TMI BlogInstructions for deduction of tax at source from salaries during financial year 1971-72 at the rates specified in Part III of First Schedule to Finance (No. 2) Bill, 1971X X X X Extracts X X X X X X X X Extracts X X X X ..... er deductions this year. An extract from Paragraph A of Part III of the First Schedule to the Finance (No. 2) Bill, 1971, insofar as it relates to levy of income-tax on "salaries" is enclosed herewith incorporating also an Explana tory Note [Annex I]. It is requested that pending the passing of the Finance (No. 2) Bill, 1971, deductions of tax from "salaries" may be made during the financial year 1971-72, according to the rates in the said Schedule. Three typical examples of calcula tions are given in Annex II. 2. The substance of main provisions in the law insofar as they relate to income from "salaries" on which tax is to be deducted at source during the financial year 1971-72, is given hereunder : (1) No tax will be deductible at source in any case unless the estimated salary income for the financial year exceeds Rs. 5,000. (2) While computing the taxable income, the disbursing officers should allow a deduction of the whole of the first Rs. 1,000, 50 per cent of the next Rs. 4,000 and 40 per cent of the balance of the qualifying amount of payments towards life insurance premia, contributions to provident fund and deposits in a 10-year account or 15-year account under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance (No. 2) bill, 1971 are given below : Category of taxpayers Amount of standard deduction for each calendar month or part thereof comprised in the period of employment or during which the conveyance has been used for the purpose of employment Rs. 1. Taxpayers owning motor cars 200 2. Taxpayers owning motor cycles, scooters or other mopeds 75 3. Taxpayers other than those referred to at item (1) and (2) 50 In the case of taxpayers owning cars, motor cycles, scooters or other mopeds, the standard deduction is admissible only if the conveyance is registered in the employee's name and not in the name of any other person even though such employee may claim to have purchased it from his own funds. [Each employee claiming such deduction will furnish to the disbursing authority a certif icate that the conveyance is registered in his own name.] The standard deduction of Rs. 50 per month is admissible to such of the salaried taxpayers who do not own any conveyance as also to those who own a bicycle or any other conveyance, not being a motor car, motor cycle, scooter or other m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the total income does not exceed Rs. 5,000 Nil ; (2) where the total income exceeds Rs. 5,000 but does not exceed Rs. 10,000 10 per cent of the amount by which the total income exceeds Rs. 5,000; (3) where the total income exceeds Rs. 10,000 but does not exceed Rs. 15,000 Rs. 500 plus 17 per cent of the amount amount by which the total income exceeds Rs. 10,000; (4) where the total income exceeds Rs. 15,000 but does not exceed Rs. 20,000 Rs. 1,350 plus 23 per cent of the amount by which the total income exceeds Rs. 15,000; (5) where the total income exceeds Rs. 20,000 but does not exceed Rs. 25,000 Rs. 2,500 plus 30 per cent of the amount by which the total income exceeds Rs. 20,000; (6) where the total income exceeds Rs. 25,000 but does not exceed Rs. 30,000 Rs. 4,000 plus 40 per cent of the amount by which the total income exceeds Rs. 25,000; (7) where the total income exceeds Rs. 30,000 but does not exceed Rs. 40,000 Rs. 6,000 plus 50 per cent of the amount by which the total income exceeds Rs. 30,000; (8) where the total income exceeds Rs. 40,000 but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income exceeds Rs. 15,000. Explanatory Note The operation of the above-noted marginal relief provision in respect of surcharge may be illustrated by the following examples : Example A Total income Rs. 15,100 Income-tax Rs. 1,373 (Rs. 1,350 plus 23 per cent of Rs. 100) Surcharge leviable : - at the flat rate of 15 per cent Rs. 205.95 (15 per cent of Rs. 1,373) - under the proviso Rs. 175 (Rs. 135, being 10 per cent of Rs. 1,350 which is the tax on a total income of Rs. 15,000 Plus Rs. 40, being 40 per cent of the amount by which the total income exceeds Rs. 15,000) As the surcharge calculated under the proviso is lower, the surcharge leviable in this case will be Rs. 175 only. Example B Total income Rs. 15,200 Income-tax on Rs. 15,200 Rs. 1,396 (Rs. 1,350 + 23 per cent of Rs. 200) Surcharge leviable : - at the flat rate of 15 per cent Rs. 209.40 (15 per cent of Rs. 1,396) - under the proviso Rs. 215.00 (Rs. 135 + Rs. 80, being 40 per cent of Rs. 200) As the surcharge calculated at the flat rate of 15 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,373 9. Union surcharge [at 15 per cent of Rs. 1,373 works out to Rs. 205.95 but limited to Rs. 175 [Rs. 135 being 10 per cent of Rs. 1,350 which is the tax on a total income of Rs. 15,000] plus Rs. 40 being 40 per cent of amount by which the total income exceeds Rs. 15,000] 175 10. Total tax payable 1,548 Example III 1. Total salary income 28,088 2. Contribution to general provident fund 3,500 3. Payment towards life insurance premia 6,275 9,775 4. Profession tax 138 [The employee has a car in the last eleven months of the year registered in his name and uses it for purposes of employment] 5. Total salary income Rs. 28,088 6. Deduct : - Profession tax 138 - Standard deduction in respect of expenditure on traveling at Rs. 200 for 11 months and at Rs. 50 for one month 2,250 2,388 25,700 7. Deduction on account of contributions toward ..... X X X X Extracts X X X X X X X X Extracts X X X X
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