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TMI BlogTax Deduction at Source – Income Tax deduction from Salaries under section 192 during the Financial Year 2008-2009X X X X Extracts X X X X X X X X Extracts X X X X ..... ation dated 12.1.2004 (Form No. 16AA) 59-63 V. Boards's Notification dated 26.8.2003 64-66 VA. Deptt. Of Eco. Affairs Notification dated 22.12.2003 67 VIA. Boards's Notification dated 24.11.2000 68 VIB. Boards's Notification dated 29.1.2001 69 VII. Form No. 10BA 70 CIRCULAR NO. 9/2008, DATED 29-9-2008 [F.No. 275/192/2008-IT(B)] SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2008-2009 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961. ……………… Reference is invited to Circular No. 08/2007, dated 5-12-2007 whereby the rates of deduction of income-tax from the payment of income under the head "Salaries" under section 192 of the Income-tax Act, 1961, during the financial year 2007-08, were intimated. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2008-09 and explains certain related provisions of the Income-tax Act. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income-tax Department - 2. Finance Act, 2008 As per the Finance Act, 2008, income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able as income-tax and surcharge shall not exceed the total amount payable as income-tax on a total income of Rs. 10,00,000 by more than the amount of income that exceeds Rs. 10,00,000. Additional surcharge on Income-tax (Education Cess on Income-tax): The amount of income-tax as increased by surcharge, if any, mentioned above shall be further increased by an additional surcharge (Education Cess on Income-tax) at the rate of two per cent of the income-tax and surcharge. Additional surcharge on Income-tax (Secondary and Higher Education Cess on Income-tax): From Financial year 2007-08 onwards, an additional surcharge is chargeable at the rate of one per cent of income-tax and surcharge (not including the Education Cess on income-tax). Surcharge, Education Cess, and Secondary and Higher Education Cess are payable by both resident and non-resident assessees. 3. Section 192 of the Income-tax Act, 1961: Broad Scheme of Tax Deduction at Source from "Salaries". Method of Tax Calculation: 3.1 Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income-tax on the estimated income of the assessee under the head &q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom one employer to another. It provides for deduction of tax at source by such employer (as the taxpayer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head "Salaries" due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). Relief when salary paid in arrear or advance: 3.5 Under sub-section (2A) of section 192 where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E duly verified by him, and thereupon the person responsible as aforesaid shall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Form No. 12BA. (Annexure-III). Form No. 12BA along with Form No. 16, as issued by the employer, are required to be produced on demand before the Assessing Officer in terms of section 139C of the Income-tax Act. Conditions for claim of deduction of interest on borrowed capital for computation of income from house property 3.7 (i) For the purpose of computing income/loss under the head 'income from house property' in respect of a self-occupied residential house, a normal deduction of Rs. 30,000 is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs. 1,50,000 is available if such loan has been taken on or after 1-4-1999 for constructing or acquiring the residential house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid, 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. Salary paid in foreign currency: 3.11 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. 4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: 4.1 Under clause (i) of section 204 of the Act the "persons responsible for paying" for the purpose of section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof. 4.2 The tax determined as per para 6 should be deducted from the salary under section 192 of the Act. Deduction of tax at lower rate: 4.3 Section 197 enables the taxpayer to make an application in Form No. 13 to his Assessing Officer, and, if the Assessing Officer is satisfied that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording 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. However, in the case of an employee who is resident in India and whose income from salaries does not exceed Rs. 1,50,000, the certificate of deduction of tax shall be issued in Form No. 16AA (Specimen Form 16AA enclosed as Annexure-IV). It is, however, clarified that there is no obligation to issue the TDS certificate (Form 16 or Form 16AA) in case tax at source is not deductible/deducted by virtue of claims of exemptions and deductions. As per section 192, the responsibility of providing correct