TMI BlogSection 192 of the Income-tax Act, 1961 - Deduction of tax at source - Salaries - Income-tax deduction from salaries during the financial year 2003-2004 under section 192X X X X Extracts X X X X X X X X Extracts X X X X ..... 04-2005) at the following rates : Rates of Income-tax 1. Where the total income does not exceed Rs. 50,000. Nil 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. Surcharge on income-tax : The amount of income-tax computed in accordance with the preceding provisions of this paragraph shall be reduced by the amount of rebate of income-tax calculated under Chapter VIII and the income-tax so reduced shall be increased by a surcharge at the rate of ten per cent of such income-tax where the total income exceeds eight hundred and fifty thousand rupees. However, the total amount payable as income-tax and surcharge shall not exceed the total amount payable as income-taxon a total income of Rs. 8,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month : (6,167/12) Rs. 514 The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee. 3.4 Salary from more than one employer - Sub-section (2) of section 192 deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer (as the taxpayer may choose) 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 Salary 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 employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). 3.5 Relief when salary paid in arrear or advance - 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, institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income chargeable under the head Salaries shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed (Annexure III-A B). These forms are required to be filed by the employee along with the Return of Income for the relevant year. 3.7 Conditions for claim of deduction of interest on borrowed capital for computation of income from house property - (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction specified in rule 10 of Part A of the Fourth Schedule. 3.10 Where any contribution made by an employer, including interest on such contributions, if any, in an approved Superannuation 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. 3.11 Salary paid in foreign currency - 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. 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 7 should be deducted from the salary under section 192 of the Act. 4.3 Deduction of tax at lower rate - 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 tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 which has been prescribed under Boards Notification No. S.O. No. 1062(E), dated 4-10-2002. It is, however, clarified that there is no obligation to issue the TDS certificate (Form 16) in case tax at source is not deductible/deducted by virtue of claims of exemptions and deductions. As per the amended 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 as prescribed in Rule 26A, Form No. 12BA and Form No. 16 of the Income-tax Rules as amended by notification No. S.O. No. 1062(E), date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucting tax at source to quote PAN of the persons for whose income-tax has been deducted in the statement furnished under section 192(2C), certificates furnished under section 203 and all returns prepared and delivered as per the provisions of section 206 of the Income-tax Act, 1961. 4.8 Annual return of TDS - According to the provisions of section 206 of the Income-tax Act, read with rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax under section 192, from Salaries shall, after the end of each financial year, prepare and deliver, by 30th June 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. It may be noted that a copy of each of the TDS certificates issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ationalized Banks vide RBIs Pension Circular (Central Series) No. 7/C.D.R./1992 (Ref. CO:DGBA:GA(NBS) No. 60/GA.64 (11CVL)-91/92), dated April 27, 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 No. 16 to the pensioners also vide CBDT Circular No. 761, dated 13-1-1998. 4.12 Important circulars - 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. 4.13 TDS certificates issued by Central Government departments which are making 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund in excess of 12% of the salary of the employee, along with interest applicable, shall be included in the income of the assessee for the previous year. Other times included in salary, profits in lieu of salary and perquisites are described in section 17 of the Income-tax Act. The scope of the term profit in lieu of salary has been amended so as not to include interest on contributions or any sum received under a Keyman Insurance Policy including the sum allocated by way of bonus on such policy. For the purposes of this sub-clause, the expression Keyman Insurance Policy shall have the meaning assigned to it in clause (10D) of section 10. 