Deduction of tax at source-Income-tax deduction from salaries during the financial year 1987-88 under section 192 of the Income-tax Act, 1961 - Income Tax - 489/1987

Deduction of tax at source-Income-tax deduction from salaries during the financial year 1987-88 under section 192 of the Income-tax Act, 1961 Circular No. 489 Dated 25/6/1987 To All State Governments (including Administration of Union Territories). Sir, Subject : Deduction of tax at source-Income-tax deduction from salaries during the financial year 1987-88 under section 192 of the Income-tax Act, 1961. I am directed to invite a reference to this Ministry's Circular No. 459 [F. No. 275/64/86-IT(B)] dated the 16th June, 1986 [(1986) 160 ITR (St.) 44] and Circular No. 465 [F. No. 275/64/86-IT(B)] dated the 4th August, 1986 [(1986) 161 ITR (St.) 64], Circular No. 476 [F. No. 275/64/86-IT(B)] dated the 11th December, 1986 [(1987) 164 ITR (St.) 153] and Circular No. 483 [F. No. 275/64/86-IT(B)] dated the 31st March, 1987 [(1987) 165 ITR (St.) 358] wherein the rates of income-tax deduction during the year 1986-87 from the payment of income chargeable under the head "Salaries" under section 192 of the Income-tax Act, 1961, were intimated. 2. Sub-section (1) of section 192 provides that the person responsible for paying any income chargeable under the head "Salaries" shall, at the time of making payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee for that financial year. The provisions of sub-section (3) of the said section are intended for making adjustment for excess or shortfalls of inadvertent nature and/or due to unforeseen circumstances. Thus aggregate tax calculated on the estimated income divided by 12 and rounded off to the nearest rupee is required to be deducted from the monthly salary. 3. There is no change in the rate of tax for the financial year 1987-88. An extract of sub-paragraph (1) of paragraph 'A' of Part III of the First Schedule to the Finance Act, 1987, is at Annexure-I. 4. The substance of the main provisions of law in so far as they relate to income chargeable under the head "Salaries" on which tax is to be deducted at source during the financial year 1987-88 is given hereunder:- (i) No tax will be deducted at source at any case unless the estimated salary income for the financial year exceeds Rs. 18,000. Some typical examples of calculations are at Annexure-II. (ii) The value of perquisites by way of free or concessional residential accommodation, or motor cars provided by employers to their employees shall be determined under rule 3 of the Income-tax Rules, 1962. Further, the value of other benefits or amenities provided free of cost or at concessional rates to the employees like supply of gas, electric energy, water for household consumption, educational facilities, etc., should also be taken into account for the purpose of computing the estimated salary income of the employees during the current financial year. (Example II at Annexure-II illustrates computation of some such perquisites). As regards the colliery allowance, it is to be noted that only the excess over Rs. 100 per month or 50% of the actual colliery allowance paid by Coal India Limited, whichever is more, is to be treated as perquisites and the balance amount on account of the payment of said allowance may be allowed to be deducted while computing the income under the head "Salaries" for purpose of deduction of tax at source. (iii) Exemption in computing total income:- (a) Clause (10) of section 10 provides exemption of death-cum-retirement gratuity from inclusion in computing total income. The Government have by Notification No. GSR 537(E) dated 1-7-1985* raised the limit of Rs. 36,000 mentioned in sub-clause (iii) of clause (10) of section 10 of the Income-tax Act to Rs. 50,000 for all the three purposes for which the said limit has been mentioned in the provisions of the said clause. (b) Sub-clause (i) of clause (10AA) of section 10 provides for exemption of 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; (c) In the case of other employees, the exemption will be determined with reference to the leave to his credit at the time of retirement on superannuation or otherwise subject to a maximum of six months' leave. This exemption will be limited to the amount payable for such unutilised leave on the basis of the average salary of the employee for six months or Rs. 30,000, whichever is less. Where the cash equivalent of unutilised earned leave is received by employees from two or more employers in the same year, the maximum amount exempt from tax will not exceed Rs. 30,000. (iv) The amount repaid to an employee from the Additional Dearness Allowance Deposit Account under the provisions of the Additional Emoluments (Compulsory Deposit) Act, 1974, shall be liable to be included in his total income of the previous year in which it is repaid as already explained in the Ministry's Circular No. 182 (F. No. 275/12/75-ITJ) dated 28-10-1975 [Printed at (1975) 101 ITR (St.) 130]. The amount repaid will include an element of interest also. While the repayment of the principal sum will be regarded as salary paid during the relevant financial year