TMI BlogINCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2018-19 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 ..... ome Tax Department- www.incometaxindia.gov.in. 2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2018 : As per the Finance Act, 2018 , income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head Salaries for the financial year 2018-19 (i.e. Assessment Year 2019-20) 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/-. Rs.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/-. Rs.1,12,500/- pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act, - (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. 2.31 Health and Education Cess Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be discontinued. However, a new cess, by the name Health and Education Cess shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Chargeable under the head Salaries inclusive of all perquisites Rs.4,50,000/- Tax on Total Salary (including Cess) Rs.10,400/- Average Rate of Tax [(10, 400/4,50,000) X 100] 2.31/% Tax payable on ₹ 50,000/= (2. 31% of 50,000) Rs.1155 Amount required to be deposited each month Rs.96(Rs.96.25)= 1155/12 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/other employer and also tax deducted at source therefrom, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 respect of loss claimed under the head Income from house prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent 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. As discussed in para 4.6.5 section 192(2D) read with rule 26C makes it mandatory for the DDO to obtain following details/evidences in respect of Interest deductible. (i) Interest payable or paid (ii)Name of the lender (iii) Address of the lender (iv) PAN of the lender PAN of the lender being financial institution or employer, is mandatory if it is available with the employee however in case of other lender obtaining of PAN is mandatory by the DDO. 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 ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NEXT MONTH b) In any case other than an Office of Government Sl No. Description Time up to which to be deposited. 1 Tax deducted in March 30th APRIL NEXT FINANCIAL YEAR 2 Tax deducted in any other month 7TH DAY 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 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.4.2.2 Payment by an Income Tax Challan: (i) In case the payment is made by an income-tax challan, the amount of tax so deducted shall be deposited to the credit of the Central Government by remitting it, within the time specified in Table in para 4.4.1 above, into any office of the Reserve Bank of India or branches of the State Bank of India or of any authorized bank; (ii) In case 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. {Rule 30(7)} 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of tax deducted is without production of challan in case of an office of the Government; (ii) Challan identification number or numbers (CIN*) in case of payment through bank. (*Challan identification number (CIN) means the number comprising the Basic Statistical Returns (BSR) Code of the Bank 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 dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of salary excluding any amount exempt under section 10 in column 333 (Total amount of salary) of Annexure II of Form 24Q as per NSDL RPU. (d) TDS on Income (including loss from House Property) under any Head other than the head Salaries offered for TDS (shown in column 339) can be shown in column 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yee is a crucial responsibility of the employer, which is expected to be discharged in accordance with law and rules of valuation framed there under. Any false information, fabricated documentation or suppression of requisite information will entail consequences thereof provided under the law. The certificates 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to their deductors. Non-furnishing of PAN by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates u/s 206AA of the Act mentioned in para 4.8 below. 4.8 Compulsory Requirement to furnish PAN by employee (Section 206AA): 4.8.1 Section 206AA in the Act makes 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 s ec 192. If the tax so calculated is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be furnished in electronically except in case where the number of deductee records is less than 20 and deductor is not an office of Government, or a company or a person who is required to get his accounts audited under section 44AB of the Act. [Rule 3A(3)]. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 203 to issue certificate of tax deducted in Form 16 to the pensioners as abolished vide CBDT circular no. 761 dated 13.1.98. 4.11. Matters pertaining to the TDS made in case of Non Resident: 4.11.1 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other sources and not under the head Salaries . Therefore, provisions of section 192 of the Act are not applicable. Hence, DDOs are not required to deduct TDS on family pension paid to person. 5.2.2 Perquisite includes: I. The value of rent free accommodation provided to the employee 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 ] I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, guest house, a caravan, mobile home, ship or other floating structure. A. For valuation of the perquisite of rent free unfurnished accommodation , all employees are divided into two categories: (i) For employees of the Central and State governments the value of perquisite shall be equal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of perquisite shall be determined on the basis of lower of the following two: 1. 