and complete particulars of perquisites or profits in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so required to be matched with the e-TDS returns furnished by the deductors. Assessing Officers may, if considered necessary, also write to the deductors for verification of the correctness of the taxes deducted or other particulars mentioned in the certificate. It has been decided for the proper administration of this Income-tax Act to allow the deductors, at their option, in respect of the tax to be deducted at source from income chargeable under the head 'Salaries' to use their digital signatures to authenticate the certificates of deduction of tax at source in Form No. 16. The deductors will have to ensure that TDS certificates in Form No. 16 bearing digital signatures have a control No. with log to be maintained by the employer (deductor). The deductor will ensure that its TAN and the PAN of the employee are correctly mentioned in such Form No. 16 issued with digital signatures. The deductors will also ensure that once the certificates are digitally signed, the contents of the certificates are not amenable to change by anyone. The income-tax authorities shall treat such certificate with digital signatures as a certificate issued in accordance with rule 31 of the Income-tax Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quarters of the financial year and on or before the 15th June following the last quarter of the financial year. The requirement of filing an annual return of TDS has been done away with with effect from 1-4-2006. The quarterly statement for the last quarter filed in Form 24Q (as amended by Notification No. S.O. 704(E), dated 12-5-2006) shall be treated as the annual return of TDS. It is now mandatory for all offices of the Government and all companies to file quarterly statements of TDS on computer media only in accordance with the "Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003" as notified vide Notification No. S.O. 974(E), dated 26-8-2003. (Annexure-V). The quarterly statements are to be filed by such deductors in electronic format with the e-TDS Intermediary at any of the TIN Facilitation Centres, particulars of which are available at www.incometaxindia.gov.in and at http://tin.nsdl.com. If a person fails to furnish the quarterly statements in due time, he shall be liable to pay by way of penalty under section 272A(2)(k), a sum which shall be Rs. 100 for every day during which the failure continues. However, this sum shall not exceed the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in this circular shall apply in the same manner as they apply to salary-income. The deductions from the amount of pension under section 80C on account of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioners furnish the relevant details to the banks, may 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 RBI's Pension Circular (Central Series) No. 7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No. 60/GA.64(11CVL)-/92), dated the 27th April, 1992, and, these instructions should be followed by all the branches of the Banks, which have been entrusted with the task of payment of pensions. Further all branches of the banks are bound under section 203 to issue certificate of tax deducted in Form 16 to the pensioners also vide CBDT Circular No. 761, dated 13-1-1998. Important Circulars: 4.14 Where Non-Residents are deputed to work in India and taxes are borne by the employer, if any refund becomes due to the employee after he has already left India and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ites, 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 employee's 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 per cent 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, in excess of 10 per cent, by the Central Government or any other employer to the account of the employee under the New Pension Scheme as notified vide Notification No. F.N. 5/7/2003-ECB&PR, dated 22-12-2003 (enclosed as Annexure-VA) and referred to in section 80CCD [para 5.4(C) 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. It may be noted that, since salary includes pensions, tax at source would have to be deducted from pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 Census. For other places, the perquisite value would be 7½ per cent of the salary. (b) Where the accommodation so provided is taken on lease/rent by the employer, the prescribed rate is 15 per cent of the salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee. For furnished accommodation, the value of perquisite as determined by the above method shall be increased by-- (i) 10 per cent of the cost of furniture, appliances and equipments, or (ii) where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable. - as reduced by any charges paid by the employee himself. "Accommodation" 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 provided to an employee working at a mining site or an onshore oil exploration site or a project execution site or a dam site or a power generation site or an off-shore site will not be treated as a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the employer. Where the attendant is provided at the residence of the employee, full cost will be taxed as perquisite in the hands of the employee irrespective of the degree of personal service rendered to him. