a) to (c) 60 6. Income chargeable under the head 'Salaries' 7. Add: Any other income reported by the employee (a) (b) Income under the Head 'Income from House Property' Income under the Head ‘Income from Other Sources' (c) Total of (a) + (b) above 8. GROSS TOTAL INCOME (6+7) 9. DEDUCTIONS UNDER CHAPTER VI-A Rs. Rs. Rs. Rs. GROSS AMOUNT QUALIFYIN DEDUCTIBL G AMOUNT E AMOUNT Rs. Rs. a) 80 CCC b) 80 D Rs. Rs. c) 80 E Rs. Rs. d) 80 G Rs. Rs. e) 80 L Rs. Rs. Rs. Rs. f) 80 QQB g) 80 RRB Rs. Rs. h) SEC Rs. Rs. 10. Aggregate of deductible amounts under Chapter VI-A 11. TOTAL INCOME (8-10) 12. TAX ON TOTAL INCOME 13. REBATE UNDER CHAPTER VIII I. Under section 88 (please specify) GROSS AMOUNT QUALIFYING AMOUNT TAX REBATE (a) Rs. Rs. Rs. 61 (b) Rs. Rs. (c) Rs. Rs. (d) Rs. Rs. (e) Rs. Rs. (f) Rs. Rs. (g) Total[(a) to (f)] Rs. Rs. II. (a) under section 88B (b) under section 88C (c) under section 88D 14. Aggregate of tax rebates at 13 above [I(g)+II(a)+II(b)+II(c)] 15. Tax payable on total income (12-14) and surcharge thereon 15A. Education cess. 16. Less....