Deduction of tax at source-Income-tax deduction from salaries during the financial year 1986-87 under section 192 of the I.T. Act, 1961 - Income Tax - 459/1986

Deduction of tax at source-Income-tax deduction from salaries during the financial year 1986-87 under section 192 of the I.T. Act, 1961 Circular No.459 Dated 16/7/1986 From B. Nagarajan, Secretary, Central Board of Direct Taxes. To All State Governments including Administration of Union Territories. Sir, Subject: Deduction of tax at source-Income-tax deduction from salaries during the financial year 1986-87 under section 192 of the I.T. Act, 1961. I am directed to invite the reference to this Ministry Circular No. 429 (F. No. 275/35/85-IT (B) dated the 8th August, 1985 (printed at [1985] 156 ITR (St.) 64 and Part 2, Volume 23, Section IV, Taxman, November, 1985, pages 164-174), wherein the rates of income-tax deductions during the financial year 1985-86 from the payment of income chargeable under the head "Salaries" under section 192 of the Income-tax Act were intimated. 2. The aforesaid circular explains the duties devolving upon the person responsible for paying any income chargeable under the head "Salaries" to deduct income-tax on the amount payable at the average rate of income computed on the basis of the rates in force for the financial year in which the payment is made and also the method of calculation of such deductions. It also explains the liabilities to which such a person will be exposed in case of failure to deduct tax at source or after deducting fails to pay the tax to the credit of the Central Government within the stipulated time. It also refers to the various exemptions/deductions admissible under the I.T. Act, in computing the income-tax for the purpose of deduction under section 192. 3. The Finance Act, 1986, has not made any modification in the rate at which income-tax will be deductible during the financial year 1986-87 from the payment of income chargeable under the head "Salaries". An extract of sub-paragraph I of Paragraph A of Part III of the First Schedule is at Annexure I. Some important changes brought about by the Finance Act, 1986, in relation to income-tax deduction from the payment of income chargeable under the head "Salaries" during the financial year 1986-87 are given below:- (1) The standard deduction admissible in the case of salaried taxpayers has been raised to 30% of the salary subject to a maximum of Rs. 10,000. This amendment is effective from 1-4-1987 and will accordingly apply in relation to the assessment year 1987-88 and subsequent years. (2) With a view to providing relief to employees getting house rent allowance and removing the disparity in the matter of liability of income-tax as between an employee getting house rent allowance and another provided with rent-free accommodation by the employer, the ceiling limit of Rs. 400 per month has been removed. 4. The contents of this circular are not exhaustive and are issued with a view to helping the employers to understand the material provisions of the I.T. Act which are applicable to deductions from "Salary" income. Wherever there is any difference of opinion or doubt a reference should always be made to the provisions of the income-tax Act and the relevant Finance Act, through which changes in the tax structure are made. Wherever necessary, the previous years' circulars may also be referred to. 5. The contents of this circular may please be brought to the notice of all disbursing officers and State Undertakings under the control of the State Governments. 6. In case any assistance is required, the ITO concerned and/or the local Public Relation Officers may be approached for the same, who will, if necessary, obtain the orders of the higher authority in the matter. Copies of this circular are available with the Director of Inspection (RS PR), 6th floor, Mayur Bhawan, New Delhi. Yours faithfully, (Sd.) B. Nagarajan, Secretary, Central Board of Direct Taxes.