TMI BlogINCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2020-21 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 ..... 1962 (hereinafter the Rules). All the sections and rules referred are of Income-tax Act, 1961 and the Income-tax Rules, 1962 respectively unless otherwise specified. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income-tax Department - www.incometaxindia.gov.in. 2. Rates of income-tax as per Finance Act, 2020 : As per the Finance Act, 2020, income-tax is required to be deducted under section 192 of the Act from income chargeable under the head Salaries for the financial year 2020-21 (i.e., assessment year 2021-22) 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 Rs. 2,50,000. Nil 2 Where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000. 5 per cent. of the amount by which the total income exceeds Rs. 2,50,000. 3 Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of a previous year to be taxed under the said section 115BAC. In case of a person having income from business or profession, such person is required to exercise the option in prescribed manner on or before the due date specified under sub-section (1) of section 139 of the Act for any previous year relevant to assessment year commencing on or after 1.4.2021 and such option once exercised shall apply to subsequent assessment years. However, in case of such persons the option once exercised can be withdrawn only once and such person shall never be eligible to exercise the option again unless such person ceases to have income from business or profession. In case of person having income from any other source apart from business and profession, such person is required to exercise the option in the prescribed manner along with the return of income to be furnished under section 139(1) of the Act for the previous year relevant to the assessment year. The concessional rates of tax provided under section 115BAC are subject to the condition that the total income shall be computed without specified exemptions or deductions, set off of loss and additional depreciation. The concessional rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of section 111A and section 112A of the Income-tax Act) exceeding five crore rupees, at the rate of thirty-seven per cent., of such income-tax ; and (e) having a total income (including the income by way of dividend or income under the provisions of section 111A and section 112A) exceeding two crore rupees, but is not covered under clauses (c) and (d), shall be applicable at the rate of fifteen per cent., of such income-tax : Provided that in case where the total income includes any income by way of dividend or income chargeable under section 111A and section 112A of the Income-tax Act the rate of surcharge on the amount of Income-tax computed in respect of that part of income shall not exceed fifteen per cent. : Provided further that in the case of persons mentioned above having total income exceeding, (a) fifth 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 but does not exceed two crore rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred. An employee intending to opt for the concessional rates of tax under section 115BAC of the Act may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 115BAC of the Act. The intimation so made to the deductor shall be only for the purpose of TDS during the previous year and cannot be modified during that year. (CBDT Circular No. CI of 2020 dated 13-4-2020) No tax, however, will be required to be deducted at source in a case unless the estimated salary income including the value of perquisites is taxable after giving effect to the exemptions, deductions and relief as applicable. (Some typical illustrations of computation of tax are given at Annexure-I). 3.2 Payment of tax on perquisites by employer : An option has been given to the employer to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource therefrom, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). 3.4 Relief when salary paid in arrear or advance : 3.4.1 Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under section 89 he may furnish to the person responsible for making the payment referred to in para (3.1), such particulars in Form No. 10E duly verified by him, and thereupon the person responsible, as aforesaid, shall compute the relief on the basis of such particulars and take the same into account in making the deduction under para (3.1) above. Further, such assessee shall upload the aforesaid Form 10E electronically in the e-filing portal along with the return of income. Here university means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under section 3 of the University ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putation 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 property separately for each house property : (a) Gross annual rent/value (b) Municipal taxes paid, if any (c) Deduction claimed for interest paid, if any (d) Other deductions claimed (e) Address of the property The DDO shall also ensure furnishing of the evidence or particulars in Form No. 12BB in respect of deduction of interest as specified in rule 26C read with section 192(2D). 3.6.1 Conditions for claim of deduction of interest on borrowed capital for computation of income from house property (section 24(b)) : Section 24(b) of the Act allows deduction from income from house property on interest on borrowed capital as under :- (i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him. (ii) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or employer, is mandatory if it is available with the employee, however in case of other lender obtaining of PAN or Aadhaar number as the case may be, 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 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 Stipulation of section 204 of the Act. As per section 204(i) of the Act, in the context of payments other than payments by the Central Government or the State Government the person responsible for paying for the purpose of section 192 means the employer himself or if the employer is a Company, the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 (rule 125). 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 and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 should be furnished to the employee by 15th June after the end of the financial year in which the income was paid and tax deducted. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. Through the Taxation and Other Law (Relaxation of Certain Provisions) Act, 2020 (No. 38 of 2020), the due date for furnishing Form 16 for FY 2019-20 to the employee has been extended up to August 15, 2020. A copy of Form 16 is enclosed. The certificate in Form 16 shall specify (a) Valid permanent account number (PAN) or Aadhaar number, as the case may be, of the deductee ; (b) Valid tax deduction and collection account number (TAN) of the deductor ; (c) (i) Book identification number or numbers (BIN) where deposit 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are mentioned below : (a) TDS certificate (Form 16) would be generated for the deductee only if valid PAN or Aadhaar number as the case may be is correctly mentioned in the Annexure II of Form 24Q in Quarter 4 filed by the deductor. Moreover, employers are advised to ensure in Form 16 that the status of matching with respect to Form 24G/OLTAS is F . If the status of matching other than F kindly take necessary action promptly to rectify the same. It is pertinent to mention here that certain facilities have been provided to the deductors at website www.tdscpc.gov.in/including online correction of statements (Form 24Q). (b) The employer should quote the gross amount of salary (including any amount exempt under section 10 and the deductions under Chapter VI-A) in column 321 (Amount paid/credited) of Annexure I of Form 24Q as per NSDL RPU (hereafter Return Preparation Utility). (c) The employer should quote the 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 off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of perquisites or profits in lieu of salary given to an employee is placed on the person responsible for paying such income, i.e., the person responsible for deducting tax at source. The form and manner of such particulars are prescribed in Rule 26A, Form 12BA (Annexure II) and Form 16 of the Rules. Information relating to the nature and value of perquisites is to be provided by the employer in Form 12BA in case salary- paid or payable is above Rs. 1,50,000. In other cases, the information would have to be provided by the employer in Form 16 itself. 4.6.4.2. An employer, who has paid the tax on perquisites on behalf of the employee as per the provisions discussed in para 3.2 of this circular, shall furnish to the employee concerned, a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate at which tax has been paid and certain other particulars in the amended Form 16. 4.6.4.3. The obligation cast on the employer under section 192(2C) for furnishing a statement showing the value of perquisites provided to the employee is a crucial responsibility of the employer, which is expected to be discharged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes it obligatory for all persons responsible for deducting tax at source to obtain and quote the Tax deduction and collection Account Number (TAN) in the challans, TDS-certificates, statements and other documents. Detailed instructions in this regard are available in this Department s Circular No. 497 (F. No. 275/118/87-IT(B) dated October 1, 1987). If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty, under section 272BB, a sum of ten thousand rupees. Similarly, as per section 139A(5B), it is obligatory for persons deducting tax at source to quote PAN or Aadhaar number as the case may be, of the persons from whose income tax has been deducted in the statement furnished under section 192(2C), certificates furnished under section 203 and all statements prepared and delivered as per the provisions of section 200(3) of the Act. 4.7.2 All tax deductors are required to file the TDS statements in Form No. 24Q (for tax deducted from salaries). As the requirement of filing TDS certificates along with the return of income has been done away with, the lack of PAN or Aadhaar number as the case may be, of deductees is creating di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. National Securities Depository Ltd. (NSDL) or at www.incometaxindiaefiling.gov.in after registering as deductor. Particulars of e-TDS Intermediary at any of the TIN Facilitation Centres are available at http ://www.incometaxindia.gov.in and http ://tin-nsdl.com portals. The requirement of filing an annual return of TDS has been done away with effect from April 1, 2006. The quarterly statement for the last quarter filed in Form 24Q (as amended by Notification No. S.O. 704(E) dated May 12, 2006) shall be treated as the annual return of TDS. Due dates of filing this statement quarter-wise is as in the Table below. Table : Due dates of filing quarterly statements in Form 24Q Sl. No. Date of ending of quarter of financial year Due date 1 30th June 31st July of the financial year 2 30th September 31st October of the financial year 3 31st December 31st January of the financial year 4 31st March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (on or after July 1, 2012), he shall be liable to pay, by way of penalty a sum which shall not be less than Rs. 10,000 but which may extend to Rs. 1,00,000. However, the penalty shall not be levied if the person proves that after paying TDS with the fee and interest, if any, to the credit of Central Government, he had delivered such statement before the expiry of one year from the time prescribed for delivering the statement. 4.9.7 At the time of preparing statements of tax deducted, the deductor is required to : (i) mandatory quote his tax deduction and collection account number (TAN) in the statement ; (ii) mandatory quote his permanent account number (PAN) or Aadhaar number as the case may be, in the statement except in the case where the deductor is an office of the Government (including State Government). In case of Government deductors PANNOTREQD to be quoted in the e-TDS statement ; (iii) mandatory quote of permanent account number PAN or Aadhaar number as the case may be, of all deductees ; (iv) furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee in the previous year, whether paid or not ; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him ; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year. (2) For the removal of doubts, it is clarified that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as Salary . 