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) Section 17 defines the terms salary, perquisite and profits in lieu of salary. Perquisite includes: (a) The value of rent free accommodation provided to the employee by his employer; (b) The value of any concession in the matter of rent in respect of any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... least 40 kilometers away from a town having a population not exceeding 20,000 as per the latest published all India census. Off-shore sites of similar nature do not have to meet any requirement of distance. The definition of Salary for calculating perquisite value is the same as per earlier Rules. The only change is that medical allowances and reimbursement for treatment of serious illness as prescribed in the proviso below section 17(2)(vi) have now been excluded from the definition of salary for this purpose. For furnished accommodation, the provision of valuation of perquisite of furnishing, fittings and furniture at 10 per cent of original cost per annum or actual hire charges is continued. In case of employer other than Central and State Government, where accommodation is taken on lease or rent by employer, actual amount of lease rental paid or payable by the employer or 10 per cent of salary whichever is lower, as reduced by the rent, if any, actually paid by the employee, is taken as perquisite. If an accommodation is provided by an employer in a hotel the value of the benefit in such a case shall be 24 per cent of the annual salary or the actual charges paid or payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncreased by the amount representing 10 per cent of the actual cost of the motor car on account of normal wear and tear and as reduced by any amount charged from the employee for such use. (c) Where the motor car is owned by the employee but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are reimbursed to him by the employer and such reimbursement is for the use of the vehicle partly for official and partly for personal or private purposes, the value of perquisite shall be the actual amount of expenditure incurred by the employer as reduced by the amounts specified in column (1) of the Table below. (d) Where the motor car is owned or hired by the employer and is used partly in the performance of his duties and partly for personal or private purposes, the value of perquisite shall be determined as per the Table below : Small car (upto 1.6 ltrs. engine capacity) Large car (above 1.6 ltrs. engine capacity) If chauffeur provided by employer to run the motor car, an additional amount as below is also charged (i) Car owned/hired by employer and expenses on maintenance and running are m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been discontinued. Under the new rules even where the supply is made from the employers own resources, the manufacturing cost per unit incurred by the employer would be the value of perquisite. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. V. Free or concessional education : The old rules already provide that value of free education facility would be the expenditure incurred by the employer. Under the new rules 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 may be 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 in a similar institution in or near the loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... touring, accommodation and other holiday expenses : It is increasingly common for employees to be provided with vacation and holiday facilities. The value of such perquisite shall be the expenditure incurred by the employer. This would also apply to official tours extended as a vacation and family members accompanying taxpayers on official tours. However, leave travel as per section 10(5) and enjoyment of holiday home facilities available uniformly to all classes of employees would remain exempt. IX. Free meals : The provision of free meals varies widely from uniform canteen food, coupons etc. to lavish hotel meals. The scheme of free meals as a staff welfare measure had been recognized and was admissible up to Rs. 35 for each meal. The new rule does not treat as perquisite free meals if the cost per meal does not exceed Rs. 50. Where any amount is recovered from the employee, such amount shall be reduced from the value of perquisite. Such free or subsidised meal should however be provided at office premises or though non-transferable vouchers meant for only meals during working hours. These vouchers should be provided by employers encashable only at an eatery, restaurant or a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e including the date of expenditure and the nature of expenditure; (b) a certificate by employer to the employee to the effect that the same was incurred wholly and exclusively for the performance of official duties. XII. Use of assets : It is common practice for an asset owned by the employer to be used by the employee. This perquisite is to be charged at the rate of 10 per cent of the original cost of the asset as reduced by any charges recovered from the employee for such use. However, the user of Computers and Laptops would not give rise to any perquisite. XIii. Transfer of assets : Often an employee or member of his household benefits from the transfer of movable asset (not being shares or securities) at no cost or at a cost less than its market value from the employer. The difference between the original cost of the movable asset (not being shares or securities) and the sum, if any, paid by the employee, shall be taken as the value of perquisite. In case of a movable asset, which has already been put to use, the original cost shall be reduced by a sum of 10 per cent of such original cost for every completed year of use of the asset. Owing to a higher degree of obsole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes not included in the head Salaries (Exemptions) - Any income falling within any of the following clauses shall not be included in computing the income from salaries for the purpose of section 192 of the Act: (1) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India or (b) on retirement from service, or, after termination of service to any place in India is exempt under clause (5) of section 10 subject, however, to the conditions prescribed in rule 2B of the Income-tax Rules, 1962. For the purpose of this clause, family in relation to an individual means: (i) The spouse and children of the individual; and (ii) The parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. It may also be noted that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel. (2) Death-cum-retirement