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. III. 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. Where the supply is made from the employer's own resources, the manufacturing cost per unit incurred by the employer would be taken for the valuation of perquisite. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. IV. Free or concessional education: Perquisite on account of 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 is running, maintaining or directly or indirectly financing the educational institution. Any amount paid by the employee for such facilities or services shall be redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or at a cost less than its market value from the employer. The difference between the original cost of the movable asset (not being shares or securities) and the sum, if any, paid by the employee, shall be taken as the value of perquisite. In case of a movable asset, which has already been put to use, the original cost shall be reduced by a sum of 10 per cent of such original cost for every completed year of use of the asset. Owing to a higher degree of obsolescence, in case of computers and electronic gadgets, however, the value of perquisite shall be worked out by reducing 50 per cent of the actual cost by the reducing balance method for each completed year of use. Electronic gadgets in this case means data storage and handling devices like computer, digital diaries and printers. They do not include household appliance (i.e. white goods) like washing machines, microwave ovens, mixers, hot plates, ovens etc. Similarly, in case of cars, the value of perquisite shall be worked out by reducing 20 per cent of its actual cost by the reducing balance method for each completed year of use. VIII. Medical Reimbursement by the employer exceeding Rs. 15,000 p.a. under section 17(2)(v) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a Regimental Fund or Non-Public Fund established by the Armed Forces of the Union referred to in section 10(23AAB) is exempt under sub-clause (iii) of clause (10A) of section 10. (4) 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, whether on superannuation or otherwise, is exempt under sub-clause (i) of clause (10AA) of section 10. In the case of other employees, this exemption will be determined with reference to the leave to their credit at the time of retirement on superannuation, or otherwise, subject to a maximum of ten months' leave. This exemption will be further limited to the maximum amount specified by the Government of India Notification No. S.O. 588(E), dated 31-5-2002 at Rs. 3,00,000 in relation to such employees who retire, whether on superannuation or otherwise, after 1-4-1998. (5) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on or after 1-4-2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20 per cent of the actual capital sum assured. However, any sum received under such policy on the death of a person would still be exempt. (8) any payment from a Provident Fund to which the Provident Funds Act, 1925 (19 of 1925), applies or from any other provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette. (9) 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 employer in respect of the relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be prescribed. However, the allowance referred to in (ii) above should not be in the nature of a personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to his place of posting or residence. The CBDT has prescribed guidelines for the purpose of clauses (i) and (ii) of section 10(14) vide Notification No. S.O. 617(E), dated 7th July, 1995 (F.No. 142/9/95-TPL) which has been amended vide Notification S.O. No. 403(E), dated 24-4-2000 (F. No. 142/34/99-TPL). The transport allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of duty is exempt to the extent of Rs. 800 per month vide Notification S.O. No. 395(E), dated 13-5-1998. (11) Under section 10(15)(iv)(i) of the Income-tax Act, interest payable by the Government on deposits made by an employee of the Central Government or a State Government or a public sector company out of his retirement benefits, in accordance with such scheme framed in this behalf by the Central Government and notified in the Official Gazette is exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aggregate 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 family, or, on stay abroad of one attendant who accompanies the patient, in connection with such treatment, will be excluded from perquisites to the extent permitted by the Reserve Bank of India. It may be noted that the expenditure incurred on travel abroad by the patient/attendant, shall be excluded from perquisites only if the employee's gross total income, as computed before including the said expenditure, does not exceed Rs. 2 lakhs. For the purpose of availing exemption on expenditure incurred on medical treatment, 'hospital' includes a dispensary or clinic or nursing home, and 'family' in relation to an individual means the spouse and children of the individual. Family also includes parents, brothers and sisters of the individual if they are wholly or mainly dependent on the individual. 