24% of salary paid or payable in respect of period during which the accommodation is provided; or 2. Actual charges paid or payable by the employer to such hotel, for the period during which such accommodation 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. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in performance of duties and partly for private or personal purposes of the employee or any member of his household if the expenses on maintenance and running of motor car for such private or personal use are fully met by the employee). However, the value of perquisite will be ₹ 900/- (plus ₹ 900/-, if chauffeur is also provided) per month if the cubic capacity of engine of the motor car exceeds 1.6 litres. (II) If the motor car or any other automotive conveyance is owned by the employee but the actual running and maintenance 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... journey free of cost or at concessional fare, in any conveyance owned, leased or made available by any other arrangement by such employer for the purpose of transport of passengers or goods shall be taken to be the value at which such benefit or amenity is offered by such employer to the public as reduced by the amount, if any, paid by or recovered from the employee for such benefit or amenity. This will not apply to the employees of any airline or the railways. VII Interest free or concessional loans [Rule 3(7)(i)]: It is 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 1st 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXX Balance amount is the taxable as perquisites on the value of food provided to the employees XXX Note : Exemption is given in following situations : 1. Tea / snacks provided in working hours. 2. Food non-alcoholic beverages provided in working hours in remote area or in an offshore installation. X Membership fees and Annual Fees [Rule 3(7)(v)]: Any membership fees and annual fees incurred by the employee (or any member of his household), which is charged to a credit 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f computers and electronic gadgets, however, the value of perquisite shall be worked out by reducing 50% 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% 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 As per the amendment vide Finance Act, 2018 , the total amount of medical re-imbursement is to be taken as perquisite under section 17(2). It is further clarified that the method regarding valuation of perquisites are given in section 17(2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory for the DDO to obtain details/evidence in respect of claim of exemption for leave travel concession or assistance before allowing the said exemption the relevant form for furnishing details by employee is Form 12BB 5.3.2 Death-cum-retirement gratuity or any other gratuity is exempt to the extent specified from inclusion in computing the total income under Section 10(10). Any deathcum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, 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 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, term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is less. These limits shall not apply in the case where the compensation is paid under any scheme which is approved in this behalf by the Central Government, having regard to the need for extending special protection to the workmen in the undertaking to which the scheme applies and other relevant circumstances. The maximum limit of such payment is ₹ 5,00,000/- where retrenchment is on or after 1.1.1997 as specified in Notification No. 10969 dated 25-06-1999. 5.3.6 Under Section 10(10C), any payment received or receivable (even if received in installments) by an employee of the following bodies at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation , is 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting out of the pension scheme referred to in section 80CCD to the extent it does not exceed forty percent , of the total amount payable to him at the time such closure of his opting out of the scheme shall be exempt. Under section 10 (12B) of the Act , any payment from the National Pension System Trust to an employee under the pension scheme referred to in section 80CCD, on partial withdrawal made out of his account in accordance with the terms and conditions, specified under the Pension Fund regulatory and Development Authority Act, 2013 and the regulation made thereunder, to the extent it does not exceed twenty-five percent of the amount of contribution made by him shall be exempt. 5.3.8 Any payment from a Provident Fund to which the Provident Funds Act, 1925, applies or from any other provident 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting or at the place he ordinarily resides or to compensate him for the increased cost of living, which may be prescribed and to the extent as may be prescribed. However, the allowance referred to in (ii) above should not 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. It is further clarified that any allowance granted to an employee which is not exempted under section 10(14) read with rule 2BB or the sum of allowance exceeding the amount prescribed under rule shall be chargeable to tax under the head income from salary. For example no exemption is provided in rule 2BB for the training allowance paid for the posting in any training institute hence whole of the training allowance shall be included in the salary. 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). Rule 2BB has been ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital approved by the Government for the purposes of medical treatment of its employees; ii) in respect of the prescribed diseases or ailments as provided in Rule 3A(2) of the Rules in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines as provided in Rule 3(A)(1)of the Rules, (c) premium paid by the employer in respect of medical insurance taken for his employees (under 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)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 onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head Salaries . 