5.2 Definition of salary , perquisite and profit in lieu of salary (section 17) : 5.2.1 Salary includes :- (i) wages, fees, commissions, perquisites, profits in lieu of, or, in addition to salary, advance of salary, annuity or pension, gratuity, payments in respect of encashment of leave, etc. (ii) the portion of the annual accretion to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 17, to effect an assurance on the life of an assessee or to effect a contract for an annuity. VI. The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the employee and for this purpose, (a) specified security means the securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 and, where employees stock option has been granted under any plan or scheme therefore, includes the securities offered under such plan or scheme ; (b) sweat equity shares means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called ; (c) the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 25 lakhs 15 per cent. of salary 2 Exceeds Rs. 10 lakhs but does not exceed Rs. 25 lakhs 10 per cent. of salary 3 For other places 7.5 per cent. of salary (b) Where the accommodation so provided is taken on lease/rent by the employer : The prescribed rate is 15 per cent. of the salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee. Meaning of Salary for the purpose of calculation of perquisite in respect of residential accommodation : a. Basic salary ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 area or (ii) where it is not located in a remote area , the accommodation is of a temporary nature having plinth area of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utomotive 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 and 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 (I) above. Normal wear and tear of the motor shall be taken at 10 per cent. per annum of the actual cost of the motor car. III Personal attendants, etc. (rule 3(3)) : The value of free service of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Rs. 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ours in remote area or in an offshore installation. Vide Notification No. G.S.R. 415(E) dated June 26, 2020, the said rule has been amended so as to provide that in case of an assessee opting for concessional taxation regime under section 115BAC of the Act the exemption provided in respect of free food and non-alcoholic beverages provided by employer through paid voucher shall not be available. X 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 Rs. 5,000 in aggregate per annum would be exempt. XI 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal cost of the asset as reduced by any charges recovered from the employee for such use. However, the use of computers and laptops would not give rise to any perquisite. XIV Transfer of assets (rule 3(7)(viii)) : Often an employee or member of his household benefits from the transfer of movable asset (not being shares or securities) at no cost or at a cost less than its market value from the employer. The difference between the original cost of the movable asset (not being shares or securities) and the sum, if any, paid by the employee, shall be taken as the value of perquisite. In case of a movable asset, which has already been put to use, the original cost shall be reduced by a sum of 10 per cent. of such original cost for every completed year of use of the asset. Owing to a higher degree of obsolescence, in case of computers and electronic gadgets, however, the value of perquisite shall be worked out by reducing 50 per cent. of the actual cost by the reducing balance method for each completed year of use. Electronic gadgets in this case means data storage and handling devices like computer, digital diaries and printers. They do not include household appliance (i. e. whit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the conditions prescribed in rule 2B of the Rules. For the purpose of this clause, family in relation to an individual means : (i) the spouse and children of the individual ; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. It may also be noted that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel. As discussed in para 4.6.5 section 192(2D) read with rule 26C makes it 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. Government of India allowed payment of cash allowance equivalent to LTC fare to Central Government employees subject to fulfilment of certain conditions vide OM No. F.No. 12(2)/2020-EII(A) dated 12th October, 2020. It has been provided that since the cash allowance of LTC fare is in lieu of deemed actual travel, the same shall be eligible for Income-tax exemption on the lines of existing Income-tax exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 corporation established by a Central, State or Provincial Act, is exempt under section 10(10A)(i). As regards payments in commutation of pension received under any scheme of any other employer, exemption will be governed by the provisions of section 10(10A)(ii). Also, any payment in commutation of pension from a fund referred to in section 10(23AAB) is exempt under section 10(10A)(iii). 5.3.4 Any payment received by an employee of the Central Government or a State Government, as cash-equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise, is exempt under section 10(10AA)(i). In the case of other employees, this exemption will be determined with reference to the leave to their credit at the time of retirement on superannuation or otherwise, subject to a maximum of ten mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 89 for any assessment year in respect of amount received on voluntary retirement or superannuation, no exemption under section 10(10C) shall be available. 5.3.7 Any sum received under a Life Insurance Policy (section 10(10D)), including the sum allocated by way of bonus on such policy other than the following is exempt under section 10(10D) : (i) any sum received under section 80DD(3) or section 80DDA(3) ; or (ii) any sum received under a Keyman insurance policy ; or (iii) any sum received under an insurance policy issued on or after April 1, 2003, but on or before March 31, 2012, in respect of which the premium payable for any of the years during the term of the policy exceeds 20 per cent. of the actual capital sum assured ; or (iv) any sum received under an insurance policy issued on or after April 1, 2012 in respect of which the premium payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 assessee 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 per cent. of the salary due to the employee for the relevant period ; or (ii) where such accommodation is situated in any other places, 40 per cent. of the salary due to the employee for the relevant period. For this purpose, Salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. As discussed in para 4.6.5 section 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure for the purpose of commuting between the place of the residence and the place of his duties. 