TMI BlogIncome-Tax Deduction from Salaries During the Financial Year 2017-18 Under Section 192 of the Income-Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Department- w ww.incometaxindia.gov.in. 2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2017 : As per the Finance Act, 2017 , income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head Salaries for the financial year 2017-18 (i.e. Assessment Year 2018-19) at the following rates: 2.1 Rates of tax A. Normal Rates of tax: Sl No Total Income Rate of tax 1 Where the total income does not exceed ₹ 2,50,000/-. Nil 2 Where the total income exceeds ₹ 2,50,000/- but does not exceed ₹ 5,00,000/-. 5 per cent of the amount by which the total income exceeds ₹ 2,50,000/- 3 Where the total income exceeds ₹ 5,00,000/- but does not exceed ₹ 10,00,000/-. ₹ 12,500/- plus 20 per cent of the amount by which the total income exceeds ₹ 5,00,000/-. 4 Where the total income exceeds ₹ 10,00,000/-. ₹ 1,12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of clause (31) of section 2 of the Act, will be as under: (a) having a total income exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten percent of such income-tax and (b) having a total income exceeding one crore rupees, at the rate of fifteen percent of such income-tax: Provided that in the case of persons mentioned above having total income exceeding;- (a) Fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees; (b) one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. 2.3.1 Education Cess on Income tax: The amount of income-tax including the surcharge if any, shall be increased by Education Cess on Income Tax at the rate of two percent of the income-tax. 2.3.2 Secondary and Higher Education Cess on Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STEPS: Income Chargeable under the head Salaries inclusive of all perquisites ₹ 4,50,000/- Tax on Total Salary (including Cess) ₹ 10,300/- Average Rate of Tax [(10,300/4,50,000) X 100] 2.29% Tax payable on ₹ 50,000/= (2.29% of 50,000) ₹ 1145/- Amount required to be deposited each month ₹ 95 ((Rs. 95.42) =1145/12) The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee. 3.3 Salary From More Than One Employer: Section 192(2) 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 Salaries due or received from the former/othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules and shall be annexed to the simple statement. The form of verification is reproduced as under: I, . (name of the assessee), do declare that what is stated above is true to the best of my information and belief. It is reiterated that the DDO can take into account any loss only under the head Income from house property . Loss under any other head cannot be considered by the DDO for calculating the amount of tax to be deducted. It may be noted that loss under the head Income from house property can be set off only up to ₹ 2.00 lakh with the income under any other head of income in view of the amendment to section 71 of the Act vide Finance Act, 2017 . Hence, loss under the head Income from house property in excess of ₹ 2.00 lakh is to be ignored for calculating the amount of tax deduction. 3.6 Computation of income under the head Income from house property : While taking into account the loss from House Property, the DDO shall ensure that the employee files the declaration referred to above and encloses therewith a computation of such loss from house property. Following details shall be obtained and kept by the employer in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs. (c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid. 3.7 Adjustment for Excess or Shortfall of Deduction: The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself. 3.8 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 Telegraphic transfer buying rate of such currency as on the date on which tax is required to be deducted at source ( see Rule 26 ). 4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: 4.1. As per section 204(i) of the Act, in the context of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NEXT MONTH 3 Tax on perquisites opted to be deposited by the employer 7TH DAY NEXT MONTH However, if a DDO applies before the jurisdictional Additional/Joint Commissioner of Income Tax to permit quarterly payments of TDS under section 192 , the Rule 30(3) allows for payments on quarterly basis and as per time given in Table below: Sl. No. Quarter of the financial year ended on Date for quarterly payment 1 30th June 7th July 2 30th September 7th October 3 31st December 7th January 4 31st March 30th April next Financial Year 4.4.2 Mode of Payment of TDS 4.4.2.1 Compulsory filing of Statement by PAO, Treasury Officer, etc in case of payment of TDS by Book Entry u/ s 200 (2A) : In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan [ Book En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a company and a person (other than a company), to whom provisions of section 44AB are applicable, the amount deducted shall be electronically remitted into the Reserve Bank of India or the State Bank of India or any authorised bank accompanied by an electronic income-tax challan ( Rule125 ). The amount shall be construed as electronically remitted to the Reserve Bank of India or to the State Bank of India or to any authorized bank, if the amount is remitted by way of: (a) internet banking facility of the Reserve Bank of India or of the State Bank of India or of any authorized bank; or (b) debit card. {Notification No.41/2010 dated 31st May 2010} 4.5 Interest, Penalty Prosecution for Failure to Deposit Tax Deducted: 4.5.1 If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201 