5.3 Deductions under section 16 of the Act 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government has since notified Public Provident Fund vide Notification S.O. No. 1559(E), dated 3-11-2005.] (c) by an employee to a Recognized Provident Fund; (d) by an employee to an approved superannuation fund; It may be noted that "contribution" to any Fund shall not include any sums in repayment of loan; (5) Any subscription :-- (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. [The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E), dated 3-11-2005.] (6) 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 referred to in clause (23D) of section 10 and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in providing long-term finance for construction or purchase of houses in India for residential purposes, or, (b) any authority constituted in India by, or, under any law, enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. [The Central Government has since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No. 37(E), dated 11-1-2007, for the purposes of section 80C(2)(xvi)(a)]. (12) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head "Income from house property" (or which would, if it has not been used for 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 an assessee from the Government, or any bank or Life I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... full-time for the said course. It is also clarified that full-time education includes play-school activities, pre-nursery and nursery classes. It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature. (14) Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution. (15) Subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company. (16) Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes. [The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t so paid or deposited as does not exceed ten per cent of his salary in the previous year. Where, in the case of such an employee, the Central Government makes any contribution to his account under such pension scheme, the employee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government as does not exceed ten per cent of his salary in the previous year. Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is received by the assessee or his nominee, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insurance policy on the health of his parents. Under the proposed new provisions he will be allowed a deduction of Rs. 27,000 (Rs. 12,000+Rs. 15,000) if neither of his parents is a senior citizen. However, if any of his parents is a senior citizen, he will be allowed a deduction of Rs. 29,000 (Rs. 12,000+Rs.17,000). Whether the parents are dependent or not, is not a consideration for deciding the deduction under the proposed new section. Further, in the above example, if cost of insurance on the health of the parents is Rs. 30,000, out of which Rs. 17,000 is paid (by any non-cash mode) by the son and Rs. 13,000 by the father (who is a senior citizen), out of their respective taxable income, the son will get a deduction of Rs. 17,000 (in addition to the deduction of Rs. 12,000 for the medical insurance on self and family) and the father will get a deduction of Rs. 13,000. E. Under section 80DD, where an assessee, who is a resident in India, has, during the previous year,-- (a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or (b) paid or deposited any amount under a scheme fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2002) ; (b) "dependant" means-- (i) in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them; (ii) in the case of a Hindu undivided family, a member of the Hindu undivided family, dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year; (c) "disability" shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) and includes "autism", "cerebral palsy" and "multiple disability" referred to in clauses (a), (c) and (h) 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); (d) "Life Insurance Corporation" shall have the same meaning as in clause (iii) of sub-section (8) of section 88; (e) "medical authority" means the medical authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified above shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest referred to above is paid in full by the assessee, whichever is earlier. For this purpose-- (a) "approved charitable institution" means an institution established for charitable purposes and approved by the prescribed authority 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and post-literacy activities. (xxi) any fund setup by a State Government to provide medical relief to the poor; or. H. 