and assessed to tax accordingly, the interest element qualifies for deduction according to section 80L of the Income-tax Act, 1961. (v) 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 Rs. 50,000, whichever is less. These limits shall not apply in the case where the compensation is paid under any scheme which is approved in this behalf by the Central Government, having regard to the need for extending special protection to the workman in the undertaking to which the scheme applies and other relevant circumstances. It may be added that a number of public sector undertakings have formulated voluntary retirement schemes for their employees. With a view to extending relief to such employees, the Finance Act, 1987, has inserted a clause (10C) under section 10 which provides for exemption in respect of any payment received by such employees at the time of their voluntary retirement in accordance with any scheme which the Central Government may approve having regard to the economic viability of the public sector undertaking/company and other relevant circumstances. This exemption will be available to any employee whether a workman or an executive. (vi) 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 employee in respect of the relevant period; or (b) The actual expenditure incurred in payment of rent in excess of 1/10th of the salary due for the relevant period; or (c) Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or (d) Where such accommodation is situated in any other place, 40% of the salary due to the employee for the relevant period, whichever is the least. For this purpose 'Salary' includes dearness allowance, i.e., if the terms of employment so provided, but excludes all other allowances and perquisites. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding house rent allowance from the total income of the employee. (vii) (a) Under section 16 of the Income-tax Act (hereinafter referred to as the Act), the taxable salary is to be computed after making standard deduction. The standard deduction is to be allowed of an amount equal to 30% of the salary subject to a maximum of Rs. 10,000. For this purpose, the term 'Salary' will include fees, commission, perquisites or profits in lieu of or in addition to salary, but will not include any payment received by the employees which are specifically exempt from tax under clauses (10), (10A), (10AA), (10B), (10C), (11), (12) and (13A) of section 10 of the Act. Thus, house rent allowance to the extent exempt under section 10(13A) of the Act will not be taken into account for the purpose of computing the amount of the standard deduction. It is to be noted that standard deduction on the above basis is to be allowed irrespective of whether any expenditure incidental to employment is actually incurred by the employee or not. This deduction will be available also to persons drawing pension during the current financial year at the same rate and subject to the same ceiling as to the employees in actual service. However, the standard deduction will be limited to Rs. 1,000 only in cases:- (i) where the employee is provided with any motor-car, motor-cycle, scooter or other moped by his employer for use otherwise than wholly and exclusively in the performance of his duties; or (ii) where he is allowed the use of any one or more motor-cars, out of a pool of motor-cars owned or hired by the employer otherwise than wholly or exclusively in the performance of his duties. The use of any vehicle provided by the employer for journey by the employee from his residence to his office or other places of work and also from office or other places of work to his residence shall not be regarded as use of such vehicles otherwise than wholly and exclusively in the performance of his duties. (b) In respect of salary paid during the financial year 1987-88, the value of any benefit, or amenity granted or provided free of cost or at concessional rate by an employer to an employee (not being a director of the company or a person who has substantial interest in the company) is not regarded as perquisites received by the employee unless the employee's income under the head 'Salary' exclusive of the value of any benefit or amenity not provided for by way of monetary payment exceeds Rs. 24,000. In cases where salary is received from more than one employer, the aggregate salary from these employers will have to be taken into account for the purpose. (viii) (a) Under section 80C of the Act, while computing the taxable income, the disbursing officer should allow deduction of the whole of the first Rs. 6,000, 50% of the next Rs. 6,000 and 40% of the balance of the qualifying amount of payment made by the employee out of his income chargeable to tax towards Life insurance premium, contributions to Provident Fund set up by the Central Govt. or to which the Provident Funds Act, 1925, applies (including contribution to Public Provident Fund constituted under the Public Provident Fund Act, 1968), contributions for participation in the Unit Linked Insurance Plan, 1971, made under section 19(1)(cc) of the Unit Trust Act, 1963, deposits in a 10 year account or 15 year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, and subscription to the National Savings Certificate (VI Issue) and the National Savings Certificate (VII Issue). The interest on National Savings Certificate (VI Issue) is deemed to be reinvested and, therefore, the holder thereof is entitled to the benefits of section 80C. In respect of contributions to "Recognised Provident Fund", there is another monetary ceiling limit laid down in clause (d) of sub-section (2) of section 80C of the Income-tax Act, 1961, in that the employee's own contribution to the individual account in the fund will not exceed 1/5th of his salary during the financial year or Rs. 10,000, whichever is less. 