and shall be deemed to be an assessee-in-default in respect of such tax and liable for penal action u/s 221 of the Act. Further Section 201(1A) provides th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... branch where the tax has been deposited, the date on which the tax has been deposited and challan serial number given by the bank.) (d) Receipt numbers of all the relevant quarterly statements of TDS (24Q). The receipt number of the quarterly statement is of 8 digit. Further as per Circular 04/2013 dated 17-04-2013 all deductors (including Government deductors who deposit TDS in the Central Government Account through book entry) shall issue the Part A of Form No. 16, by generating and subsequently downloading it through TRACES Portal and after duly authenticating and verifying it, in respect of all sums deducted on or after the 1st day of April, 2012 under the provisions of section 192 of Chapter XVII-B. Part A of Form No 16 shall have a unique TDS certificate number. 'Part B (Annexure)' of Form No. 16 shall be prepared by the deductor manually and issued to the deductee after due authentication and verification along with the Part A of the Form No. 16. It may be noted that under the new TDS procedure, TAN of deductee/ PAN of the deductee and receipt number of TDS statement filed by the deductor act as unique identifier for granting online credit of TDS to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umn 350 (Reported amount of TDS by previous employer, as per NSDL RPU. (e) Employer is advised to quote Total Taxable Income (Column 346) in Annexure II without rounding-off and TDS should be deducted and reported accordingly i.e. without rounding-off of TDS also. Example: Total Taxable Income Total Taxable Income (Rounded Off) TDS to be Deducted TDS Deducted/ Reported after rounding-off of income Short Deduction Rs.1350094 ₹ 1350090 ₹ 235028.20 ₹ 235028 Rs.1.20 4.6.2. If an assessee is employed by more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers and Part B may be issued by each of the employers or the last employer at the option of the assessee. 4.6.3. Authentication by Digital Signatures : (i) Where a certificate is to be furnished in Form No. 16, the deductor may, at his option, use digital signatures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icates in Forms 16 and/or Form 12BA specified above, shall be furnished to the employee by 31st May of the financial year immediately following the financial year in which the income was paid and tax deducted. If he fails to issue these certificates to the person concerned, as required by section 192(2C) , he will be liable to pay, by way of penalty, under section 272A(2)(i), a sum which shall be ₹ 100/- for every day during which the failure continues. As per Section 139C of the Act, the Assessing Officer can require the taxpayer to produce Form 12BA along with Form 16, as issued by the employer. 4.6.5 DDOs empowered to obtain evidence of proof or particulars of the prescribed claim (including claim for set-off of loss) under the section 192(2D) : DDOs have been authorized u/s 192 to allow certain deductions, exemptions or allowances or set-off of certain loss as per the provisions of the Act for the purpose of estimating the income of the assessee or computing the amount of tax deductible under the said section. The evidence /proof /particulars for some of the deductions/exemptions/allowances/set-off of loss claimed by the employee such as rent receipt fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes furnishing of PAN by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor has been made responsible to make TDS at higher of the following rates: i) at the rate specified in the relevant provision of this Act; or ii) at the rate or rates in force; or iii) at the rate of twenty per cent. The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. However, where the income of the employee computed for TDS u/s 192 is below taxable limit, no tax will be deducted. But where the income of the employee computed for TDS u/s 192 is above taxable limit, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to be deducted at the average rate. Education cess @ 2% and Secondary and Higher Education Cess @ 1% is not to be deducted, in case the tax is deducted at 20% u/s 206AA of the Act. 4.9 Statement of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.9.4 Fee for default in furnishing statements (Section 234E): If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) in respect of tax deducted at source on or after 1.07.2012 he shall be liable to pay, by way of fee a sum of ₹ 200 for every day during which the failure continues. However, the amount of such fee shall not exceed the amount of tax which was deductible at source. This fee is mandatory in nature and to be paid before furnishing of such statement. 4.9.5 Rectification of mistake in filing TDS Statement: A DDO can also file a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered earlier. 4.9.6 Penalty for failure in furnishing statements or furnishing incorrect information (section 271H): If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) or furnishes an incorrect statement, in respect of tax deducted at source on or after 1.07.2012, he shall be liable to pay, by way of penalty a sum which shall not be less than ₹ 10,000/- but which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyer, 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 the tax has been borne by it [ Circular No. 707 dated 11.07.1995]. 