gratuity or any other gratuity which is exempt to the extent specified from inclusion in computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 10(10C), any payment received or receivable (even if received in instalments) by an employee of the following bodies at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation, is exempted from income-tax to the extent that such amount does not exceed five lakh rupees: (a) A public sector company; (b) Any other company; (c) An authority established under a Central, State or Provincial Act; (d) A local authority; (e) A co-operative society; (f) A university established or incorporated or under a Central, State or Provincial Act, or, an Institution declared to be a University under section 3 of the University Grants Commission Act, 1956; (g) Any Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institute of Technology Act, 1961; (h) Such Institute of Management as the Central Government may by notification in the Official Gazette, specify in this behalf. It may also be noted that where this exemption has been allowed to any employee for any assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 under section 10(13A), it has been decided as an administrative measures that salaried employees drawing house rent allowance up to Rs. 3000 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or such other gallantry award as may be specifically notified by the Central Government. Such notification has been made vide Notification Nos. S.O. 1948(E), dated 24-11-2000 and 81(E), dated 29-1-2001 which are enclosed as per Annexures IV and IVA. (13) 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 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 as provided in rule 3A(2) of Income-tax Rules, 1962, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines as provided in rule 3A(1) of I.T. Rules, 1962 : In a case falling in sub-clause (ii) above, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and shall, in no case, exceed the amount specified under this clause. 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 to the assessee by an employer, 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. The deduction hitherto available to non-Government employees has been withdrawn. Tax on employment : 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 Deduction 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 or any other insurer for rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dical 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, subject to the conditions listed below : However, where such dependant is a person with severe disability, an amount of seventy-five thousand rupees shall be allowed as deduction subject to the specified conditions. The deduction under this section shall be allowed only if the following conditions are fulfilled : A. (i) the scheme referred to in clause (b) above provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual in whose name subscription to the scheme has been made; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996). (f) person with disability means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); (g) person with severe disability means a person with eighty per cent or move of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); (h) specified company means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002). (4) 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, there 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 chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relief Fund (ii) The Prime Ministers Armenia Earthquake Relief Fund (iii) The Africa (Public Contributions - India) Fund (iv) The National Foundation for Communal Harmony (v) Chief Ministers Earthquake Relief Fund - Maharashtra (vi) National Blood Transfusion Council (vii) State Blood Transfusion Council (viii) Army Central Welfare Fund (ix) Indian Naval Benevolent Fund (x) Air Force Central Welfare Fund (xi) The Andhra Pradesh Chief Ministers Cyclone Relief Fund - 1996 (xii) The National Illness Assistance Fund (xiii) The Chief Ministers Relief Fund or Lieutenant Governors Relief Fund in respect of any State or Union Territory as the case may be, subject to certain conditions. (xiv) The university or educational institution of national eminence approved by the prescribed authority. (xv) The National Sports Fund to be set up by Central Govern-ment. (xvi) The national cultural fund set up by the Central Govern-ment. (xvii) The fund for technology development and application set up by the Central Government. (xviii)The national trust for welfare of persons with autism, cerebral palsy, mental retardati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pees shall be allowable. Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner along with the return of income, in respect of the assessment year for which the deduction is claimed. In cases where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority in the prescribed form and manner and a copy thereof is furnished along with the return of income. For the purposes of this section, the expressions disability, medical authority, person with disability and person with severe disability shall have the same meaning as given in section 80DD (sub-para (3) of para 5.4 of this Circular). Tax rebate 6. An assessee, being an individual, will be entitled to tax rebates under Chapter VIII of the Income-tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in any Unit-linked Insurance Plan of the LIC Mutual Fund notified by the Central Government under clause (23D) of section 10. (8) Any subscription made to effect or keep in force 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the deduction is allowable under the provisions of section 24 of the Income-tax Act will also not be included in payments towards the cost of purchase or construction of a house property. Where the house property in respect of which deduction has been allowed under these provisions is transferred by the taxpayer 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. 