'Salary' for this purpose would include dearness allowance if the terms of the employment so provide, but will exclude all other allowances and perquisites. The expression "Recognised Provident Fund" has been defined in section 2(38) of the Act to mean provident fund which has been and continues to be recognised by the Commissioner in accordance with the rules contained in Part A of the Fourth Schedule to the Act and includes a provident fund established under a Scheme framed under the Employees' Provident Funds Act, 1952. (c) The additional monetary ceiling of 1/5th of salary or Rs. 10,000, whichever is less, will not be applicable to the contribution to the provident fund referred to in sub-clauses (iii) and (iv) of clause (a) of sub-section (2) of section 80C. Such provident funds are:- A. Government Provident Fund and Railway Provident Fund; B. Provident Funds established by such local authorities and institutions as are mentioned in the Schedule to the Provident Funds Act, 1925, and those notified by the Government from time to time under section 8(3) of that Act; and C. Any Provident Fund set up by the Central Government and notified by it in the Official Gazette. Public Provident Fund set up under the Public Provident Fund Act, 1968, is an example of such a fund; (d) Under clause (b) of sub-section (2) of section 80C where the assessee is a Hindu undivided family the deduction is allowable in respect of:- (i) any sums paid in the previous year by the assessee out of his/its income chargeable to tax; (1) to effect or to keep in force an insurance on the life of any member of the family; or (2) as a contribution to any provident fund referred to in sub-clause (iv) to clause (a) where such contribution is to an account standing in the name of any member of the family; or (ii) any sum deposited in the previous year by the assessee out of its income chargeable to tax in a 10-year account or a 15-year account under the Posts 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 any member of the family. (e) The Finance Act, 1987, has substituted clause (h) of sub-section (2) of section 80C with effect from 1-4-1988 (applicable in relation to assessment year 1988-89 and subsequent years). According to the "substituted" section, deductions under section 80C(1) include any sums paid by the assessee out of his or its income chargeable to tax:- I. as subscription to such security of the Central Government as the Government may, by notification in the Official Gazette, specify, in this behalf; or II. for the purpose of purchase or construction of a residential house property, construction of which is completed after 31st day of March, 1987 and 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, Housing Board etc. the deduction will also be allowable in respect of repayment of loans borrowed by the taxpayer from the Government or any bank or Life Insurance Corporation and certain other categories of institutions engaged in the business of providing long term finance for construction or purchase of house in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company. The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. Payment towards the cost of house property, however, will not include, admission fee or cost of share or initial deposit or the cost of the land (except where the consideration for the purchase of house property is a composite amount and the cost of land cannot be separately ascertained) or the cost of any addition or alteration. Payments towards any expenditure in respect of 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 the new 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, no deduction under these provisions shall be allowable in respect of previous year in which the transfer is made and the aggregate amount of deduction allowed in the earlier years shall be chargeable to tax under the head "Income from other sources" of the previous year in which such transfer takes place. The aggregate of the deductions admissible hereunder will not exceed Rs. 10,000. (f) subject to the limits specified in (b), (c) and (e) (II) above, the aggregate of the sums which qualify for the purpose of computing the deduction under section 80C shall not exceed:- (1) in the case of any individual being an author, playwright, artist, musician, actor, or sportsman (including an athelete) sixty thousand rupees; (2) in the case of any other individual or a Hindu undivided family or any such association of persons or a body of