4.11.2 In respect of non-residents, the salary paid for services rendered in India shall be regarded as income earned in India. It has been specifically provided in the Act that any salary payable for rest period or leave period which is both preceded or succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. 5. COMPUTATION OF INCOME UNDER THE HEAD SALARIES 5.1 INCOME CHARGEABLE UNDER THE HEAD SALARIES : (1) The following income shall be chargeable to income-tax under the head Salaries : (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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by his employer; II. The value of any concession in the matter of rent in respect of any accommodation provided to the employee by his employer; III. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases: i) By a company to an employee who is a director of such company; ii) By a company to an employee who has a substantial interest in the company; iii) By an employer (including a company)to an employee, who is not covered by (i) or (ii) above and whose income under the head Salaries (whether due from or paid or allowed by one or more employers), exclusive of the value of all benefits and amenities not provided by way of monetary payment, exceeds ₹ 50,000/-. [What constitutes concession in the matter of rent have been prescribed in Explanations 1 to 4 below section 17(2)(ii) of the Act] IV. Any sum paid by the employer in respect of any obligation which would otherwise have been payable by the assessee. V. Any sum payable by the employer, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund or other specified funds u/s 17, to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual to the licence fee charged for such accommodation as reduced by the rent actually paid by the employee. Employees of autonomous, semi-autonomous institutions, PSUs/PSEs subsidiaries, Universities, etc. are not covered under this method of valuation. (ii) For all others, i.e., those salaried taxpayers not in employment of the Central government and the State government, the valuation of perquisite in respect of accommodation would be at prescribed rates, as discussed below: a) Where the accommodation provided to the employee is owned by the employer : Sl No Cities having population as per the 2001 census Perquisite 1 Exceeds 25 lakh 15% of salary 2 Exceeds 10 lakhs but does not exceed 25 lakhs 10% of salary 3 For other places 7.5 % of salary b) Where the accommodation so provided is taken on lease/ rent by the employer: The prescribed rate is 15% of the salary or the actual amount of lease rental payable by the employer, whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is provided as reduced by any rent actually paid or payable by the employee. However, nothing in (C) shall be taxable if following two conditions are satisfied : 1. The hotel accommodation is provided for a total period not exceeding in aggregate 15 days in a previous year, and 2. Such accommodation is provided on an employee s transfer from one place to another place. It may be clarified that while services provided as an integral part of the accommodation, need not be valued separately as perquisite, any other services over and above that for which the employer makes payment or reimburses the employee shall be valued as a perquisite as per the residual clause. In other words, composite tariff for accommodation will be valued as per the Rules and any other charges for other facilities provided by the hotel will be separately valued under the residual clause. D. However, the value of any accommodation provided to an employee working at a mining site or an on-shore 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 perquisite if: i) such accommodation is located in a remote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e charges are met or reimbursed by the employer, the method of valuation of perquisite value is different and as below: a) where the motor car or any other automotive conveyance is owned by the employee but actual maintenance running expenses (including chauffeur salary, if any) are met or reimbursed by the employer, no perquisite shall be chargeable to tax if the car is used wholly and exclusively for official purposes. However following compliances are necessary: ➢ The employer has maintained complete details of the journey undertaken for official purposes; ➢ The employer gives a certificate that the expenditure was incurred wholly for official duties. However if the motor car is used partly for official or partly for private purposes then the amount of perquisite shall be the actual expenditure incurred by the employer as reduced by the amounts in c) referred to in (1) above. Normal wear and tear of the motor shall be taken at 10 % per annum of the actual cost of the motor car. III Personal attendants etc. [ Rule 3(3) ]: The value of free service of all personal attendants including a sweeper, gardener and a watchman is to be taken at actual c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s common practice, particularly in financial institutions, to provide interest free or concessional loans to employees or any member of his household. The value of perquisite arising from such loans would be the excess of interest payable at prescribed interest rate over interest, if any, actually paid by the employee or any member of his household. The prescribed interest rate would now be the rate charged per annum by the State Bank of India as on the 1 st day of the relevant financial year in respect of loans of same type and for the same purpose advanced by it to the general public. Perquisite value would be calculated on the basis of the maximum outstanding monthly balance method . For valuing perquisites under this rule, any other method of calculation and