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 - Income Tax - 504/1988

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 Circular No. 504 Dated 8/2/1988 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 1987-88 under section 192 of the Income-tax Act, 1961. I am directed to say that under the provisions of section 192 of the Income-tax Act, 1961, tax has to be deducted at source by any person responsible for paying any income chargeable under the head "Salaries". The rates of income-tax deduction during the year 1987-88 and the relevant rules applicable have already been circulated under Circular No. 489 (F. No. 275/51/87-IT(B)), dated 25th June, 1987-[1987] 166 ITR (St.) 152. The scope of deduction of tax at source from "Salaries" was modified by the Finance Act, 1987, by the insertion of sub-sections (2), (2A) and (2B) in section 192 of the Income-tax Act. The salient features of these provisions are given below: (a) The new sub-section (2) inserted in section 192 deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer (as the taxpayer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head "Salary" due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified, by him and by the former/other employer. The present employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from former or other employer). (b) Under the existing provisions of section 89(1), it is the Income-tax Officer who is empowered to give relief from the incidence of tax at a higher rate in a case where an employee receives salary in arrears or in advance. The Amending Act by inserting sub-section (2A) in section 192 provides that in respect of salary payment of employees of Government or public sector undertakings, deduction of tax at source may be made after allowing relief under section 89(1). (c) Presently, the person making payment of salary cannot take into account other incomes of the employee for the purpose of deduction of tax at source. The Amending Act by inserting sub-section (2B) enables a taxpayer to furnish particulars of income other than salaries to his employer who shall deduct out of the salary payment, the tax due on the total income subject to the condition that the total amount of tax deducted shall not be less than the amount deductible from income from salaries only. (d) These amendments will come into force with effect from 1st June, 1987. To meet the requirements of the new provisions, the Central Government have notified necessary amendments in the Income-tax Rules, 1962, vide Notification No. S.O. 963(E), dated 29-10-1987*. A copy of the notification along with enclosures is sent herewith for information and guidance. 2. This may please be brought to the notice of all Drawing and Disbursing Officers and others who are responsible for paying any income chargeable under the head "Salary" for their guidance. This may also be brought to the notice of all State Governments/Union Administrations. It may be noted that the DDO must mention in the Annual TDS Certificate the fact of section 89(1) of the Income-tax Act relief having been given and also attach a copy of Form 10E to this Certificate. 3. Copies of this circular are available with the DI (RS PR), 6th Floor, Mayur Bhawan, Connaught Circus, New Delhi-110 001. Yours faithfully, (Sd.) B. Nagarajan, Director, Government of India. * See Income-tax (8th Amendment) Rules, 1987: [1987] 168 ITR (St.) 156.