Deduction of tax at source-Income-tax deduction from salaries during the financial year 1988-89 under section 192 of the Income-tax Act, 1961 - Income Tax - 517/1988

Deduction of tax at source-Income-tax deduction from salaries during the financial year 1988-89 under section 192 of the Income-tax Act, 1961 Circular No. 517 Dated 16/6/1988 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 1988-89 under section 192 of the Income-tax Act, 1961. I am directed to invite a reference to this Ministry's Circular No. 489 (F. No. 275/51/87-IT(B)), dated 25-6-1987 ([1987] 166 ITR (St.) 152] and Circular No. 498 (F. No. 275/11/87-IT(B)), dated 4-11-87*, Circular No. 501 (F. No. 275/109/87-IT(B)) 20-1-88** and Circular No. 504 (F. No. 275/138/87-IT(B)), dated 8-2-88+ 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, 1961 were intimated. Reference is also invited to this Department's Circular No. 499 (F. No. 275/51/87-IT(B)), dated 1st December, 1987++, wherein the fact of levy of surcharge was intimated to you. 2. Sub-section (1) of section 192 provides that the person responsible for paying any income chargeable under the head "Salaries" shall, at the time of making 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 for that financial year. The provisions of sub-section (3) of the said section are intended for making adjustment for excess or shortfalls of inadvertent nature and/or due to unforeseen circumstances. The aggregate tax thus calculated on the estimated income divided by 12 and rounded off to the nearest rupee is required to be deducted from the monthly salary. 3. There is no change in the rate of tax for the financial year 1988-89. An extract of sub-paragraph (1) of paragraph A of Part III of the First Schedule to the Finance Act, 1988, is at Annexure-I. However, the Finance Act, 1988, has modified the provisions relating to "standard deduction" and deposits under "National Savings Scheme". The Finance Act, 1988, also extends the scope of deduction admissible under section 80CCA to the deferred annuity plans of the Life Insurance Corporation. Moreover, the surcharge on income-tax which was levied by the Finance (Amendment) Act, 1987 (No. 46 of 1987) has been extended during the current financial year also. These are explained in the succeeding paragraphs. 4. The substance of the main provisions of law in so far as they relate to income chargeable under the head "Salaries" on which tax is to be deducted at source during the financial year 1988-89 is given hereunder:- (i) No tax will be deducted at source in any case unless the estimated salary income for the financial year exceeds Rs. 18,000. Some typical examples of calculations are at Annexure-II. (ii) The value of perquisites by way of free or concessional residential accommodation, or motor cars provided by employers to their employees shall be determined under rule 3 of the Income-tax Rules, 1962. Further, the value of other benefits or amenities provided free of cost or at concessional rates to the employees like supply of gas, electric-energy, water for household consumption, educational facilities, etc. should also be taken into account for the purpose of computing the estimated salary income of the employees during the current financial year (Example II at Annexure-II illustrates computation of some such perquisites.) As regards the colliery allowance, it is to be noted that only the excess over Rs. 100 per month or 50% of the actual colliery allowance paid by Coal India Limited whichever is more is to be treated as perquisites and the balance amount on account of the payment of said allowance may be allowed to be deducted while computing the income under the head "Salaries" for purpose of deduction of tax at source. (iii) Exemption in computing total income:- (a) Clause (10) of section 10 provides exemption of death-cum-retirement gratuity from inclusion in computing total income. The Government have by Notification No. 7534 (F. No. 178/131/87-IT-AI), dated 18-9-1987#, raised the limit of Rs. 36,000 mentioned in sub-clause (iii) of clause (10) of section 10 of the Income-tax Act to Rs. 1,00,000 for all the three purposes for which the said limit has been mentioned in the provisions of the said clause, in relation to the employees who retire or become incapacitated or die on or after 1st January, 1986, or whose employment is terminated on or after the said date. Vide Notification No. GSR 405, dated 28-4-1988##, the enhanced limit of Rs. 1,00,000 will be applicable for all the three purposes mentioned in the said clause in relation to the employees mentioned therein who retire or become incapacitated prior to such retirement or die on or after the first day of April, 1988, or whose employment is terminated on or after the said date. (b) Sub-clause (i) of clause (10AA) of section 10 provides for exemption of 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 on superannuation or otherwise (c) In the case of other employees, the exemption under section 10(10AA) will be determined with reference to the leave to his credit at the time of retirement on superannuation or otherwise, subject to a maximum of eight months' leave. This exemption will be limited to the amount payable for such unutilised leave on the basis of the average salary of the employee for eight months, subject to the limit to be prescribed by the Central Government. Where the cash equivalent of unutilised earned leave is received by the employee from two or more employees in the same year, the maximum amount exempt from tax shall not exceed the limit so specified. The limit has now been specified in the Government of India Notification No. S.O. 553(E), dated 8th June, 1988.$ (iv) The amount repaid to an employee from the additional dearness allowance deposit account under the provisions of Additional Emoluments (Compulsary Deposit) Act, 1974, shall be liable to be included in his total income of the previous year in which it is repaid as already explained in the Ministry's Circular No. 182 (F. No. 275/12/75-ITJ) dated 28-10-1975 (printed at [1975] 101 ITR (St.) 130). The amount repaid will include an element of interest also. While the repayment of the principal sum will be regarded as salary paid during relevant financial year and assessed to tax accordingly, the interest element qualifies for deduction according to section 80L of the Income-tax Act, 1961. (v) Under section 10 (10B), the retrenchment compensation received by a workman is exempt from income-tax subject to certain limits. The maximum amount of retrenchment compensation exempt is the sum calculated on the basis provided in section 25F(b) of the Industrial Disputes Act, 1947, or any amount not less than Rs. 50,000 as the Central Government may, by notification specify