TMI BlogINCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2021-22 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 ..... 2 (hereinafter the Rules). All the sections and rules referred are of Income-tax Act, 1961 and 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. As per section 192(1) of the Act, any person responsible for paying any income chargeable under the head Salaries shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under the head of Salary income for that financial year. The section also provides that a person responsible for paying any income chargeable under the head Salaries shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof. 1. Definition of salary , perquisite and profit in lieu of salary (section 17) 1.1 What is salary? As per section 15 of the Act, the following incomes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0A). Family Pension is chargeable to tax under the head Income from 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. 1.2 What is a perquisite ? As per section 17(2) of the Act, perquisites include : (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 : (a) By a company to an employee who is a director of such company ; (b) By a company to an employee who has a substantial interest in the company ; (c) By an employer (including a company) to an employee, who is not covered by (a) or (b) 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 or amenities not provided for by way of monetary payment, exceeds Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme referred to in clause (vii) above to the extent it relates to the contribution referred to in the said clause which is included in total income ; and (viii) the value of any other fringe benefit or amenity as prescribed in rule 3. 1.3 What is profit in lieu of salary ? As per section 17(2) of the Act, Profits in lieu of salary include : I. the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto ; II. any payment (other than any payment referred to in clauses (10), (10A), (10B), (11), (12) (13) or (13A) of section 10) due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Where the total income exceeds Rs. 10,00,000 Rs. 1,10,000 plus 30 per cent. of the amount by which the total income exceeds Rs. 10,00,000 C. In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year Sl. No. Total income Rate of tax 1 Where the total income does not exceed Rs. 5,00,000 Nil 2 Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000 20 per cent. of the amount by which the total income exceeds Rs. 5,00,000 3 Where the total income exceeds Rs. 10,00,000 Rs. 1,00,000 plus 30 per cent. of the amount by which the total income exceeds Rs. 10,00,000 2.2 Surcharge on income-tax The amount of income-tax computed in accordance with the provisions of section 111A or section 112 or section 112A or the provisions of section 115BAC of the Income-tax Act, shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne crore rupees but does not exceed two crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees ; (c) two crore rupees but does not exceed five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of two crore rupees by more than the amount of income that exceeds two crore rupees ; (d) five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of five crore rupees by more than the amount of income that exceeds five crore rupees. 2.3 Health and education cess The amount of income-tax as increased by the applicable surcharge shall be further increased by an additional surcharge, for the purposes of Union, to be called Health and Education Cess on Income-tax . Health and education cess on income-tax shall be levied at the rate of four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for concessional tax regime. Where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year. Further, where the option is exercised under clause (i) of sub-section (5), in the event of failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent assessment years also and other provisions of the Act shall apply for those years accordingly. The conditions specified in sub-section (2) of section 115BAC is as follows : For the purposes of sub-section (1), the total income of the individual or Hindu undivided family shall be computed (i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or section 16 or clause (b) of section 24 (in respect of the property referred to in sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, a person, being an eligible start-up referred to in section 80-IAC, responsible for paying any income to the assessee being perquisite of the nature specified in sub-clause (vi) of clause (2) of section 17 in any previous year relevant to the assessment year 2021-22 and thereafter, shall deduct or pay, as the case may be, tax on such income within 14 days (a) after the expiry of 48 months from end of the relevant assessment year ; or (b) from the date of sale of such specified security or sweat equity share by the assessee ; or (c) from the date of the assessee ceasing to be the employee of the person, whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred. Any 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 employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the head Salaries of an employee below sixty years of age during the financial year 2021-22, is Rs. 6,00,000 (inclusive of all perquisites), out of which Rs. 50,000 is on account of non-monetary perquisites and the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above. Steps : Income chargeable under the head Salaries inclusive of all perquisites Rs. 6,00,000 Tax as per normal rates on total salary (including cess) Rs. 33,800 Average rate of tax [(33,800/6,00,000) 100] 5.63 per cent. Tax payable on Rs. 50,000 = (5.63 per cent. of 50,000) Rs. 2,815 Amount required to be deposited each month Rs. 235 = 2,815/12 The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee. 3.4 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with rule 2BA) a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year. 3.6 Information regarding income under any other head Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than Salaries (not being a loss under any such head other