Deduction of tax at source-Income-tax deduction from salaries during the financial year 1987-88 under section 192 of the Income-tax Act, 1961-Deduction admissible in respect of deposits made in the National Savings Scheme, 1987 - Income Tax - 501/1988

Deduction of tax at source-Income-tax deduction from salaries during the financial year 1987-88 under section 192 of the Income-tax Act, 1961-Deduction admissible in respect of deposits made in the National Savings Scheme, 1987 Circular No. 501 Dated 20/1/1988 To All State Governments (including Administration of Union Territories) Sir, I am directed to invite a reference to this Ministry's Circular No. 489 (F. No. 275/51/87-IT(B)), dated 25th June, 1987-[1987] 166 ITR (St.) 152, wherein the rates of income-tax deduction during the year 1987-88 from the payment of income chargeable under the head "Salaries" under section 192 of the Income-tax Act were intimated. 2. It may be added that the Finance Act, 1987, has inserted a new section 80CCA in the Income-tax Act, 1961. Under the new provisions, deduction will be allowed to an individual, a Hindu undivided family and certain categories of associations of persons or bodies of individuals in respect of the deposits made in the National Savings Scheme*. The deduction will be restricted to 50% of the amount deposited, as does not exceed Rs. 20,000 in a previous year. The maximum deduction admissible on this account is limited to Rs. 10,000 per annum. In case the depositor makes any withdrawals from the amount standing to his credit in the National Savings Scheme together with the interest accrued thereon, an amount equal to 50% of the amount so withdrawn shall be deemed to be the income of the taxpayer for the previous year in which such withdrawal is made. Interest on the deposits made under the National Savings Scheme will be taxable only in the year of withdrawal and to the extent of fifty per cent. thereof. The Department of Economic Affairs in the Ministry of Finance by their Notification No. GSR 335(E), dated 30-3-1987, notified the National Savings Scheme Rules, 1987,* in the Gazette of India. 3. The deductions admissible under section 80CCA of the Income-tax Act in respect of the deposits made by the employees out of their income chargeable to tax in the said National Savings Scheme may be allowed by the drawing and disbursing officer while computing the income of the employees for the purpose of deduction of tax at source. These instructions may please be brought to the notice of all disbursing officers and State undertakings under the control of the State Governments, etc. 4. It may be noted that the deduction admissible under this section is in addition to the deduction admissible under section 80C of the Income-tax Act. Yours faithfully, (Sd.) B. Nagarajan, Director, Government of India. * See [1987] 167 ITR (St.) 42.