individuals as is referred to in clause (g) of sub-section (2), forty thousand rupees. (g) It may be noted that the deduction provided under section 80C will be available to the taxpayer in respect of such sums paid up to 31st March, of the financial year towards the purchase of National Savings Certificates etc. (ix) No deduction should be made from the salary income in respect of any donations for charitable purposes. The tax relief on such donations as admissible under section 80G of the Act, will have to be claimed by the taxpayer separately at-the time of finalisation of the assessment. However, in cases where contributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, the Prime Minister's Drought Relief Fund, the National Children's Fund or the Indira Gandhi Memorial Trust are made, 50 per cent. of such contributions may be deducted in computing the total income of the employee. The donation to the Prime Minister's National Relief Fund will be eligible for hundred per cent. deduction. Thus, deduction in this respect may be allowed while computing the total income for the purpose of deduction of income-tax at source for financial year 1987-88. Deduction will not be admissible where the aggregate of all contributions in the year is less than Rs. 250. (x) Under section 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 sec. 10(13A) 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 deductions 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 determined under sub-clause (i) of clause (a), or as the case may be, clause (b) of sub-section (2) of section 23. (d) The accommodation occupied by him for the purpose of his own residence is situated in any of the following places, namely:- (i) Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior (Lashkar), Hyderabad, Indore, Jabalpore, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Pune, Srinagar, Surat, Vadodra (Baroda) or Varanasi (Banaras) or the Urban agglomeration of each of such places; or (ii) Bombay, Calicut, Cochin, Ghaziabad, Hubli-Dharwar, Madras, Solapur, Trivandrum or Vishakhapatnam. Explanation.-" Urban Agglomeration" in relation to a place means the area for the time being included in the urban agglomeration of such place for the purpose of grant of house rent allowance by the Central Government to its employees under the orders issued by it from time to time in this regard. The disbursing authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessees. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. (xi) Section 10(14) of the Act, provides for exemption from income-tax of any special allowance or benefit, not being in the nature of an entertainment allowance or other perquisite within the meaning of clause (2) of section 17 specially granted to the employee to meet the expenses actually, incurred wholly, necessarily and exclusively, in the performance of the duties of an office or employment of profit. In view of this provision, disbursing authorities have been authorised vide Board's Circular No. 196 [F. No. 275/29/76-IT-J] dated the 31st March, 1976 [printed at [1976] 103 ITR (St.) 38-39] not to deduct tax at source from conveyance allowance granted to an employee to the extent it is exempt under the said section. It has been stated herein that the employee in receipt of conveyance allowance would have to furnish the necessary certificate before the disbursing authority in support of the fact that the conveyance allowance is only a reimbursement of expenses laid down wholly, necessarily and exclusively in the performance of duties of an office or employment of profit. The satisfaction of the disbursing authorities would still be liable for scrutiny by the Income-tax Officer during regular assessment proceedings before him. The disbursing authority is also required to endorse a certificate in terms of section 10(14) on the tax deduction certificate issued under section 203 of the Act. In this connection, attention is invited to the Explanation to clause (14) of section 10 which clarifies that any allowance granted to the assessee to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides shall not be regarded for purposes of that clause as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties. This may be kept in view while deciding whether any expenditure from the special allowance has been actually incurred, and if so, the extent to which it has been incurred to meet the expenses wholly, necessarily and exclusively in the performance of duties of an office or employment of profit. (xii) Section 80RRA provides that where the gross total income of an individual who is a citizen of India, includes any remuneration received by him in foreign currency from any employer (i.e., a foreign employer or an Indian concern) for any services rendered by him outside India, 50 per cent. of such remuneration or more as amended by the Finance Act, 1987, as clarified below in sub-clause (3) will be deducted in computing the taxable income. It also provides that where the assessee renders continuous service abroad for more than 36 months, the remuneration received by him for any period of service after the expiry of the said 