than the loss under the head Income from house property ) received by the taxpayer for the same financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is properly signed and verified by the taxpayer in the manner as prescribed under rule 26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under : I, (name of the assessee), do declare that what is stated above is true to the best of my information and belief. It is reite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion allowable (Rs.) 1 Repair or renewal or reconstruction of the house Any time 30,000 2 Acquisition or construction of the house Before April 1, 1999 30,000 3 Acquisition or construction of the house On or after April 1, 1999 1,50,000(up to the assessment year 2014-15) 2,00,000(with effect from the assessment year 2015-16) 4. Aggregate deduction of Sl. 1 and Sl. 3 of the table above shall not exceed Rs. 2,00,000 from the financial year 2019-20. In case of Serial No. 3 above : (a) The acquisition or construction of the house should be completed within 5 years from the end of the financial year in which the capital was borrowed. Hence, it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee. (b) Further any prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of any sum chargeable under the Act, is made by or on behalf of Central Government or State Government, the Drawing and Disbursing Officer or any other person by whatever name called, responsible for crediting, or as the case may be, paying such sum is the person responsible for paying for the purpose of section 192. As per clause (v) of section 204, in case of a person not resident in India, the person responsible for paying means the person himself or any person authorised by such person or the agent of such person in India including any person treated as an agent under section 163. 4.1 Tax deduction at source The concept of Tax deduction at Source (TDS) was introduced with an aim to collect tax from the source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee, from whose income, tax has been deducted at source, would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor. 4.1.2 Rates for tax de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 As per rule 30(3), an Assessing Officer with prior approval of the Joint Commissioner of Income-tax may permit quarterly payments of TDS under section 192, for the quarters of the financial year on the dates specified 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 Mode of Payment of TDS 4.4.1 Compulsory filing of Statement by PAO. Treasury Officer, etc. in case of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the month of May 2021, required to be furnished on or before June 15, 2021 under rule 30 was to be furnished on or before June 30, 2021, as per Circular No. 9 of 2021, dated May 20, 2021) 4.4.2 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 branch of the Reserve Bank of India or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for furnishing Form 16 for the financial year 2020-21 to the employee up to July 31, 2021. 4.6.2 The certificate in Form 16 shall specify the following ; (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. (*C1N 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. 4.6.3 Further as per Circular 4 of 2013 dated April 17, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der one employer only during the year, certificate in Form No. 16 issued for the quarter ending on 31st March of the financial year shall contain the details of tax deducted and deposited for all the quarters of the financial year. 5. (i) if an assessee is employed under more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers. (ii) Part B (Annexure-I) of the certificate in Form No. 16 may be issued by each of the employers or the last employer at the option of the assessee. (iii) Part B (Annexure-II) of the certificate in Form 16 may be issued by the specified bank to a specified senior citizen (refer section 194P of the Act). 6. In Part A, in items I and II, in the column for tax deposited in respect of deductee, furnish total amount of tax, surcharge and health and education cess. 7. Deductor shall duly fill details, where available, in item numbers 2(f) and 10(k) before furnishing of Part B (Annexure) to the employee. 8. If an assessee is employed by more than one employer during the year, each of the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng-off and TDS should be deducted and reported accordingly i.e. without rounding-off of TDS also. (f) It is mandatory for non-Government deductors to quote PAN. In case of Government deductors, PANNOTREQD should be mentioned. (g) Fee paid under section 234E for late filling of TDS statement to be mentioned in separate column of Fee (column 306) (h) In column 308, Government DDOs to mention the amount of TDS remitted by the PAO/TO/CDDO, other deductors to write the exact amount of TDS deposited through challan. (i) In column 309, Government deductors to write B where TDS is remitted to the credit of Central Government through book adjustment. Other deductors to write C . (j) Challan/Transfer Voucher (CIN/BIN) particulars, i. e., 310, 311, 312 should be exactly the same as available at Tax Information Network. (k) In column 313, mention minor head as marked on the challan. (l) Where an employer deducts from the emoluments paid to an employee or pays on his behalf any contributions of that employee to any approved superannuation fund, all such deductions or payments should be included in the statement. 4.6.9 Authentication by digital signa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the employee is a crucial responsibility of the employer, which is expected to he 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 Form 16 shall be furnished to the employee by June 15, of the financial year immediately following the financial year in which the income was paid and taxes deducted. Through the Circular No. 12 of 2021, dated June 25, 2021, the due date for furnishing Form 16 for the financial year 2020-21 to the employee was extended up to July 31, 2021. Form 12BA should be furnished to the employee by 30th April of the assessment year. If the person responsible for paying any income chargeable under the head salaries and therefore responsible for furnishing statement under Form 12BA and Form 16, as the case may be fails to issue these certificates to the person concerned, as required by section 192(2C), he/she will be liable to pay, by way of penalty, under section 272A(2)(i), a sum which shall be Rs. 100 for every day during which the failure continues. 