adjustment otherwise adopted by the employer shall not be relevant. However, small loans up to ₹ 20,000/- in the aggregate are exempt. Loans for medical treatment of diseases 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit card (including any add-on card) provided by the employer, or otherwise, paid for or reimbursed by the employer is taxable on the following basis: Amount of expenditure incurred by the employer XXX Less : Expenditure on use for official purposes XXX Less : Amount, if any, recovered from the employee XXX XXX Amount taxable as perquisite XXX However if the amount is incurred wholly and exclusively for official purposes it will be exempt if the following conditions are fulfilled i) Complete details of such expense, including date and nature of expenditure, is maintained by the employer. ii) Employer gives a certificate that the same was incurred wholly and exclusively for official purpose. XI Club Expenditure [Rule 3(7)(vi) ]: Any annual or periodical fee for Club facility and any expenditure in a club by the employee (or any member of his household), which is paid or reimbursed by the employer is taxable on the following basis: Amount of expenditure incurred by the employer XXX Less : Expenditure on use for official purposes XXX Less : Amount, if any, recovered from the employee XXX XXX Amount taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of cars, the value of perquisite shall be worked out by reducing 20% of its actual cost by the reducing balance method for each completed year of use. XIV Gifts [ Rule 3(7)(iv) ]: The value of any gift or vouchers or token in lieu of which such gift may be received, given by the employer to the employee or member of his household, is taxable as perquisite. However gift, etc less than ₹ 5,000 in aggregate per annum would be exempt. XV Medical Reimbursement by the employer exceeding ₹ 15,000/- p.a. u/s 17(2) is to be taken as perquisite. It is further clarified that the method regarding valuation of perquisites are given in section 17(2) of the Act and in rule 3 of the Rules. The deductors may look into the above provisions carefully before they determine the perquisite value for deduction purposes. 5.2.3 'Profits in lieu of salary' shall include I. the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto; II. any payment (other than any payment referred to in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence service is exempt. Gratuity received in cases other than those mentioned above, on retirement, termination etc is exempt up to the limit as prescribed by the Board. Presently the limit is ₹ 10 lakhs w.e.f. 24.05.2010 [Notification no. 43/2010 S.O. 1414(E) F.No. 200/33/2009-ITA-1 dated 11th June 2010]. 5.3.3 Any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all- India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority] or a corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of voluntary separation , is exempt from income-tax to the extent that such amount does not exceed ₹ 5,00,000/-: 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 Section 3 (g) 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. The exemption of amount received under VRS has been extended to employees of the Central Government and State Government and employees of notified institutions having importance throughout India or any State or States. 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 year. Further, if relief has been allowed under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovident fund set up by the Central Government and notified by it in the Official Gazette is exempt under section 10(11). 5.3.9 Under section 10(13A ) of the Act, 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 Rules, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be the least of the following: (a) the actual amount of such allowance received by the assessee in respect of the relevant period i. e. the period during which the accommodation was occupied by the assesse during the financial year; or (b) the actual expenditure incurred in payment of rent in excess of one-tenth of the salary due for the relevant period; or (i) where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im 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 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 Section 10(14) (i) 10 (14) (ii) vide notification No.SO 617(E) dated 7th July, 1995 (F.No.142/9/95-TPL)which has been amended vide notification SO No.403(E) dt 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 ₹ 1600 p. m. or ₹ 3200 p.m. (for a person who is blind or deaf and dumb or is orthopaedically handicapped with disabilities of lower extremes) vide notification S.O.No. 395(E) dated 13.05.98 r/w S.O. No. 1002 (E) dated 13.04.2015 S.O. No. 2604 (E) dated 23.09.2015. 5.3.11 Under Section 10(15)(iv)(i) of the Act, interest payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any scheme approved by the Central Government or Insurance Regulatory and Development Authority) or 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 or Insurance Regulatory and Development Authority); (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 ₹ 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 ₹ 2 lakhs. For the purpose of availing exemption on expenditure incurred o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from his gross total income: 5.5.1 Deduction in respect of Life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. (section 80C) A. Section 80C , entitles an employee to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of ₹ 1,50,000/ -: (1) Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the spouse or any