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. 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 section 10(13A) of the Act; (b) The assessee files the declaration in Form No. 10BA. (Annexure-VII) (c) 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. 2,000 per month, whichever is less. The total income for working out these percentages will be computed before making any deduction under section 80GG. (d) 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction/rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the Assessing Officer. 6. Calculation of income-tax to be deducted 6.1 Salary income for the purpose of section 192 shall be computed as follow:-- (a) First compute the gross salary as mentioned in para 5.1 excluding all the incomes mentioned in para 5.2; (b) Allow deductions mentioned in para 5.3 from the figure arrived at (a) above. (c) Allow deductions mentioned in para 5.4 from the figure arrived at (b) above ensuring that aggregate of the deductions mentioned in para 5.4 does not exceed the figure of (b) and if it exceeds, it should be restricted to that amount. This will be the amount of income from salaries on which Income-tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees. 6.2 Income-tax on such income shall be calculated at the rates given in para 2 of this Circular keeping in view the age and gender of the employee. 6.3 The amount of tax payable so arrived at shall be increased by surcharge (if applicable) and additional surcharge (Education Cess) at the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Government servant. The matter has been examined by the Board; the issue is clarified as given below. Salary is as defined under section 15 of Income-tax Act, 1961 :-- (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became 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. It is clear from the Office Memorandum issued by the Department of Expenditure that 60 per cent of the pay arrears neither fall in the category of due nor are allowed. Moreover, section 192 of Income-tax Act, 1961, inter alia, requires any person responsible for paying any income chargeable under the head "Salaries" to deduct income-tax on the amount payable at the stipulated rate at the time of payment. Therefore it is clarified that income-tax at source would be deducted under section 192 only from the arrears of salary actually paid duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Audit (Central), Mumbai 49. Director of Audit, Scientific & Commercial Department, Mumbai 50. All Banks (Public sector, Nationalised including State Bank of India) 51. Secretary, Reserve Bank of India Central Office P.B. No. 406, Mumbai- 400001 (25 copies for distribution to its Branches). 52. Accounts Officer, Inspector General of Assam Rifles, (Hqrs), Shillong 53. All Chambers of Commerce & Industry 54. Lok sabha/ Rajya Sabha Secretariat Libraries (15 copies each) 55. All Officers and Sections in Technical Wing of CBDT 56. Asstt. Chief Inspector, RBI Inspection Deptt. Regional Cell Mumbai/Kolkata/ Chennai/ New Delhi/ and Kanpur. 57. Controller of Accounts, Deptt. Of Economic Affairs, New Delhi 58. Manager, Reserve Bank of India, Public Dept Office, Ahmedabad, Bangalore/ Bhubaneswar/ Mumbai /Kolkata/ Hyderabad/ Kanpur/ Jaipur/ Chennai/ Nagpur/ New Delhi/ Patna/ Guwahati/Trivandrum. 59. Accountant General, Post & Telegraph, Simla. 60. Controller General of Defence Accounts, New Delhi. 61. Directorate of Audit, Defence Services, New Delhi 62. World Health Organisation, New Delhi 63. International Labour Office, India Branch, New Delhi 64. Secretary, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CI, 163 Backbay Reclamation, Mumbai-20 91. NABARD, Poonam Chambers, Dr. Annie Basant Road, P.B. No. 552, Worli, Mumbai 92. National Housing Bank, 3rd Floor, Bombay Life Building, 45, Veer Nariman Road, Mumbai 93. IRBI, 19, Netaji Subhash Road, Kolkata 94. All Foreign Banks operating in India 95. Air India, New Delhi 96. University Grants Commission, Bahadur Shah Jafar Marg, New Delhi 97. The Deputy Director (Admn.), NSSO (FOD), Mahalanobis Bhavan, 6th Floor, 164, G.L. Tagore Road, Kolkata-700108 ANNEXURE-I EXAMPLE 1 For Assessment Year 2009-10 Calculation of income-tax in the case of a male employee having gross salary income of : (i) Rs. 2,00,000, (ii) Rs. 5,00,000 and (iii) Rs. 10,00,000 Particulars (Rupees (i)) (Rupees) (ii) (Rupees) (iii) Gross Salary Income 2,00,000 5,00,000 10,00,000 (Including