4.7.4 DDOs emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 difficulties in giving credit for the tax deducted, tax deductors are therefore, advised to procure and quote correct PAN or Aadhaar number, as the case may be of all deductees in the TDS statements for salaries in Form 24Q. Taxpayers are also liable to furnish their correct PAN or Aadhaar number as the case may be, to their deductors. Non-furnishing of PAN or Aadhaar number as the case may be, by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates under section 206AA of the Act mentioned in para 4.9 below. 4.9 Compulsory requirement to furnish PAN or Aadhaar by employee (section 206AA) 4.9.1 Section 206AA in the Act makes furnishing of PAN or Aadhaar number as the case may be, by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If the employee (deductee) fails to furnish his/her PAN or Aadhaar number, as the case may be, to the deductor, the deductor has been made responsible to make TDS at higher of the following rates : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st May of the financial year immediately following the financial year in which the deduction is made (Note : The statement of deduction of tax for the last quarter of the financial year 2020-21 required to be furnished on or before May 31, 2021 under rule 31A of the Income-tax Rules, was extended to June 30, 2021 vide Circular No. 9 of 2021, dated May 20, 2021, which was further extended to July 1, 2021 vide Circular No. 12 of 2021, dated June 25, 2021) 4.10.2 The statements in Form 24Q may be furnished in paper form or electronically under digital signature or along with verification of the statement in Form 27A or verified through an electronic process in accordance with the procedures, formats and standards specified by the Director General of Income-tax (Systems). The procedure for furnishing the e-TDS/TCS statement is detailed at Annexure VI. 4.10.3 Where the deductor is an office of the Government or is the principal officer of a company or is a person who is required to get his accounts audited under section 44AB in the immediately preceding financial year, or the number of deductee s records in a statement for any quarter of the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es ; (iv) furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be. (v) furnish particular of amounts paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax under section 197 by the Assessing Officer of the payee. 4.14 TPS on Income from Pension 4.14.1 As per section 17(1)(ii) of the Income-tax Act, 1961, the term Salary includes pension. In the case of pensioners who receive their pension (not being family pension paid to a spouse) from a nationalized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income. The deductions from the amount of pension under section 80C on account of contribution to Life Insurance, Provident fund, subscription to certain equity shares or debentures, etc., if the pensioner furnishes the relevant details to the banks, may be allowed. Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalized banks vide RBI s Pension Circular (Central Series) No. 7/C.D.R./1992 (R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinguish between the salary paid to a resident or a non-resident. Hence all payments taxable under the head Salaries are liable for deduction of TDS irrespective of the residential status of the recipient. 4.15.2 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 Explanation to section 9(1)(ii) of 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. 4.15.3 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/she 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 July 11, 1995]. 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 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 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 Where the accommodation so provided is taken on lease/ rent by the employer : The value of perquisite is lower of the two : (i) 15% of the salary or (ii) the actual amount of lease rental paid or payable by the employer, as reduced by any amount of rent actually paid by the employee. For the purpose of calculation of value of perquisite under rule 3, the term Salary includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but docs not include the following : (a) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Government or any State Government to an employee who is serving on deputation with any body or undertaking under the control of such Government, (i) the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation ; and (ii) the value of perquisite of such an accommodation shall be the amount calculated in accordance with table in para (a)(ii) above, as if the accommodation is owned by the employer. (c) Furnished accommodation in a hotel : The 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 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 para (c) above shall be taxable if the hotel accommodation is provided for a total period not exceeding in aggregate 15 days on transfer of an employee from one place to another place. It may be clarified that while services provided as an integral part of the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) In case the motor car is used partly in performance of duties and partly for private or personal purposes of the employee or any member of his household, and the expenses on maintenance and running of motor car are met or reimbursed by the employer, the value of perquisite will be Rs. 1,800 (plus Rs. 900 if chauffeur is also provided) per month for motor car where cubic capacity of engine of the motor car does not exceed 1.6 litres. However, the value of perquisite will be Rs. 2,400 (plus Rs. 900, if chauffeur is also provided) per month if the cubic capacity of engine of the motor car exceeds 1.6 litres. the expenses on maintenance and running of motor car for such private or personal use are fully met by the employee, the value of perquisite will be Rs. 600 (plus Rs. 900, if chauffeur is also provided) per month for motor car where cubic capacity of engine of the motor car does not exceed 1.6 litres. However, the value of perquisite will be Rs. 900 (plus Rs. 