36 months will not qualify for any deduction. In the case of an employee of Central Government or any State Government, or a person who was, immediately before taking up the service outside India, in the employment of the Central Government or any State Government, the deduction will be allowed only if the service of the employee is sponsored by the Central Government. In the case of any other individual, the deduction will be allowed only if he is a "technician" and the terms and conditions of his services outside India are approved for the purpose of the said section by the Central Government or the 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 rendered outside India. Thus, if the remuneration is paid to the Indian technician etc. partly in Indian currency and partly in foreign currency, the amount paid in Indian currency, will not be taken into account for purposes of deduction under section 80RRA. Likewise, if a part of the remuneration, although paid in foreign currency, relates to services rendered in India, then such part of the remuneration will also not qualify for deduction under section 80RRA. (2) 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:- (i) 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; (ii) In the case of any other individual being a technician, the fact of the terms and conditions of his service outside India having been approved in this behalf by the Central Government (Ministry of Finance, Department of Revenue, Foreign Tax Division, New Delhi). (It should also be ensured that the deduction is allowed with reference to the remuneration received in foreign currency in respect of the period of service outside India. The fact that deduction is admissible only in relation to the first 36 months of continuous service outside India should also be kept in view). (3) The Finance Act has made the following amendment to section 80RRA with effect from the first day of April, 1988:- In section 80RRA of the Income-tax Act, in sub-section (1), for the words "of an amount equal to fifty per cent. thereof", the following shall be substituted with effect from the first day of April, 1988, namely:- "of an amount equal to:- (i) fifty per cent. of the remuneration; or (ii) seventy-five per cent. of such remuneration as is brought into India by, or on behalf of, the assessee in accordance with the Foreign Exchange Regulation Act, 1973, and any rules made thereunder, whichever is higher". However, the said exercise of the verification of the excess amount allowable as a deduction under section 80RRA cannot be made by the Drawing and Disbursing Officer. The Drawing and Disbursing Officer should only allow a deduction equal to 50% of the remuneration at source. (xiii) Under section 80U in computing the total income of a resident individual who is totally blind or suffers from any of the permanent physical disability a deduction of Rs. 15,000, is allowed. The Board has by notification No. S.O. 529(E), dated 17th July, 1985**, specified the physical disabilities which will be reckoned as permanent physical disabilities for purposes of deduction under this section. According to the said notification, a permanent physical disability shall be regarded as a permanent physical disability for purpose of clause (ii) of sub-section (i) of section 80U, if it falls in any one of the categories specified below, namely:- (a) permanent physical disability of more than 50 per cent. in one limb; or (b) permanent physical disability of more than 60 per cent. in two or more limbs; (c) permanent deafness with hearing impairment of 71 decibels and above; or (d) permanent and total loss of voice. The deduction of Rs. 15,000, from the total income is allowed by the employer subject to the production of a certificate from the Income-tax Officer in favour of the employer as laid down in this Ministry's Circular No. 272 dated 26th May, 1980 [printed at [1980] 124 ITR (St.) 3]. The certificate once issued will continue to be in force till it is withdrawn by the Income-tax Officer. (xiv) The Finance Act, 1987, has inserted sub-section (2), (2A), (2B) in section 192 with effect from 1st June, 1987. According to these sub-sections:- (a) Where during the financial year an assessee is employed simultaneously under more than one employer or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in section 192(1), (being one of the said employers, having regard to the circumstances as such employee may choose) details of income under the head "Salaries" due or received by him from the employer or employers in the prescribed form duly verified in the prescribed manner and thereupon the employer shall deduct tax at source from the aggregate salary of the employee. (b) Where an employee who receives salary in arrears or in advance is entitled to relief under section 89(1) of the Income-tax Act, he may furnish to the person responsible for making payment referred to in section 192(1) such particulars in the prescribed form and duly verified in the prescribed manner and thereupon the said person shall compute and allow the relief under section 89(1) on the basis of such particulars. (c) New sub-section (2B) in