allowances) Contribution to G.P.F. 20,000 50,000 1,00,000 Computation of Total Income and tax payable thereon Gross Salary 2,00,000 5,00,000 10,00,000 Less : Deduction U/s 80C 20,000 50,000 1,00,000 Taxable Income 1,80,000 4,50,000 9,00,000 Tax thereon 3,000 45,000 1,75,000 Add : Surcharge Nil Nil Nil Education Cess @2% 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of section 17(2)(v) Rs. 15,000 Taxable Income Rs. 3,15,000 Less : Deduction under section 80C : GPF 20,000 LIC 20,000 Repayment of HBA 25,000 Tuition Fees 60,000 Investment in Unit-Linked Insurance 20,000 Plan _________________ Total 1,45,000 Restricted to Rs. 1,00,000 Rs. 1,00,000 Total Income : Rs. 2,15,000 Tax Payable Rs. 6,500 Add : Surcharge Nil Education Cess @2% 130 Secondary and Higher Education Cess @1% 65 Total Income-tax payable Rs. 6,695 Rounded off to Rs. 6,700 EXAMPLE 4 For Assessment Year 2009-10 Illustrative calculation of House Rent Allowance under section 10(13A) in respect of residential accommodation situated in Delhi in case of a female employee: Particulars 1. Salary Rs. 2,50,000 2. Dearness Allowance Rs. 1,00,000 3. House Rent Allowance Rs. 1,40,000 4. House rent paid Rs. 1,44,000 5. General Provident Fund Rs. 36,000 6. Life Insurance Premium Rs. 4,000 7. Subscription to Unit-Linked Insurance Plan Rs. 50,000 Computation of total income and tax payable thereon 1. Salary + D.A. + C.C.A. Rs. 3,50,000 House Rent Allowance Rs. 1,40,000 2. Total Salary income Rs. 4,90,000 3. Less: House Ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher Education Cess @ 1% 1,686 Total Income-tax payable Rs. 1,73,638 Rounded off to Rs. 1,73,640 EXAMPLE 6 For assessment year 2009-10 Illustrating Valuation of perquisite and calculation of tax in the case of a female employee of a Private Company posted at Delhi and repaying House Building Loan. Particulars: 1. Salary Rs. 3,00,000 2. Dearness Allowance Rs. 1,00,000 3. House Rent Allowance Rs. 1,80,000 4. Special Duties Allowance Rs. 12,000 5. Provident Fund Rs. 60,000 6. LIP Rs. 10,000 7. Deposit in NSC VIII issue Rs. 30,000 8. Rent Paid by the employee for house hired by her Rs. 1,20,000 9. Repayment of House Building Loan (Principal) Rs. 60,000 10. Tuition Fees for three children (Rs.10,000 per child) Rs. 30,000 Computation of total income and tax payable thereon 1. Gross salary (Basic+DA+HRA+SDA) 5,92,000 Less: House rent allowance exempt u/s 10(13A) Least of: a. Actual amount of HRA received 1,80,000 b. Expenditure on rent in excess of 10% of salary (Including D.A.) assuming D.A. is including for retirement benefits (1,20,000-40,000) 80,000 c. 50% of salary (including D.A) 2,00,000 (-) 80,000 Gross Total Taxable Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,000 (Maximum allowable for loans taken before 1-4-1999) (-)Rs. 30,000 Gross total income Rs. 3,70,000 Less: Deduction u/s 80G 50% of Rs. 6,000 Rs. 3,000 Less: Deduction u/s 80C G.P.F. 20,000 N.S.C. 10,000 Housing Loan repaid 30,000 Total: 60,000 Total Deductions under Chapter VI-A Rs. 63,000 Total Income Rs. 3,07,000 Tax payable Rs. 16,400 Add: Surcharge Nil Education Cess @2% 328 Secondary and Higher Education Cess @1% 164 Total Income-tax payable Rs. 16,892 Rounded off to Rs. 16,890 EXAMPLE - 9 For assessment year 2009-10 Income Tax calculation in the case of a male pensioner who is more than 65 years of age. Particulars (Rupees) Service Pension 2,40,000 Infrastructure Bond 30,000 N.S.C. purchased 20,000 Computation of Taxable Income and Tax thereon Income from Salary (Pension) 2,40,000 Less: Deduction under section 80C Infrastructure Bond 30,000 N.S.C. 20,000 Total 50,000 Total Income 1,90,000 Tax payable Nil Note: Taxpayers of sixty five years of age or above do not have to pay tax up to a total income of Rs. 2,25,000 ANNEXURE-II Form for sending particulars of income under section 192(2B) for the year ending 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if any recovered from the employee (Rs.) Amount of perquisite chargeable to tax Col(3) - Col(4) (Rs.) (1) (2) (3) (4) (5) 1 Accommodation 2 Cars/Other automotive 3 Sweeper, gardener, watchman or personal attendant 4 Gas, electricity, water 5 Interest free or concessional loans 6 Holiday expenses 7 Free or concessional travel 8 Free meals 9 Free Education 10 Gifts, vouchers etc. 11 Credit card expenses 12 Club expenses 13 Use of movable assets by employees 14 Transfer of assets to employees 15 Value of any other benefit/amenity/service/privilege 16 Stock options(non-qualified options) 17 Other benefits or amenities 18 Total value of perquisites 19 Total value of Profits in lieu of salary as per 17(3) 9. Details of tax, - (a) Tax deducted from salary of the employee u/s 192(1) ……… (b) Tax paid by employer on behalf of the employee u/s 192(1A) ……… (c) Total tax paid ……… (d) Date of payment into Government treasury ……… DECLARATION BY EMPLOYER I ………………. s/o ………………&h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not