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 is owned by the employee but the actual running and maintenance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The employer gives a certificate that the expenditure was incurred wholly and exclusively for performance of official duties. (IV) In case where one or more motor-cars are owned or hired by the employer and the employee or any member of his household are allowed the use of such motor-car or all of any of such motor-cars (otherwise than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount calculated in respect of one car as if the employee had been provided one motor-car for use partly in the performance of his duties and partly for his private or personal purposes and the amount calculated in respect of the other car or cars as if he had been provided with such car exclusively for his private or personal purposes. The normal wear and tear of the motor shall be taken at 10% per annum of the actual cost of the motor car. (C) Personal attendants etc. (rule 3(3)) : The value of benefit of all personal attendants including a sweeper, gardener and a watchman shall be the actual cost to the employer. Where the attendant is provided at the residence of the employee, full cost will be taxed as perquisite in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engers 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 an airline or the railways. (G) Interest free or concessional loans [rule 3(7)(i)] The value of perquisite arising from interest free or concessional loans to employees or any member of his/her household 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 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, for loans up to Rs. 20,000 in the aggregate no value would be charged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and usable only at eating joints, to the extent the value thereof does not exceed fifty rupees per meal, or (b) tea or snacks provided during working hours, or (c) free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore 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 employee 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. (J) Gifts [rule 3(7)(iv)] The value of any gift or vouchers or token in lieu of which such gift may be received by the employee or member of his/her household shall be the sum equal to the amount of such gift. However, in case the gift, etc is less than Rs. 5,000 in aggregate per annum, the value of perquisite shall be Nil. (K) Membership fees and annual fees (rule 3(7)(v)) Any membership fees and annual fees incurred by the employee (or any member of his/her household), which is charged to a credit card (including any add-on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the employee for such use. (N) Transfer of assets [rule 3(7)(viii)] The value of perquisite arising from transfer of any movable asset belonging to the employer directly or indirectly to the employee or any member of his/her household shall be the actual cost of such asset to the employer as reduced by the following : (a) cost of normal wear and tear at 10% for each year during which that asset is put to use and further ; (b) the amount recovered or paid by the employee as consideration for such transfer. Note : Rate of wear and tear for computers and electronic items is 50% and for motor cars is 20% (calculated by reducing balance method). (O) Value of perquisite [rule 3(7)(ix)] The value of any other benefit or amenity, service, right or privilege provided by the employer shall be determined on the basis of cost to the employer under arm s length transaction as reduced by the employee s contribution. If it is related to the expenses on telephones including a mobile phone actually incurred on behalf of the employee by the employer, the value shall be Nil. In paras (A) to (N) above, the phrase member of household shall include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to such conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person ; (ii) any sum of money received by a member of the family of a deceased person, from the employer of the deceased person (without limit), or from any other person or persons to the extent that such sum or aggregate of such sums does not exceed ten lakh rupees, where the cause of death of such person is illness relating to Covid-19 and the payment is, received within twelve months from the date of death of such person, and subject to such other conditions, as may be notified by the Central Government in this behalf, shall not be the income of such person. Further, it is proposed to provide that for the purpose of both of the said clauses, family in relation to an individual shall have the same meaning as assigned to in the Explanation 1 to clause (5) of section 10. These amendments will take effect retrospectively from April 1, 2020 and will accordingly apply in relation to the assessment year 2020-21 and subsequent assessment years. 5.3 Incomes not included under the head Salaries (exemptions) Any income falling within any of the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority) or a corporation established by a Central, State or Provincial Act, is exempt under section 10(10A)(i) of the Act. 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) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver 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 Rs. 5,00,000 where retrenchment is on or alter January 1, 1997 as specified in Notification No. 10969, dated June 25, 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 Rs. 