TMI BlogInstructions for deduction of tax at source from salaries during the financial year 2000-2001X X X X Extracts X X X X X X X X Extracts X X X X ..... here the total income exceeds 10 per cent of the amount by which the total Rs. 50,000 but does not exceed income exceeds Rs. 50,000 Rs. 60,000 3. Where the total income exceeds Rs, 1,000 plus 20 per cent of the amount by Rs. 60,000 but does not exceed which the total income exceeds 60,000 Rs. 1,50,000 4. Where the total income exceeds Rs. 19,000 plus 30 per cent of the amount by Rs. 1,50,000 which the total income exceeds Rs. 1,50,000. Surcharge on income-tax The amount of income-tax so computed shall be reduced by the amount of rebate of income-tax calculated under Chapter VIII-A and the income-tax so reduced shall be increased by a surcharge : (a) @ 10% of such income-tax where the total income exceeds sixty thousand rupees but does not exceed one lakh fifty thousand rupees; (b) at the rate of fifteen per cent of such income-tax where the total income exceeds one lakh fifty thousand rupees. However, the total amount payable as income-tax and surcharge shall not exceed the total amount payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take into account in making the deduction under Para (3.1) above. Explanation.For this purpose University means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be University for the purpose of the Act. 3.4 Sub-section (2B) of section 192 enables a taxpayer to furnish particulars of income under any head other than Salaries and of any tax deducted at source thereon, in the prescribed Form (No. 12C) vide Annexure II. Such income should not be a loss under any such head or other than the loss under the head Income from house property for the same financial year. The person responsible for making payment (DDO) shall take such other income and tax, if any, deducted at source from such income, and the loss, if any, under the head Income from house property into account for the purpose of computing tax deductible under section 192 of the Income-tax Act. It is, however, provided that this sub-section shall not in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring that financial year itself. 3.6 The trustees of a recognised Provident Fund or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule to the Act applies, at the time when accumulated balance due to an employee is paid, make therefrom the deduction specified in rule 10 of Part A of the Fourth Schedule. 3.7 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. 3.8 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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. 148(E), dated 28-2-1991. A specimen of the certificate is enclosed as Annexure III. This certificate is to be issued on the tax-deductors own stationery within one month from the close of the financial year, i.e., by April 30 of every year. If he fails to issue the TDS certificate to the person concerned as required by section 203, he will be liable to pay, by way of penalty, under section 272A, a sum which shall be Rs. 100 for every day during which the failure continues. 4.7 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source from salaries is No. 9 with Blue colour Band. Where the amount of tax deducted at source is credited to the Central Government through book adjustment, care should be taken to ensure that the correct amount of income-tax is reflected therein. 4.11 In the case of pensioners who receive their pension from a nationalised bank, the instructions contained in this circular shall apply in the same manner as they apply to salary income. The 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) 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 nationalised banks vide RBIs Pens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year. (2) For the removal of doubts, it is clarified that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. Any salary, bonus, commission or remuneration by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as Salary. (3) Salary includes wages, fees, commissions, perquisites, profits in lieu of, or, in addition to salary, advance of salary, annuity or pension, gratuity, payments in respect of encashment of leave, etc. It also includes the annual accretion to the employees account in a recognised 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 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 previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of allotment of shares, debentures or warrants directly or indirectly under the Employees Stock Option Plan or Scheme. 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 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any payment received 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 Cooperative 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 assessment year, it shall not be allowed to him for any other assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance up to Rs. 3,000 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 employee has incurred actual expenditure on payment of rent. (10) Clause (14) of section 10 provides for exemption of the following allowances: (i) Any special allowance or benefit granted to an employee to meet the expenses incurred in the performance of his duties as prescribed under rule 2BB subject to the extent to which such expenses are actually incurred for that purpose. (ii) Any allowance granted to an assessee either to meet his personal expenses at the place of his posting or at the place he ordinarily resides or to compensate him for the increased cost of living, which may be prescribed and to the extent as may be prescribed. However, the allowance referred to in (ii) above should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved by the Government for the purposes of medical treatment of its employees; (ii) in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines : Provided that in a case falling in sub-clause (ii), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital; (c) premium paid by the employer in respect of medical insurance taken for his employees (under any scheme approved by the Central Government, or the reimbursement of insurance premium to the employees who take medical insurance for themselves or for their family members (under any scheme approved by the Central Government); (d) reimbursement by the employer of the amount spent by an employee in obtaining medical treatment for himself or any member of his family from any doctor, not exceeding in the aggregate of Rs. 15,000 in an year; (e) as regards medical treatment abroad, the actual expenditure on stay and treatment abroad of the employee or any member of his fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for receiving pension from the Fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessees account, if any) as does not exceed the amount of ten thousand rupees in the previous year. Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a rebate with reference to such amount shall not be allowed under section 88. (2) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental dispensary or a hospital maintained by a local authority as per Explanation given below section 80DD. It would be sufficient if the employee furnishes a medical certificate from a Government Hospital and a declaration in writing duly signed by the claimant certifying the actual amount of expenditure on account of medical treatment (including nursing) training and rehabilitation of the handicapped dependent and receipt/acknowledgements for the amount paid of deposited in the specified schemes of LIC or UTI. Therefore, DDOs may not insist production of vouchers/bills by the employees for having incurred expenditure on medical treatment of their handicapped dependents for allowing the deduction under section 80DD for the purpose of computing tax deductible at source. (Ref. CBDT Circular No. 775, dated 26-3-1999). (4) Under section 80DDB, where an assessee who is resident in India has, during the previous year, actually incurred any expenditure on the medical treatment of such disease or ailment as may be specified in rule 11DD made in this behalf by the Board (a) for himself or a dependent relative, in case the assessee is an individual, (b) for any member of a Hindu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved charitable institution means an institution established for charitable purposes and notified by the Central Government under clause (2C) of section 10, or, an institution referred to in clause (a) of sub-section (2) of section 80G; (b) financial institution means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf; (c) higher education means full-time studies for any graduate or post-graduate course in engineering, medicine, management, or for post-graduate course in applied sciences or pure sciences, including mathematics and statistics; (d) initial assessment year means the assessment year relevant to the previous year, in which the assessee starts repaying the loan or interest thereon. (6) No deduction should be allowed by the DDO from the salary income in respect of any donations made for charitable purposes. The tax relief on such donations as admissible under section 80G of the Act, will have to be claimed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn : (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. The Drawing and Disbursing Authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessee. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. (8) Section 80U allows deduction of forty thousand rupees in computing the total income of a resident individual, who at the end of the previous year, is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability, or mental retardation, specified in rule 11D of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n : (a) to any such security of the Central Government or any such deposit scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf; (b) to any such saving certificates as defined under section 2(c) of the Government Saving Certificate Act, 1959 as the Government may, by notification in the Official Gazette, specify in this behalf. Interest on NSC (VI issue) and NSC (VIII Issue) which is deemed investment also qualifies for the rebate. (7) Any sum paid as contribution in the case of an individual, for himself, spouse or any child, (a) for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India; (b) for participation in any unit-linked insurance plan of the LIC Mutual Fund 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c company, public sector company or a university established by law or a college affiliated to such university, or a local authority or a co-operative society. The stamp duty, 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 any addition or alteration to, or, renovation or repair of the house property which is carried out after the issue of the completion certificate by competent authority, or after the occupation of the house by the assessee or after it has been let out. Payments towards any expenditure in respect of which the deduction is allowable under the provision 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of such units shall not be taken into account for the purposes of sections 54EA and 54EB: Provided further that this clause shall apply if the amount of subscription to such units is subscribed only in the eligible issue of capital of any company. Explanation : For the purposes of this clause - eligible issue of capital means an issue referred to in clause (i) of Explanation to clause (xvi) in sub-section (2) of section 88. (16) Subject to the limits mentioned for the various items, the entitlement to tax-rebate will be calculated at the rate of 20% of the total amount of the aforesaid savings etc., in the case of individuals, and at the rate of 25% in the case of an author or playwright or artist or musician or actor or sportsman (including an athlete) whose income derived from the exercise of his profession as such author/playwright/artist/musician/actor/sportsman/athlete constitutes twenty five per cent or more of his total income. The maximum tax rebate allowable will be Rs. 16,000 generally, and Rs. 17,500 in the case of authors, playwrights, artists, musicians, actors, sportsmen and athletes. There will, therefore, be an overall limit for savings which will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income under the head Salaries on which income-tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees. 7.2 Income-tax on the estimated income from salary as shown in para 7.1 shall be calculated at the rates given in para 2. 7.3 The amount of tax rebates computed under para 6 shall be deducted from the income-tax calculated according to para 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 rate of ten per cent or fifteen per cent, as the case may be, 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 and the tax rebates as mentioned in para 6 are allowed only if the investments or the payments have been made out of the income chargeable to tax during the financial year 2000-2001. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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