TMI BlogSection 192 of the Income-tax Act, 1961 - Deduction of tax at source - Salaries - Income-tax deduction from salaries during the financial year 2004-2005 under section 192X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2005-2006) 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. (Please also refer to section 88D discussed in Para 7 of the Circular for special provisions in respect of individuals having total income not exceeding Rs. 1,00,000). 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-A (Sections 88, 88B, 88C and 88D) 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f non-monetary perquisites and the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above. Steps : Income Chargeable under the head Salary inclusive of all perquisites: Rs. 2,40,000 Tax on Total Salaries : Rs. 37,000 Average Rate of Tax [(37,000/2,40,000) 100] : 15.41% Tax payable on Rs. 40,000 ( 15.41% of 40,000) : Rs. 6,167 Amount required to be deposited each 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 tax payer 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er income and the tax deducted thereon had not been taken into account. In other words, the DDO can take into account only the loss from House Property for working out the amount of total tax to be deducted. While taking into the account the loss from House Property, the DDO shall ensure that the assessee files the declaration referred to above and encloses therewith a computation of such loss from House Property. Sub-section (2C) lays down that a person responsible for paying 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt deductions for that employee within that financial year itself. 3.9 TDS on payment of balance under provident fund and superannuation fund - The trustees of a Recognized Provident Fund, or any person authorized by the regulations of the Fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule to the Act applies, at the time when the accumulated balance due to an employee is paid, make therefrom the deduction 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 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , section 276B lays own that if a person fails to pay to the credit of the Central Government within the prescribed time the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years, and with fine. 4.6 Furnishing of certificate for tax deducted - According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate to the payee to the effect that tax has been deducted and to specify therein the amount deducted and certain other particulars. This certificate, usually called the TDS certificate, has to be furnished within a period of one month from the end of the relevant financial year. 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 (Specimen Form 16 enclosed as Annexure-III-B ). However, in the case of an employee who is resident in India and whose income from salaries, before allowing standard deduction, does not exceed Rs. 1,50,000, the certificate of deduction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure continues. 4.7 Mandatory quoting of PAN and TAN - According to the provisions of section 203A of the Income-tax Act, it is obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax-deduction Account No. (TAN) in the Challans, TDS-certificates, returns etc. Detailed instructions in this regard are available in this Departments Circular No.497 (F.No.275/118/87-IT(B) dated 9-10-1987). If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty, under section 272BB, a sum of ten thousand rupees. Similarly, as per section 139A(5B), it is obligatory for persons ducting tax at source to quote PAN of the persons from 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax deducted at source is credited to the Central Government through book adjustment, care should be taken to ensure that the correct amount of income-tax is reflected therein. 4.11 TDS on income from pension - In the case of pensioners who receive their pension from a nationalized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income. The deductions from the amount of pension on account of standard deduction under section 16 and the tax rebate under section 88B [in the case of pensioners, resident in India, who are 65 years of age or more : refer Para 6(18)] will be allowed by the concerned bank at the time of deduction of tax at source from the pension, before making payment to the concerned pensioner. As regards the tax rebate under section 88 on account of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioners furnish the relevant details to the banks, the tax rebate at the specified rate may also 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 RBIs Pension Circular (Central Series) No.7/C.D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the statement referred to in section 203AA of the Income-tax Act, such tax shall be treated as tax paid on behalf of the person from whose income such tax has been deducted and credit for such tax would be given to such person without production of a TDS certificate. Consequently, the return filed by such person in respect of the income of financial year 2005-06 onwards would not be accompanied by any TDS certificate. (b) The person deducting the tax (employer in case of salary income), shall be required to file Quarterly Statements for the periods ending on 30th June, 30th September, 31st December and 31st March in each such financial year and shall file these statements, duly verified, to the prescribed income-tax authority or the person authorized by such authority. The Quarterly Statements would be filed on computer media only in accordance with the Scheme to be notified in this regard by the Central Government. In case of failure in filing of the Quarterly Statement, the person deducting the tax shall be liable for a penalty under section 272A(2)(k) of Rs. 100 for each day of default. These Quarterly Statements would compulsorily require quoting of the Tax Deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual accretion to the employees account in a recognized provident fund to the extent it is chargeable to tax under 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% 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 by the Central Government to the account of the employee under the New Pension Scheme as notified vide Notification No. F.No. 5/ 7/2003- ECB PR dated 22-12-2003 (copy enclosed as Annexure-VA) and referred to in section 80CCD (para 5.4(2) 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. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n widened by clarifying that it 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 located in a remote area provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site or an accommodation provided in an off-shore site will not be treated as a perquisite. A project site for the purposes of this sub-rule means a site of project upto the stage of its commissioning. A remote area means an area located at 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 furnishings, fittings and furnitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if any) are reimbursed to him by the employer, provided that the motor car is used wholly and exclusively for official purposes and the documents as prescribed in sub-para (f) below are maintained. (b) Where the motor car is owned or hired by the employer and is used exclusively for the private or personal purpose of the employee, the value of perquisite would be equal to the actual amount of expenditure incurred by the employer on the running and maintenance of the motor car (including remuneration of the chauffeur, if any), as increased by the amount representing 10% 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 (I) of the Table below. (d) Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the above amount. IV. Gas, electricity water : For free 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. However, when the supply is made from employers own resources, under the old rules the value of perquisite was taken as Nil. There was also a separate provision in the old rules for valuation at 6.25% of salary of the taxpayer for part official use. This has 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 indirec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof. In case of loans taken for repairs, renovations etc., the higher interest rate of 13% would be applicable for calculation of perquisite. Small loans upto Rs. 20,000 in the aggregate are exempt. Loans for medical treatment specified in Rule 3A are also exempt, provided the amount of loan for medical reimbursement is not reimbursed under any medical insurance scheme. Where any medical insurance reimbursement is received, the perquisite value at the rate of 13% shall be charged from the date of reimbursement on the amount reimbursed, but not repaid against the outstanding loan taken specifically for this purpose. VIII. Travelling, 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 mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic facilities for the health and recreation of employees are not hit, health clubs, sports facilities etc. provided uniformly to all classes of employees by the employer at the employers premises are exempt. The initial one time deposit or fees for corporate or institutional membership, where the benefit does not remain with the employee after cessation of employment, are exempt. Where such expenses on entertainment including meals are for purposes of business and proper records for the same are maintained no perquisite would arise. For credit card and club expenses to be exempt for business purposes, the following documentation needs to be maintained by the employer: (a) complete details in respect of such expenditure 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% of the original cost of the asset as reduced by any charges recovered from the employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity not included in the rules shall be valued at the cost under an arms-length transaction to the employer where the employer pays for the benefit or amenity. However, the benefit of conveyance to and from residence to place of work, periodicals and journals required for discharge of work and expenses on telephones including a mobile phone shall not be included in calculating perquisite value. 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 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 termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain limits. The maximum amount of retrenchment compensation exempt is the sum calculated on the basis provided in section 25F(b) of the Industrial Disputes Act, 1947 or any amount not less than Rs. 50,000 as the Central Government may by notification specify in the Official Gazette, whichever is less. These limits shall not apply in the case where the compensation is paid under any scheme which is approved in this behalf by the Central Government, having regard to the need for extending special protection to the workmen in the undertaking to which the scheme applies and other relevant circumstances. The maximum limit of such payment is Rs. 5,00,000 where retrenchment is on or after 1-1-1977. (6) Under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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% 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, if the terms of employment so provide,but excludes all other allowances and perquisites. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 7-6-89, as amended by notification No. F.2/14/89-NS-II dated 12-10-89, 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 individual or family pension received by any member of the family of an individual who has been in the service of the Central Government or State Government and has been 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 Notifications No. S.O.1948(E) dated 24-11-2000 and 81(E) dated 29-1-2001 which are enclosed as per Annexure VIA VIB . (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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 16 of the Income-tax Act, the standard deduction available is as under : In the case of an assessee whose income from salary, before allowing a deduction under this clause: (a) does not exceed five lakh rupees, a deduction of a sum equal to forty per cent of the salary or thirty thousand rupees, whichever is less; (b) exceeds five lakh rupees, a deduction of a sum of twenty thousand rupees. It is clarified that where salary is due from, or paid or allowed by, more than one employer, the deduction under this clause shall be computed with reference to the aggregate salary due, paid or allowed to the assessee and shall, in no case, exceed the amount specified under this clause. 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 Employmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inee, 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. Where any amount paid or deposited by the assessee has been allowed as a deduction under this section, no rebate with reference to such amount shall be allowed under section 88. 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. (3) Under section 80D, in the case of the following categories of persons, a deduction can be allowed for a sum not exceeding Rs. 10,000 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in force an insurance on the health of the categories of persons mentioned below provided that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um 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; (ii) the assessee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability. However, if the dependant, being a person with disability, predeceases the assessee, an amount equal to the amount paid or deposited under sub-para (3)(b) above shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year. B. The assessee, 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 under section 139, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999); (g) person with severe disability means (i) a person with eighty per cent or more 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); or (ii) a person with severe disability referred to in clause (o) 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); (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).] (5) 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 chargeable to tax, by way of repaym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef 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 Government. xvi. The National Cultural Fund set up by the Central Government. xvii.The Fund for Technology Development and Application set by the Central Govt. xviii. The National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple disabilities. (7) Under section 80GG of the Act an assessee is entitled to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate 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 (4) 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 the individual. (2) Any payment made to effect or to keep in force a contract for a deferred annuity, not bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 may, by notification in the Official Gazette, specify in this behalf. (12) Any subscription made to any such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 tax-payer at any time before the expiry of five years from the end of the financial year in which possession of such property is obtained by him or he receives back, by way of refund or otherwise, any sum specified in section 88(2)(xv), no deduction under these provisions shall be allowed in respect of such sums paid in such previous year in which the transfer is made and the aggregate amount of deduction of income tax so allowed in the earlier years shall be added to the tax on the total income of the assessee with which he is chargeable for such assessment year. It may be noted that the amount which will qualify for tax rebate in respect of this item will not exceed Rs. 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 of any two children of the employee. It is clarified that any payment towards any development fees or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross total income exceeds 15% Rs. 1,50,000 but does not exceed Rs. 5,00,000 3. Where the gross total income exceeds Nil Rs. 5,00,000 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. Rebate to senior citizens: (19) 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 computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 9,200 Rs. 8,200 Rs. 1,00,000 Rs. 1,02,000 Rs. 9,400 Rs. 7,400 Rs. 1,00,000 Rs. 1,03,000 Rs. 9,600 Rs. 6,600 Rs. 1,00,000 Rs. 1,04,000 Rs. 9,800 Rs. 5,800 Rs. 1,00,000 Rs. 1,05,000 Rs. 10,000 Rs. 5,000 Rs. 1,00,000 Rs. 1,06,000 Rs. 10,200 Rs. 4,200 Rs. 1,00,000 Rs. 1,07,000 Rs. 10,400 Rs. 3,400 Rs. 1,00,000 Rs. 1,08,000 Rs. 10,600 Rs. 2,600 Rs. 1,00,000 Rs. 1,09,000 Rs. 10,800 Rs. 1,800 Rs. 1,00,000 Rs. 1,10,000 Rs. 11,000 Rs. 1,000 Rs. 1,00,000 Rs. 1,11,000 Rs. 11,200 Rs. 200 Rs. 1,00,000 Rs. 1,11,100 Rs. 11,220 Rs. 120 Rs. 1,00,000 Rs. 1,11,200 Rs. 11,240 Rs. 40 Rs. 1,00,000 It may be clarified that in order to be eligible for a rebate under section 88D, the total income of the employee after allowing deductions under Chapter VIA of the Income-tax Act and after setting off any loss from house property should be up to Rs. 1,00,000 or up to Rs. 1,11,200, as the case may be. DDOs to satisfy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d off to the nearest rupee. Miscellaneous 8.1 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 the Finance Act 2004 and the Finance (No. 2) Act 2004. 