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 Co-operative Society : (f) A university established or incorporated or under a Central, State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be exempt. The said clause was amended by the Finance Act, 2021 to provide that : (a) with effect from February 1, 2021, the sum received under a Unit Linked Insurance Policy issued on or after February 1, 2021, shall not be exempt if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs. 2,50,000, (b) if premium is payable for more than one ULIP, issued on or after February 1, 2021, the exemption under this clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs. 2,50,000 for any of the previous years during the term of any of those policies. However, the above amendments will not be applicable in case of sum received on death of the person. Under section 10(12A) of the Act, any payment from the National Pension System Trust to an assessee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD to the extent it does not exceed sixty percent from financial year 2019-2020 (as amended by Finance (No. 2) Act. 2019), of the total amount payable to him at the time such closure of his opting out of the scheme shall be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r after the 1st day of April, 2021 and computed in prescribed manner. Second proviso to clause (11) of section 10, with effect from April 1, 2022, provides that if the contribution by a person is in a fund in which there is no contribution by the employer of such person, the provisions of the first proviso shall have the effect as if for the words two lakh and fitly thousand rupees , the words five lakh rupees had been substituted. Rule 9D of the Income-tax Rules, 1962 provides for the calculation of taxable interest relating to contribution in a provident fund or recognized provident fund, exceeding specified limit. 5.3.10 Under section 10(13A) of the Act, any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from income-tax to the extent as may be prescribed having regard to the area or place in which such accommodation is situated and other relevant considerations, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be the least of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10(14)(i) and 10(14)(ii) vide notification No. S.O. 617(E), dated July 7, 1995 (F. No. 142/9/95-TPL) which has been amended vide notification S. O. No. 403(E), dated April 24, 2000 (F. No. 142/34/99-TPL). Rule 2BB has been amended and the exemption in respect of transport allowance for financial year 2018-19 shall be available up to Rs. 3,200 per month only to the person who is blind or orthopedically handicapped with disabilities of lower extremities, to meet his/her expenditure for the purpose of commuting between the place of the residence and the place of his duties. 5.3.12 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 tor the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (or any member of his/her family) outside India, travel and stay abroad of the employee (or any member of his/her family) for medical treatment and expenditure on travel and stay abroad of one attendant who accompanies the patient. However, the expenditures on medical treatment abroad are excluded from perquisites only to the extent permitted by the Reserve Bank of India. Further, the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees ; (f) any sum paid by the employer for any expenditure in relation with medical treatment abroad, subject to the conditions mentioned in (e) above. For the purpose of availing exemption on expenditure incurred on medical treatment, hospital includes a dispensary or clinic or nursing home, and family in relation to an individual means the spouse and children of the individual. Family also includes parents, brothers and sisters of the individual if they are wholly or mainly dependent on the individual. It is pertinent to mention that benefits specifically exempt under section 10(13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees whichever is less. 5.4.3 Tax on employment (section 16(iii)) : The tax on employment (professional tax) within the meaning of article 276(2) of the Constitution of India, leviable by or under any law, shall also be allowed as a deduction in computing the income 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 848(E), dated the November 29, 2011, publishing the National Savings Certificates (IX-Issue) Rules, 2011, G.S.R. 868(E), dated the December 7, 2011, specifying the National Savings Certificates IX Issue as the class of Savings Certificates F. No.13/2011-NS-II r/w amendment Notification No. G.S.R. 319(E), dated April 25, 2012] (6) Any sum paid as contribution in the case of an individual, for himself, spouse or any child, (a) for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India ; (b) for participation in any unit-linked insurance plan of the LIC Mutual Fund referred to 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 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... villages, or for both. [The Central Government has since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No. 37(E), dated January 11, 2007, for the purposes of section 80C(2)(xvi)(a)] (12) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head Income from house property (or which would, if it has not been used for assessee s own residence, have been chargeable to tax under that head) where such payments are made towards or by way of any installment or part payment of the amount due under any self-financing or other scheme of any Development Authority, Housing Board or other authority engaged in the construction and sale of house property on ownership basis or by way of instalment or part payment of the amount due to any company or cooperative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any public finance institution, (15) Subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company. (16) Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes. [The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S. O. No. 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 pens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above and the employee or his nominee receives this amount together with the interest or bonus accrued or credited to this account due to the reason of (i) surrender of annuity plan whether in whole or part, (ii) pension received from the annuity plan, then the amount so received during the financial year shall be the income of the employee or his nominee for that financial year and accordingly will be charged to tax. Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 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.N. 5/7/2003-EGB PR, dated December 22, 2003 National Pension System-NPS or as may be notified by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) or sub-section (1B) shall not be deemed to be the income of the nominee. Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 80C. Further, as per section 80CCD(5), it has been specified that with effect from April 1, 2009, any amount received by the employee from the New Pension Scheme shall be deemed not to have been received in the previous year if such amount is used for purchasing an annuity plan in the same previous year. It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and section 80CCD(1) shall not exceed Rs. 1,50,000. The deduction allowed under section 80CCD(1B) is an additional deduction in respect of any amount paid in the NPS up to Rs.50,000. However, the contribution made by the Central Government or any other employer to a pension scheme under section 80CCD(2) shall be excluded from the limit of Rs. 1,50,000 provided under this section. 5.5.4 Deduction in respect of health insurance premia paid, etc. (section 80D) Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) 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. 2. 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 sub-section (4A) of section 80D. 5.5.5 Deductions in respect of expenditure on persons or dependants with disability (a) Deductions in respect of maintenance including medical treatment of a dependent who is a person with disability (section 80DD) : Under section 80DD, where an employee, who is a resident in India, has, during the previous year (a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a depend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 section 80DD deduction is in case of the dependent of the employee whereas section 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 I above and furnished before the DDO. 3. For the purposes of sections 80DD and 80U some of the terms defined are as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies (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. 5.5.6 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 Rs. 40,000 whichever is less. Now the deduction can be allowed on the basis of a prescription from an oncologist, a urologist, nephrologist, a hematolegist, an immunologist or such other specialist, as mentioned in rule 11DD. However, the amount of the claim shall be reduced by the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 5.5.8 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 : (i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2019 and ending on the 31st day of March, 2021 : (ii) the stamp duty value of residential house property does not exceed forty-five lakh rupees : (iii) the assessee does not own any residential house property on the date of sanction of loan. For the purposes of this section, (a) the expression financial institution shall have the meaning assigned to it in clause (a) of sub-section (5) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther assessment year. 5.5.10 Deductions on respect of donations to certain funds, charitable institutions, etc. (section 80G) : Section 80G provides for deductions on account of donation made to various funds, charitable organizations, etc. In cases where employees make donations to the Prime Minister s National Relief Fund, the Chief Minister s Relief Fund or the Lieutenant Governor s Relief Fund through their respective employers, it is not possible for such funds to issue separate certificate to every such employee in respect of donations made to such funds as contributions made to these funds are in the form of a consolidated cheque. An employee who makes donations towards these funds is eligible to claim deduction under section 80G. It is, hereby, clarified that the claim in respect of such donations as indicated above will be admissible under section 80G on the basis of the certificate issued by the Drawing and Disbursing Officer (DDO)/Employer in this behalf - Circular No. 2 of 2005, dated January 12, 2005. No deduction under this section is allowable in case the amount of donation exceeds Rs. 2,000 unless the amount is paid by any mode other than cash. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 association or institution which has as its object the training of persons for implementing programmes of rural development. furnishes the certificate under section 35CCA (2A) Prescribed Authority under rule 6AAA 5. An association or institution, which has as its object the undertaking of any programme of conservation of natural resources or of afforestation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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. 5.5.14 Deduction in respect of interest on deposits in case of senior citizens (section 80TTB) : Section 80TTB introduced by the 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-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. 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 agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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% 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 as the case may be, or provides an invalid PAN or Aadhaar number as the ease may be, then the deduction will have to be made at maximum marginal rate. Rule 8 of Part-A of fourth schedule of the Act excludes the following accumulated balance due and becoming payable to the employee from the total income : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Calculation of income-tax to be deducted 9.1 Salary income for the purpose of section 192 shall be computed as follow : (a) First compute the gross salary as mentioned in para 5.1 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 para 3.6. 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. 2.00 lakhs, (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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