5.5 DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT In computing the taxable income of the employee, the following deductions under Chapter VI-A of the Act are to be allowed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit 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 section 10 (23D) and as notified by the Central 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment Authority, Housing Board etc. The deduction will also be allowable in respect of re-payment of loans borrowed by an assessee from the Government, or any bank or Life Insurance Corporation, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Notification 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PR dated 22.12.2003 National Pension System-NPS or as may be notifed by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance 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. Subject to provisions of section 10 (12A) and section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are satisfied: (a) The assessee is a resident individual (b) His gross total income does not exceed ₹ 12 lakhs; (c) He has acquired listed shares in accordance with a notified scheme or listed units of an equity oriented fund as defined 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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. 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. (II) Lump sum payment of health insurance premium In case, a lump sum amount is paid to effect or to keep in force an insurance on health for more than a year, proportionate deduction (appropriate fraction) will be allowable for the year in which it was paid and for subsequent year/years in accordance with subsection (4A) of Section 80D. 5.5.6 Deductions in respect of expenditure on persons or dependants with disability 5.5.6.1 Deductions in respect of maintenance incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 ; (b) dependant means- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case of the person against whom such claim is made is a senior citizen (60 age years or more) then the deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 deduction under this section is allowable in case the amount of donation exceeds ₹ 2000/- unless the amount is paid by any mode other than cash. 5.5.10 Deductions is respect of rents paid (Section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ience 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 National Committee, for carrying out any eligible project or scheme. furnishes the certificate u/s 35AC(2)(a) National Committee for Promotion of Social Economic Welfare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 , w.e.f 01 .04.2019, allows deduction to a senior citizen from his gross total income in respect of income by way of interest on deposits with- (a) 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); (b) a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); or (c) a Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898 (6 of 1898), The amount of deduction in respect of above interest on deposit is as under: - (i) in a case where the amount of such income does not exceed in the aggregate fifty thousand rupees, the whole of such amount; and (ii) in any other case, fifty thousand rupees. However, no deduction is allowed under section 80TTB to any partner of the firm or any member of the association or any individual of the body if said interest is derived from any deposit held by, or on behalf of, a firm, an association of persons or a body of individuals. For this purpose, senior citizen means an individual r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovident fund is includible in his total income owing to the provisions of Rule 8 of Part A of Fourth Schedule not being applicable at the time of payment of accumulated balance due to the employee, deduct income tax thereon @ 10% if the amount of such payment or aggregate of such payment exceeds ₹ 50,000/-. In case the employee does not provide his/her PAN or provides an invalid PAN then the deduction will have to be made at maximum marginal rate. The Rule-8 of Part-A of fourth schedule excludes the following accumulated balance due and becoming payable to the employee from the total income; (i) If, he has rendered continuous service with his employer for a period of five years or more, or (ii) If, though he has not rendered such continuous service, the service has been terminated by reason of - the employees ill health, or by the contraction or discontinuance of the employer s business or other cause beyond the control of employee, or (iii) if, on cessation of his employment, the employee obtains employment with any other employer, to the extent amount of such accumulated balance is transferred to his individual account in any recognized provident f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Head Income from House property to the extent of ₹ 2.00 lakh. (d) Allow deductions mentioned in para 5.5 from the figure arrived at (c) above ensuring that the relevant conditions are satisfied. The aggregate of the deductions subject to the threshold limits mentioned in para 5.5 shall not exceed the amount at (b) above and if it exceeds, it should be restricted to that amount. This will be the amount of total income of the employee on which income tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees. 9.2 Income-tax on such income shall be calculated at the rates given in para 2.1 of this Circular keeping in view the age of the employee and subject to the provisions of sec. 206AA, as discussed in para 4.8. Rebate as per Section 87A up to ₹ 2500/- to eligible persons (see para 6) may be given. Surcharge shall be calculated in cases where applicable (see para 2.2). 