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 These instructions may be brought to the notice of all Disbursing Officers and Undertakings including those under the control of the Central/State Governments. 8.4 Copies of this Circular are available with the Director of Income-tax (Research, Statistics Publications and Public Relations) 6th Floor, Mayur Bhavan, Indira Chowk, New Delhi-110 001 and at the following websites: www.finmin.nic.in www.incometaxindia.gov.in Annexures For Assessment Year 2005-06 Example-1 Calculation of Income tax in the case of an employee having gross salary income of : (i) Rs. 1,10,000 (ii) Rs. 6,00,000 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 House Building Advance 25,000 6. Tuition fees for two children (Rs. 20,000 for one child and Rs. 10,000 for the other child) 30,000 7. Investment infrastructure Bond u/s 88(2)(xvi) 20,000 COMPUTATION OF TAX Gross Salary 3,00,000 Add: Perquisite in respect of reimbursement of medical expenses in excess of Rs. 15,000 in view of Sec. 17(2)(v) 15,000 3,15,000 Less: Standard Deduction 30,000 Taxable Income 2,85,000 Tax thereon 59,500 Rebate u/s 88: GPF 20,000 LIC 20,000 Repayment of HBA (Maximum) 20,000 Tuition Fees (Restricted to max. of 12,000 per child or actuals, whichever is lesser) 22,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add: Education Cess @ 2% 470 Total Tax Payable 24,000 Note: Part of the dearness allowance merged with the basic pay and shown as Dearness Pay is also included in the definition of Salary for working out the amount of exemption under section 10(13A). 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 1.61) used partly for personal and partly for official work and actual running and maintenance charges including chauffers salary are reimbursed by employer, but no documents are maintained regarding details of journeys - Rs. 1. Salary 1,08,000 2. Bonus 12,000 3. Free gas, electricity, water etc. (Actual bills paid by company) 6,000 4 (a) Furnished flat provided to the employee for which actual rent paid by the company per annum 78,000 (b) Hotel rent paid by employer (for two months) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 VIII issue 20,000 8. Rent Paid by the employee for house hired by him 24,000 9. Repayment of House Building loan taken by the employee from LIC 12,000 10. Subscription to eligible issue of capital of a Co. approved u/s 88(2)(xvi) 20,000 COMPUTATION OF TOTAL INCOME AND TAX PAYABLE THEREON Rs. 1. Gross salary 1,68,400 Less: House rent allowance exempt u/s 10(13A) Rs. a. Actual amount of HRA received 12,000 b. Expenditure on rent in excess of 10% of salary (Including D.A.) as personal D.A. is including for retirement benefits 8600) 8,600 c. 50% of salary (including D.A) 77,000 (-) 8,600 Total salary Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net Taxable Income 2,17,500 Tax thereon 39,250 Less : Rebate u/s 88 GP 20,000 NSC 10,000 Housing Loan repaid 20,000 Total 50,000 Rebate @ 15% of Rs. 50,000 7,500 Tax Payable 31,750 Add: surcharge Nil Add: Education Cess 635 Total tax payable 32,385 Example 8 Income Tax calculation in the case of an employee who claims loss under the head Income from house property, loan taken before 1-4-1999. Particulars : Rs. 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) 2,00,000 4. Donation paid to National Childrens Fund 5,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000 Rebate under section 88 @ 15% of Rs. 50,000 = Rs. 7,500 7,500 Tax payable 17,300 Add: Education Cess @ 2% 346 Total Tax Payable 17,646 Note: In the case of a woman assessee who is 65 years of age or more, she will be entitled to rebate only under section 88B of the Act meant for senior citizens and not under section 88C of the Act. Annexure-II Form for sending particulars of income under section 192(2B) for the year ending 31st March, 2002 1. Name and address of the employee 2. Permanent Account Number 3. Residential status 4. Particulars of income under any head of income other than salaries (not being a loss under any such head other than the loss under the head Income from house property) received in the financial year (i) Income from house property .................................. (in case of loss, enclose computation thereof) (ii) Profits and gains of business or profession .................................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Government service from 1st of January, 2004 (except the armed forces in the first stage). The monthly contribution would be 10 per cent of the salary and DA to be paid by the employee and matched by the Central Government. However, there will be no contribution form the Government in respect of individuals who are not Government employees. The contribution and investment returns would be deposited in a non-withdrawable pension tier-I account. The existing provisions of defined benefit pension and GPF would not be available to the new recruits in the Central Government service. (ii) In addition to the above pension account, each individual may also have a voluntary tier-II withdrawable account at his option. This option is given as GPF will be withdrawn for new recruits in Central Government service. Government will make no 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 anytime. This withdrawable account does not constitute pension investment, and would attract no special tax treatment. (iii) Individuals can normally exit at o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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