5.3.11 Under section 10(15)(iv)(i) of the Act, interest payable by the Government on deposits made by an employee of the Central Government or a State Government or a public sector company out of his retirement benefits, in accordance with such scheme framed in this behalf by the Central Government and notified in the Official Gazette is exempt from income-tax. By Notification No. F.2/14/89-NS-II dated June 7, 1989, as amended by Notification No. F.2/14/89-NS-II dated October 12, 1989, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause. 5.3.12 Any scholarship granted to meet the cost of education is not to be included in total income as per provisions of section 10(16) of the Act. 5.3.13 Section 10(18) provides for exemption of any income by way of pension received by an individual who has been in the service of the Central Government or State Government and has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or such other gallantry award as may be specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, hospital includes a dispensary or clinic or nursing home, and family in relation to an individual means the spouse and children of the individual. Family also includes parents, brothers and sisters of the individual if they are wholly or mainly dependent on the individual. It is pertinent to mention that benefits specifically exempt under sections 10(13A), 10(5), 10(14), 17, etc. of the Act would continue to be exempt. These include benefits like house rent allowance, leave travel concession, travel expense allowance on tour and transfer, daily allowance to meet tour expenses as prescribed, medical facilities subject to conditions. 5.3.15 In this connection it is to be noted that as per section 10(14) read with rule 2BB any allowance granted to meet the cost of travel on tour or on transfer includes any sum paid in connection with transfer, packing and transportation of personal effects on such transfer shall be exempt. Also any allowance, whether, granted for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty shall be exempt. 5.3.16. Vide Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident 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 Rs. 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 making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary ; (4) Any contribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification No. S.O. 1561(E), dated November 3, 2005] (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 No. S.O. 1562(E) dated November 3, 2005 and Jeevan Akshay-III vide Notification No. S.O. 847(E) dated June 1, 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 and 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 No. S.O. 1563(E) dated November 3, 2005] The investments made after April 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 co-operative 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 also not be included in payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1220(E), dated July 28, 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. (20) From financial year 2019-20, any contribution by employee of the Central Government to a specified account of the pension scheme referred to in section 80CCD (a) for a fixed period of not less than three years ; and (b) which is in accordance with the scheme as may be notified by the Central Government in the Official Gazette for the purposes of this clause. Explanation. For the purposes of this clause, specified account means an additional account referred to in sub-section (3) of section 20 of the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013). B. Section 80C(3) and 80C(3A) states that in case of Insurance Policy other than contract for a deferred annuity the amount of any premium or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80C. 5.5.3 Deduction in respect of contribution to pension scheme of Central Government (section 80CCD) : Section 80CCD(1) allows an employee, being an individual employed by the Central Government on or after January 1, 2004 or being an individual employed by any other employer, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. No. 5/7/2003-ECB and PR dated December 22, 2003 National Pension System-NPS or as may be notified by the Central Government. However, the deduction shall not exceed an amount equal to 10 per cent. 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 a 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 Rs. 50,000. The deduction of Rs. 50,000 shall be allowed whether or not any deduction is allowed under sub-section (1). How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er an equity savings scheme (section 80CCG) : Section 80CCG provides deduction with effect from assessment year 2013-14 in respect of investment made under notified equity saving scheme. Rajiv Gandhi Equity Savings Scheme 2012 has been notified vide S.O. No. 2777(E), dated November 23, 2012 (subsequent corrigendum S.O. No. 2835(E), dated December 5, 2012) and amended vide Notification No. S.O. 3693(E), dated December 18, 2013 as a scheme under this section. The scheme was modified in December 2013 vide Notification No. S.O. 3693, dated December 18, 2013 (RGESS, 2013). The deduction under this section in accordance with RGESS, 2013 is available if following conditions are satisfied : (a) The assessee is a resident individual ; (b) His gross total income does not exceed Rs. 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government Health Scheme/notified scheme for self and family ; and (ii) amount paid for preventive health check-up up to Rs. 5,000 # Allowable only if no amount is paid for medical insurance. Note 1 : The payment for preventive health check-up can only be made in cash, other payments must be made by non-cash mode. Note 2 : Finance Act, 2018 amended section 80D of the Act to provide that in case of single premium health insurance policy having cover of more than one year, the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the monetary limits specified above. 