child of the individual. (2) Any payment made to effect or to keep in force a contract for a deferred annuity , not being an annuity plan as is referred to in item (7) herein below on the life of the individual, the spouse or any child of the individual, provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity; (3) Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purpose of securing to him a deferred annuity or ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Government. [The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.] (7) Any subscription made to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify; [The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No. 1562(E) dated 3.11.05 and Jeevan Akshay-III vide Notification S.O. No. 847(E) dated 1.6.2006 ] (8) Any subscription made to any units of any Mutual Fund, of section 10(23D) , or from the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking Repeal) Act, 2002 under any plan formulated in accordance with any scheme as the Central Government, may, by notification in the Official Gazette, specify in this behalf; [The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 156 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration, or National Housing Bank, or certain other categories of institutions engaged in the business of providing long term finance for construction or purchase of houses in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, or a public sector company, or a university established by law, or a college affiliated to such university, or a local authority, or a cooperative society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act. 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 provisions of section 24 of the Act will a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification S.O. No. 1220(E) dated 28.7.2006] (17) Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf. (18) Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004. (19) Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981. B. Section 80C(3) 80C(3A) states that in case of Insurance Policy other than contract for a deferred annuity the amount of any premium or other payment made is restricted to: Policy issued before 1st April 2012 20% of the actual capital sum assured Policy issued on or after 1st April 2012 10% of the actual capital sum assured Policy issued on or after 1st April 2013 * - In cases of persons with disability or person with severe disability as per Sec 80 U or suffering from disease or ailment as specified in rules made under Sec 80DDB 15% of the actual capital sum assured *Introduced by Finance Act 2013 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance but excludes all other allowance and perquisites). As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed an deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed ₹ 50,000. The deduction of ₹ 50,000 shall be allowed whether or not any deduction is allowed under sub-section(1). However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD. As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year. If any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above, and the employee or his nominee receives this amount together with the amount accrued thereon, due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in section 10(38) ; (d) The assessee is a new retail investor; (e) The investment is locked-in for a period of 3 years from the date of acquisition in accordance with the above scheme; (f) The assessee satisfies any other condition as may be prescribed. Amount of deduction The amount of deduction is at 50% of the amount invested in equity shares/units. However, the amount of deduction under this provision cannot exceed ₹ 25,000. Withdrawal of deduction If the assessee, after claiming the aforesaid deduction, fails to satisfy the above conditions, the deduction originally allowed shall be deemed to be the income of the assessee of the year in which default is committed. This deduction is allowed for three consecutive assessment years beginning with the AY in which the listed equity shares or units were first acquired. If any deduction is claimed by a taxpayer under this section in any year, he shall not be entitled to any deduction under this section for any other year. The deduction under this section shall only be allowed in respect of investment made only up to 31st March, 2017. Therefore, no deduction under this section is allowed for in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... health of such person any mode other than cash Aggregate allowable is ₹ 30,000/ *Aggregate of the sum allowable as deduction under Sl No 1, 2 3 and 4, 5 6 above shall not exceed ₹ 30000/- Here i) family means the spouse and dependent children of the employee. ii) Senior citizen means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year. iii) Very senior citizen means an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year The DDO must ensure that the medical insurance referred to above shall be in accordance with a scheme made in this behalf by- (a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 and approved by the Central Government in this behalf; or (b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999. 5.5.6 Deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch individual is a person with severe disability , a higher deduction of ₹ 1,25,000/- shall be allowable. DDOs should note that 80DD deduction is in case of the dependent of the employee whereas 80U deduction is in case of the employee himself. However, under both the sections, the employee shall furnish to the DDO the following: 1. A copy of the certificate issued by the medical authority as defined in Rule 11A(1) in the prescribed form as per Rule 11A(2) of the Rules. The DDO has to allow deduction only after seeing that the Certificate furnished is from the Medical Authority defined in this Rule and the same is in the form as mentioned therein. 