20,000. (14) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 20% 2. Where the gross total income exceeds Rs. 1,50,000 but does not exceed Rs. 5,00,000 15% 3. Where the gross total income exceeds Rs. 5,00,000 Nil 4. In case of an individual, where the income under the head salaries does not exceed Rs. 1,00,000 (before allowing standard deduction) and is at least 90% of his gross total income. 30% Gross total income means the total of incomes under all heads before allowing deductions under Chapter VIA of the Income-tax Act, 1961. It is further clarified that the income under the head Salaries is derived after allowing standard deduction. The above rates shall be applicable to all individuals including sportsmen, artists, authors, playwrights, etc. Higher rebate earlier allowed to such special category individuals has been withdrawn by the Finance Act, 2002. (19) Rebate to senior citizens - Under section 88B, 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 a computed before allowing the deductions under Chapter VIII) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 7.2. However, it is to be ensured that the tax rebates given as per para 6 is limited to the income-tax calculated as per para 7.2. Further, tax payable so arrived at shall be increased by surcharge at the prescribed rate to arrive at the total tax payable. 7.4 It is also to be noted that deductions under Chapter VIA of the Act as mentioned in para 5.4 of this Circular are allowed only if the investments or the payments have been made out of the income chargeable to tax during the financial year 2003-04. 7.5 The amount of tax as arrived at para 7.3 should be deducted every month in equal instalments. The net amount of tax deductible should be rounded off to the nearest rupee. Miscellaneous 8.1 These instructions are not exhaustive and are issued only with a view to help 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, 2003. 8.2 In case any assistance is required, the Assessing Officer/the local Public Relation Officer of the Income-tax Department may be contacted. 8.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income tax thereon 46,000 Rebate under section 88 GPF 25,000 LIP 10,000 Total 35,000 Rebate @ 15% on Rs. 35,000 5,250 Tax Payable 40,750 Add : Surcharge Nil Total tax payable 40,750 Example 3 Calculation of Income-tax in the case of an employee where medical treatment expenditure was borne by the employer. Particulars (Rupees) 1. Gross Salary 3,00,000 2. Medical reimbursement by employer on the treatment of self and dependent family member 30,000 3. Contribution of GPF 20,000 4. LIC premium 20,000 5. Repayment of HouseBuilding Advance 25,000 6. Tuition fees for two children (Rs. 20,000 for one child and Rs. 10,000 for other child) 30,000 7. Investment infrastructure Bond u/s 88(2)(xvi) 20,000 Computation of tax Gross Salary 3,00,000 Add : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction u/s 16(i) @ 40% or 30,000 whichever is less 30,000 Total income (rounded off) 65,300 Tax on total income 2,060 Rebate u/s 88 GPF 24,000 LIP 2,500 CTD 2,400 Subscription to Infrastructure Bonds u/s 88(2)(xvi) 10,000 Total 38,900 Rebate @ 30% 11,670 Tax on total income 2,060 Less : Tax Rebate restricted to Rs. 2,060 2,060 Tax Payable Nil Example 5 Illustrating valuation of perquisite and calculation of tax in the case of an employee of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months. Employee owns a car (cubic capacity of engine exceeds 1.6 ltr.) used partly for personal and partly for official work and actual running and maintenance charges including chauffeurs salary are reimbursed by employer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax on Total Income 13,920 Tax rebate u/s 88 Provident Fund 24,000 Subscription to NSC VIII Issue 18,000 LIP 3,000 Contribution to infrastructure Bond 30,000 Total 75,000 Tax Rebate @ 20% 15,000 Tax on total income 13,920 Tax rebate (restricted) 13,920 Tax payable Nil Example 6 Illustrating Valuation of perquisite and calculation of tax in the case of an employee of a Private Company posted at Delhi and repaying House Building Loan. Particulars : (Rupees) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Interest payable on housing loan (Loan taken after 1-4-1999) 2,00,000 4. Donation paid to National Children Fund 5,000 5. NSC Purchased 10,000 6. GPF 20,000 Computation of taxable income and tax thereon (Rupees) 1. Salary income 4,00,000 Gross salary Less : Standard Deduction 30,000 Taxable salary 3,70,000 2. Income from house property Annual value Nil Interest payable on loan under section 24 2,00,000 Loss from house property (Maximum allowable) 1,50,000 Gross total income 2,20,000 Less deduction under section 80G 50% of Rs. 5,000 2,500 Net taxable income 2,17,500 Tax thereon 39,250 Less rebate under section 88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Nil Total Tax payable 67,750 Example 9 Income-tax calculation in the case of a woman assessee who is less than age of 65 years. Particulars Rupees Gross Salary 1,20,000 G.P.F. 10,000 N.S.C. purchased 10,000 Computation of Taxable Income and Tax thereon Gross Salary 1,20,000 Less: Standard deduction under section 16(i) 30,000 Taxable Income 90,000 Tax thereon 7,000 Less: Rebate under section 88C (Being woman) 5,000 Less: Rebate under section 88 G.P.F. 10,000 N.S.C. 10,000 Total 20,000 Rebate under section 88 @ 20% of Rs. 20,000 = Rs. 4,000 = restricted to Rs. 2,000 2,000 Tax payable Nil Note:- In the case of a woman assessee who is 65 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