below the rank of Commissioner of Income-tax designated by the Board for the purpose of administration of this scheme; (6) "e-TDS Intermediary" means a person, being a company, authorised by the Board to act as e-TDS Intermediary under this scheme; (7) "e-TDS Return" means a return to be filed under section 206 of the Act duly supported by a declaration in Form No. 27A as prescribed under the Rules; (8) "Rules" means the Income-tax Rules, 1962; (9) All other words and expressions used herein but not defined and defined in the Act shall have the meanings respectively assigned to them in the Act. 3. Preparation of e-TDS Return. - (1) The e-deductor shall use the relevant Forms prescribed under the Rules for preparing e-TDS Returns. (2) The e-deductor shall prepare his e-TDS Return according to the data structure to be provided by the e-filing Administrator. (3) While preparing e-TDS Return, the e-deductor shall quote his permanent account number and tax deduction account number as also the permanent account number of all persons in respect of whom tax has been deducted by him except in respect of cases to which the first proviso to sub-section (5A) or the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form No.27A and the provisional receipt issued shall be deemed to be the acknowledgement of the e-TDS Return. (5) Where the details of deposit of tax deducted at source in bank, the permanent account number, tax deduction account number or any other relevant details are not given in the e- TDS Return, the e-filing Administrator shall forward a deficiency memo to the e-deductor with a request to remove the deficiencies within seven days of receipt of the same. (6) In case the deficiency indicated in the deficiency memo is removed within seven days, the data on e-TDS Return shall be transmitted by the e-TDS Intermediary to the e-filing Administrator and the provisional receipt shall be deemed to be acknowledgement of the e-TDS Return. The date of issue of provisional receipt shall be deemed to be the date of filing of the e-TDS Return. (7) In case no deficiency memo is issued by the e-filing Administrator within thirty days of issue of the provisional receipt, the provisional receipt issued shall be deemed to be the acknowledgement of the e-TDS Return and the date of issue of provisional receipt shall be deemed to be the date of filing of e-TDS Return. (8) Where the deficienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng review of the functioning of e-return Intermediary, verification of any complaints, scrutinising advertising material issued by them and such other matters as he deems fit. 8. Powers of the Board: The Board may revoke the authorisation of an e-filing Intermediary on grounds of improper conduct, misrepresentation, unethical practices, fraud or established lack of service to the e-deductors or such other ground as it may deem fit. Notification No.205/2003. F. No. 142/31/2003-TPL (Deepika Mittal) Under Secretary to the Government of India ANNEXURE VA MINISTRY OF FINANCE (Department of Economic Affairs) (ECB & PR Division) NOTIFICATION New Delhi, the 22nd December, 2003 F.No. 5/7/2003-ECB & PR - The Government approved on 23rd August, 2003 the proposal to implement the Budget announcement of 2003-04 relating to introducing a new restructured defined contribution pension system for new entrants to Central Government service, except to Armed Forces, in the first stage, replacing the existing system of defined benefit pension system : (i) The system would be mandatory for all new recruits to the Central Government service from 1st of January, 2004 (except the armed forces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA MINISTRY OF FINANCE (Department of Revenue) (Central Board of Direct Taxes) Notification New Delhi, the 24th November, 2000 S.O. 1048(E) - In exercise of the powers conferred by sub-clause (i) of clause (18) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, hereby specifies the gallantry awards for the purposes of the said section, mentioned in column 2 of the table below awarded in the circumstances as mentioned in corresponding column 3 thereof : TABLE Sl. No. Name of gallantry award Circumstances for eligibility (1) (2) (3) 1. Ashok Chakra When awarded to civilians for gallantry 2. Kirti Chakra -do- 3. Shaurya Chakra -do- 4. Sarvottan Jeevan Raksha Padak When awarded to civilians for bravery displayed by them in life saving acts. 5. Uttam Jeevan Raksha Medal -do- 6. Jeevan Raksha Padak -do- 7. President's police medal for gallantry When awarded for acts of exceptional courage displayed by Members of Police Forces, Central Police or Security Forces and certified to this effect by the head of the department concerned. 8. Police medal for gallantry -do- 9. Sena Medal When awarded for acts of courage or conspi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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