2. Further in cases where the condition of disability is temporary and 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 as in 1 above and furnished before the DDO. 3. For the purposes of sections 80DD and 80 U some of the terms defined are as under:- (a) Administrator means the Administrator as referred to in clause (a) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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; (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. 5.5.7. Deduction in respect of medical treatment, etc. (Section 80DDB): Section 80DDB allows a deduction in case of employee, who is resident in India, during the previous year, of any amount actually paid for the medical treatment of such disease or ailment as may be specified in the rules 11DD (1) for himself or a dependant. The deduction allowed is equal to the amount actually paid is in respect of the employee or his dependant or ₹ 40,000 whichever is less. Now the deduction can be allowed on the basis of a prescription from an oncologist, a urologist, nephrologist, a haematologist, an immunologist or such other specialist, as mentioned in Rule 11DD. However, the amount of the claim shall be reduced by the amount if any received from the insurer or reimbursed by the employer. Further in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nized by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so; 5.5.9 Deductions on respect of donations to certain funds, charitable institutions, etc. (Section 80G): Section 80G provides for deductions on account of donation made to various funds , charitable organizations etc. In cases where employees make donations to the Prime Minister s National Relief Fund, the Chief Minister s Relief Fund or the Lieutenant Governor s Relief Fund through their respective employers, it is not possible for such funds to issue separate certificate to every such employee in respect of donations made to such funds as contributions made to these funds are in the form of a consolidated cheque. An employee who makes donations towards these funds is eligible to claim deduction under section 80G. It is, hereby, clarified that the claim in respect of such donations as indicated above will be admissible under section 80G on the basis of the certificate issued by the Drawing and Disbursing Officer (DDO)/Employer in this behalf - Circular No. 2/2005, dated 12-1-2005. No ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ientific research u/s 35(1)(ii) Central Government 2 A research association which has as its object the undertaking of research in social science or statistical research or to a University, college or other institution to be used for research in social science or statistical research u/s 35(1)(iii) Central Government 3 an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved for the purposes of section 35CCA furnishes the certificate u/s 35CCA (2) Prescribed Authority under Rule 6AAA 4 an association or institution which has as its object the training of persons for implementing programmes of rural development. furnishes the certificate u/s 35CCA (2A) Prescribed Authority under Rule 6AAA 5 a public sector company or a local authority or to an association or institution approved by the Nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Indian Post Office Act, 1898, For this section, time deposits means the deposits repayable on expiry of fixed periods. 6. REBATE OF ₹ 2500 FOR INDIVIDUALS HAVING TOTAL INCOME UPTO ₹ 3.5 LAKH [SECTION 87A] Finance Act 2017 provided relief in the form of rebate to individual taxpayers, resident in India, who are in lower income bracket, i. e. having total income not exceeding ₹ 3,50,000/-. The amount of rebate available under section 87A is ₹ 2,500/- or the amount of tax payable, whichever is less from AY 2018-19. 7 TDS ON PAYMENT OF ACCUMULATED BALANCE UNDER RECOGNISED PROVIDENT FUND AND CONTRIBUTION FROM APPROVED SUPERANNUATION FUND: 7.1 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 to the Act. The accumulated balance is treated as income chargeable under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of employee is transferred to his account under a pension scheme referred to in section 80 CCD and notified by the central Government. When the accumulated balance due and becoming payable to an employee includes any amount transferred from his individual account in any other recognized provident fund(s) maintained by his former employer(s), then in computing the period of continuous service the period or periods of continuous services rendered under former employer(s) shall be counted for the purposes of (i) and (ii) above. Under the above four situations at (i) to (iv), the accumulated balance due and payable to the employee is not liable for TDS under section 192 A. 8. DDOS TO SATISFY THEMSELVES ABOUT THE GENUINENESS OF CLAIM: The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/ subscriptions / payments made by the employees, by calling for such particulars/ information as they deem necessary before allowing the aforesaid deductions. In case the DDO is not satisfied about the genuineness of the employee's claim regarding any deposit/ subscription/ payment made by the employee, he should not allow the same, and the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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