9.3 The amount of tax as increased by the surcharge if applicable so arrived at shall be increased by Health and education Cess at the rate of 4% to arrive at the total tax payable. 9.4 The amount of total tax payable as arrived at par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (i) (ii) (iii) (iv) (v) Gross salary 2,50,000 4,00,000 10,00,000 55,00,000 1,10,00,000 Less : Deduction under section 80C 45,000 50,000 1,00,000 1,00,000 1,00,000 Taxable income 2,05,000 3,50,000 9,00,000 54,00,000 1,09,00,000 (A) Tax thereon Nil 2,500* 92,500 14,32,500 30,82,500 Surcharge 1,43,250 4,62,375 Add : Health and education cess at 4 per cent. Nil 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Income-tax thereon/payable(includes rebate of Rs. 2,500 as per section 87A) Nil 9. Add : Health and education cess at 4 per cent. Nil 10. Total income-tax payable Nil 11. Rounded off to Nil Example 3 For assessment year 2019-20 Calculation of income-tax in the case of an employee below the age of sixty years where medical treatment expenditure was borne by the employer (with valid PAN furnished to employer) : Sl. No. Particulars (Rs.) 1. Gross salary 5,20,000 2. Medical reimbursement by employer on the treatment of self and dependant family member 35,000 3. Contribution to GPF 20,000 4. LIC premium 20,000 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Income-tax thereon/payable 7,750 8. Add : Health and education cess at 4 per cent. 310 9. Total income-tax payable 8060 Example 4 For assessment year 2019-20 Illustrative calculation of house rent allowance under section 10(13A) in respect of residential accommodation situated in Delhi in case of an employee below the age of sixty years (with valid PAN furnished to employer) : Sl. No. Particulars (Rs.) 1. Salary 3,50,000 2. Dearness allowance 2,00,000 3. House rent allowance 1,40,000 4. House rent paid 1,44,000 5. General provident fund 36,000 6. Life insurance premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at at concessional rate for ten months and in a hotel for two months (with valid PAN furnished to employer) : Sl. No. Particulars (Rs.) 1. Salary 7,00,000 2. Bonus 1,40,000 3. Free gas, electricity, water, etc. (Actual bills paid by the company) 40,000 4(a) Flat at concessional rate (for ten months) at Rs. 36,000/month 3,60,000 4(b) Hotel rent paid by employer (for two months) 1,00,000 4(c) Rent recovered from employee 60,000 4(d) Cost of furniture 2,00,000 5. Subscription to unit-linked insurance plan 50,000 6. Life insurance premium 10,000 7. Contribution to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,330 Example 6 For assessment year 2019-20 Illustrating valuation of perquisite and calculation of tax in the case of an employee below the age of 60 years of a private company posted at Delhi and repaying house building loan (with valid PAN furnished to employer) : Sl. No. Particulars (Rs.) 1. Salary 4,00,000 2. Dearness allowance 1,00,000 3. House rent allowance 1,80,000 4. Special duties allowance 12,000 5. Provident fund 60,000 6. LIP 10,000 7. Deposit in NSC VIII Issue 30,000 8. Rent paid for house hired by employee 1,20,000 9. Repayment of house building loan (principal) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove the age of sixty years but below the age of 80 years and having gross pension of : (i) Rs. 4,50,000, (ii) Rs. 8,00,000, (iii) Rs. 12,50,000 B. What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices : Particulars (Rs.) (Rs.) (Rs.) (i) (ii) (iii) Gross pension 4,50,000 8,00,000 12,50,000 Contribution of P.P.F. 70,000 1,00,000 1,50,000 Computation of total income and tax payable thereon Particulars (Rs.) (Rs.) (Rs.) (i) (ii) (iii) Gross pension 4,50,000 8,00,000 12,50,000 Less : Deduction under section 80C 70,000 1,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Mr. A, employed with XYZ Ltd. Up to 31-10-2016, received following emoluments : Sl.No. Particulars Rupees 1. Basic pay p.m. 13,000 2. Bonus for the year received in July, 2015 7,200 3. Club facility (for private use only) expenditure by employer p.m. 700 4. House rent allowance p.m. 2,800 5. Employer's contribution to URPF p.m. (Mr. A also made equal contribution) 1,000 W.e.f. 1-11-2015, Mr. A joined PQR Ltd., with following pay package : 1. Basic pay p.m. 18,000 2. House rent allowance p.m. 1,600 3. Club facility (for private use only) expenditure by employer p.m. 1,100 4. Use of car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net salary 2,02,800 2. Income from other sources 95,000 Gross total income 2,97,800 Less : Deduction under section 80C : Contribution to LIC/PPF/NSC Rs. 20,000 : Contribution to RPF (Rs. 2,000 x 5) Rs. 10,000 30,000 Total income 2,67,800 Computation of tax liability Tax payable on Rs. 2,67,800 890 Less : Rebate under section 87A 890 Net income-tax payable Nil Add : Surcharge Nil Add : Health and education cess at 4 per cent. Total tax payable Nil Example 10 2. Computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,200 1-7-2018 to 31-12-2018 at 9% i.e. Rs. 41,200 p.m. 22,248 1-1-2019 to 28-2-2019 at 11% (assumed) i.e., Rs.41,200 p.m. 9,064 5,32,112 House rent allowance 1,17,504 6,49,616 Transport allowance 1-3-2018 to 30-6-2018 at Rs. 3,200 p.m. 12,800 1-7-2018 to 31-12-2018 at Rs. 3,780 p.m. 22,680 1-1-2019 to 28-2-2019 at Rs. 3,852 p.m. 7,704 43,184 Less : Exempt under section 10(14) at Rs. 800 p.m. 19,200 23,984 6,73,600 Honorarium 3,000 Fees (2/3 retained by him) 4,000 Total salary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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