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. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount equal to the amount paid or deposited under sub-para (b) above shall be deemed to be the income of the employee of the previous year in which such amount is received by the employee and shall accordingly be chargeable to tax as the income of that previous year. 5.5.6.2 Deductions in respect of a person with disability (section 80U) : Under section 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of Rs. 75,000. However, where such individual is a person with severe disability, a higher deduction of Rs. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sability means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 ; (g) person with severe disability means (i) a person with eighty per cent. or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 ; or (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution referred to in section 80G(2)(a) ; (b) financial institution means a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act) ; or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf ; (c) higher education means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognized 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 Deduction in respect of interest on loan taken for certain house property (section 80EEA) : Section 80EEA introduced by the Finance (No. 2) Act, 2019 (No. 23 of 2019), allows deduction from gross total income of an individual (not eligible to claim deduction under section 80EE) in respect of the interest payable on loan taken by him from any financial institution for the purpose of acquisition of a residential house property if following conditions are met : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 43B. The amount of this deduction shall not exceed Rs. 1,50,000 and it shall be allowed in computing the total income of the individual for the assessment year 2020-21 and subsequent assessment years. Where a deduction under this section is allowed for any interest referred to in this section, no deduction shall be allowed in respect of such interest under any other provision of this Act for the same or any other assessment year. 5.5.11 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, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons Approval/Notification under section Authority granting approval/ Notification 1. A research association which has as its object the undertaking of scientific research or to a University, college or other institution to be used for scientific research under section 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 under section 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 under section 35CCA(2) Prescribed Authority under rule 6AAA 4. An ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such amount ; and (ii) in any other case, ten thousand rupees. The deduction is available if such savings account is maintained in a (a) banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) ; (b) 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) Post Office as defined in clause (k) of section 2 of the Indian Post Office Act, 1898. For this section, time deposits means the deposits repayable on expiry of fixed periods. 5.5.15 Deduction in respect of interest on deposits in case of senior citizens (Section 80TTB) : Section 80TTB introduced by Finance Act, 2018 allows deduction to a senior citizen from his gross total income in respect of income by way of interest on deposits with (a) banking company to which the Banking Regulation Act, 1949, applies (including any bank or banking institution referred to in section 51 of that Act) ; (b) co-operative society engaged in carrying on the business of banking (including a co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the Act. TDS should be at the average rate of tax at which, the employee was liable to be taxed during the preceding three years or during the period, if that period is less than three years, when he was member of the fund. The deductor shall remain liable to deduct tax on any sum paid on account of returned contributions (including interest, if any) even if a fund or part of a fund ceases to be an approved superannuation fund. 7.3 As per section 192A of the Act, with effect from June 1, 2015 the trustees of the EPF Scheme, 1952 framed under section 5 of the EPF and Misc. Provisions Act, 1952 or any person authorized under the scheme to make payment of accumulated balance due to employees, shall, in a case where the accumulated balance due to an employee participating in a recognized provident 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 at 10 per cent. if the amount of such payment or aggregate of such payment exceeds Rs. 50,000. In case the employee does not provide his/her PAN or Aadhaar number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistance before allowing the said exemption. The relevant form for furnishing details by employee is Form 12BB. It may be noted that the DDOs shall allow income-tax exemption as referred to in para. 5.3.1. after obtaining copies of invoices of specified expenditure incurred during the specified period. 9. Calculation of income-tax to be deducted : 9.1 Salary income for the purpose of section 192 shall be computed as follows : (a) First compute the gross salary as mentioned in para 5.1 including all the incomes mentioned in para 5.2 and excluding the income mentioned in para 5.3. (b) Allow deductions mentioned in para 5.4 from the figure arrived at (a) above and compute the amount to arrive at net salary of the employee. (c) Add income from all other heads House property , Profits and gains of business or profession , Capital gains and Income from other Sources to arrive at the gross total income as shown in the form of simple statement mentioned at para 3.5. However it may be remembered that no loss under any such head is allowable by DDO other than loss under the head Income from house property to the extent of Rs. 2 lakhs. (d) Allow dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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