The Finance (Amendment) Ordinance, 1987--Clarification of provisions - Income Tax - 494/1987

The Finance (Amendment) Ordinance, 1987--Clarification of provisions Circular No. 494 Dated 22/9/1987 The Central Government has promulgated an Ordinance (No. 6 of 1987) on the 19th September, 1987. The Oedinance is named as the Finance (Amendment) Ordinance, 1987. By this Ordinance Part III of the First Schedule to the Finance Act, 1987 has been amended. 2. Part III of the First Schedule to the Finance Act, 1987, prescribed the rates of tax for the following purposes:- (i) deduction of tax at soruce under section 92 on income chargeable to tax under the head ``Salaries''; (ii) deduction of tax at source under section 80E(9) on payment of annuities; (iii) advance tax payable by a taxpayer under Chapter XVII-c (not being ``advance tax'' in respect of any income chargeable to tax under Chapter XII or Chapter XII-A or sub-section (1A) of section 161 or section 164 or section 164A or section 167A of the Income-tax Act at the rates as specified in that Chapter ors ection ); (iv) computation of tax in a summary manner on the estimated undisclosed income consequent upon search and seizure [first proviso to section 132(5); (v) computation of tax liability of a non-resident shipping business [section 172(4)]; (vi) computation of tax liability of a person who is likely to transfer property to avoid tax [section 175]; and (vii) computation of tax liability in the case of a discontinued business [Section 176(2)]; 3. Paragraph 2 of the Ordinance lays down that where the income of a person exceeds Rs. 50,000, the amount of income-tax computed for the purpose of deduction of tax at source asl also for the purpose of payment of advance tax shall be increased by a surcharge for the purposes of the Union calculated at the rate of 5 per cent. ont the amount of the income-tax so computed. For example, in the case of an individual having an income of Rs. 52,000 liable for advance tax for the previous year relevant to the assessment year 1988-89, the advance tax payable by him in accordance with the rates specified in Part III of the First Schedule will be Rs. 9,250 + 40% of the income in excess of Rs. 50,000, i.e., Rs. 10,050 (Rs. 9,250+40% of RS. 2,000). On this amount, surcharge for the purposes of the Union will be levied at the rate of 5% i.e., Rs. 503. Thus, the total advance tax including surcharge payable by the individual taxpayer will be Rs. 10,553. The liability to pay surcharge on income chargeable under the head ``salaries'' can also be determined in a similar manner. 4. Paragraph 3 of the Ordinance stipulates that in respect of the advance tax instalments paid or payable by a taxpayer on 15th June, 1987, and 15th September, 1987, the surcharge in respect of these two instalments of the advance tax should be paid by the 30th September, 1987. 5. In the example referred to in paragraph 3 above, if the previous year of the person ends on the 31st December 1987, the person will be liable for the payment of advance ax in three equal instalments of Rs. 3,518 (consisting of Rs. 3,350 as advance tax and Rs. 168 as surcharge for the purposes of the Union) payable on the 15th June, 1987, 15th September, 1987, and 15th December, 1987, Paragraph 3 of the Ordinance stipulates that in respect of the instalments of advance tax payable on the 15th June, 1987, and the 15th September, 1987, the surcharge for the purposes of the Union, amounting to RS. 336, shall be payable by the 30th September, 1987. 6. Failure to comply with the provisions of paragraphs 2 and 3 of the Ordinance will make a taxpayer defaulter and the consequential provisions of the Income-tax Act will automatically apply.