section 192 enables a taxpayer having salary income in addition to other incomes to furnish in the prescribed manner the details of total income to his employer who shall deduct out of salary payment the tax due on the total income subject to the prescribed conditions. (xv) It may be noted that the person responsible for paying to a non-resident any income chargeable under the head "Salaries", shall deduct tax at source under the provisions of section 192. (xvi) The Finance Act, 1987, has inserted a new section 203A in the Income-tax Act, with effect from 1st June, 1987. Section 203A reads as under:- "203A(1). Every person deducting tax in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D and section 195, if he has not been allotted any tax-deduction account number shall, within such time as may be prescribed, apply to the Income-tax Officer for the allotment of a tax-deduction account number. (2) Where a tax-deduction account number has been allotted to a person such person shall quote such number:- (a) in all challans for the payment of any sum in accordance with the provisions of section 200; (b) in all certificates issued in accordance with the provisions of section 203; (c) in all the returns delivered in accordance with the provisions of sections 206, 206A and 206B to any income-tax authority; and (d) in all other documents pertaining to such transactions as may be prescribed in the interests of revenue". It may be added that the Finance Act, 1987, has also inserted a new section 272BB which deals with the penalty for failure to comply with the provisions of section 203A. The penalty leviable thereunder may extend to Rs. 5,000. The Finance Act, 1987, has substituted section 206 of the Income-tax Act by the following section with effect from June 1, 1987:- "206 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 the foregoing provisions of this Chapter shall prepare, within the prescribed time after the end of each financial year and deliver or cause to be delivered to the prescribed income-tax authority, such returns in such form and verified in such manner and setting forth such particulars as may be prescribed". A separate circular will be issued to prescribe the time for filing an application for allotment of tax deduction account number under section 203A, to prescribe the income-tax authority to whom the returns etc. under section 206 are to be submitted and to cover any other incidental matter. In the meantime, the persons deducting tax in accordance with the provisions of section 192 may be advised to apply to the concerned Income-tax Officer immediately for the allotment of tax deduction account number. (xvii) The total income computed in accordance with the provisions of the Act should be rounded off to the nearest multiple of ten rupees by ignoring the fraction which is less than five rupees and increasing the fraction which amounts to five rupees or more, to ten rupees. The net amount of tax deductible should be similarly rounded off to the nearest rupee. (xviii) Section 201 provides:- "(1) If any such person and in the cases referred to in section 194, the principal officer and the company of which he is principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax: Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Income-tax Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax. (1A) Without prejudice to the provisions of sub-section (i), if any such person, principal officer of company as is referred to in that sub-section does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of a person or the company as the case may be, referred to in sub-section (1)". (xix) Attention is also invited to section 276B, where it is provided that if a person fails to deduct or after deducting fails to pay the tax as required under the provisions of Chapter XVII-B of the Income-tax Act, 1961, he shall be punishable:- (i) in a case where the amount of tax which he has failed to deduct or pay exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; and (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. 5. 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. 6. These instructions are not exhaustive and are issued only with a view to helping the employers to understand the various relevant provisions. Wherever there is a difference of opinion, reference should always be made to the provisions of the Income-tax Act and the relevant Finance Act through which the changes in the tax structure are made. 7. These instructions may please be brought to the notice of all disbursing officers and State Undertakings under the control of the State Governments. 8. In case any assistance is required, the Income-tax Officer concerned and/or the Local Public Relations Officer may be approached for the same, who will, if necessary obtain the orders of higher authorities in the matter. 9. Copies of this Circular are available with the Director of Inspection (Research Statistics and Public Relations), 6th Floor, Mayur Bhavan, Connaught Circus, New Delhi-110 001. Yours faithfully, (Sd.) B. Nagarajan, Director, Central Board of Direct Taxes. * See [1985] 155 ITR (St.) 40. ** See [1985] 155 ITR (St.) 86.