in the official Gazette, whichever 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 workman in the undertaking to which the Scheme applies and other relevant circumstances. It may be added that a number of public sector undertakings have formulated voluntary retirement schemes for their employees. Any payment received by an employee, whether a workman or executive, of a public sector company at the time of his voluntary retirement in accordance with any scheme which the Central Government may approve having regard to the economic viability of the public sector undertaking/company and other relevant circumstances will be exempt under section 10(10C) of the Income-tax Act, 1961. (vi) Under section 10(13A) of the Income-tax Act, 1961, 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. According to rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be:- (a) The actual amount of such allowance received by an employee in respect of the relevant period; or (b) The actual expenditure incurred in payment of rent in excess of 1/10th of the salary due for the relevant period; or (c) Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or (d) Where such accommodation is situated in any other place, 40% of the salary due to the employee for the relevant period, whichever is the least. For this purpose, "Salary" includes dearness allowance, i.e. if the terms of employment so provide, but excludes all other allowances and perquisites. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in rule 2A, qualifies for exemption from income-tax. Thus house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the house rent allowance or any portion thereof from the total income of the employee. (vii) (a) Under section 16 of the Income-tax Act, 1961 (hereinafter referred to as the Act), the taxable salary is to be computed after making standard deduction. The Finance Act, 1988, has raised the standard deduction to 33-1/3% of the salary, subject to an enhanced ceiling of Rs. 12,000. For this purpose the term "Salary" will include fees, commissions, perquisites or profits in lieu of or in addition to salary, but will not include any payment received by the employees which are specifically exempt from tax under clauses (10), (10A), (10AA), (10B), (10C), (11), (12) and (13A) of section 10 of the Act. Thus, house rent allowance to the extent exempt under section 10(13A) of the Act will not be taken into account for the purpose of computing the amount of the standard deduction. This deduction will be available also to persons drawing pension during the current financial year at the same rate and subject to the same ceiling as to the employees in actual service. However, the standard deduction will be limited to Rs. 1,000 only in cases:- (i) Where the employee is provided with any motor car, motor cycle, scooter or other moped by his employer for use otherwise than wholly and exclusively in the performance of his duties; or (ii) Where he is allowed the use of any one or more motor cars, out of a pool of motor cars owned or hired by the employer otherwise than wholly or exclusively in the performance of his duties. The use of any vehicle provided by the employer for journey by the employee from his residence to his office or other places of work and also from office or other places of work to his residence shall not be regarded as use of such vehicles otherwise than wholly and exclusively in the performance of his duties. (b) In respect of salary paid during the financial year 1988-89, the value of any benefit or amenity granted or provided free of cost or at concessional rate by an employer to an employee (not being a director of the company or a person who has substantial interest in the company) is not regarded as perquisites received by the employee unless the employee's income under the head "Salary" exclusive of the value of any benefit or amenity not provided for by way of monetary payment exceeds Rs. 24,000. In cases where salary is received from more than one employer, the aggregate salary from these employers will have to be taken into account for the purpose. (viii) (a) Under section 80C of the Act, while computing the taxable income, the disbursing officer should allow deduction of the whole of the first Rs. 6,000, 50% of the next Rs. 6,000 and 40% of the balance of the qualifying amount of payment made by the employee out of his income chargeable to tax towards life insurance premium, contributions to provident fund set up by the Central Government or to which the Provident Funds Act, 1925, applies (including contribution to public provident fund constituted under the Public Provident Fund Act, 1968), contributions for participation in the Unit Linked Insurance Plan, 1971, made under section 19(1)(cc) of the Unit Trust of India Act, 1963, deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, and subscription to the National Savings Certificates (VI Issue) and the National Savings Certificates (VII Issue). The interest on National Savings Certificates (VI Issue) is deemed to be reinvested and therefore, the holder thereof is entitled to the benefits of section 80C. (b) In respect of contributions to "Recognised provident fund", there is another monetary ceiling limit laid down in clause (d) of sub-section (2) of section 80C of the Income-tax Act, 1961, in that the employee's own contribution to the individual account in the fund will not exceed 1/5th of his salary during the financial year or Rs. 10,000 whichever is less, "Salary" for this purpose would include dearness allowance if the terms of the employment so provide, but will exclude all other allowances and perquisites. The expression "Recognised provident fund" has been defined in section 2(38) of the Act to mean provident fund which has been and continues to be recognised by the Commissioner in accordance with the Rules contained in Part A of the Fourth Schedule to the Act and includes a provident fund established under a Scheme framed under the Employees' Provident Funds Act, 1952. (c) The additional monetary ceiling of 1/5th of salary or Rs. 10,000 whichever is less, will not be applicable to the contribution to the provident fund referred to in sub-clauses (iii) and (iv) of clause (a) of sub-section (2) of section 80C. Such provident funds are:- A. Government Provident Fund and Railway Provident Fund; B. Provident funds established by such local authorities and Institutions as are mentioned in the Schedule to the Provident Funds Act, 1925, and those notified by the Government from time to time under section 8(3) of that Act; and C. Any provident fund set up by the Central Government and notified by it in the Official Gazette. Public Provident Fund set up under the Public Provident Fund Act, 1968, is an example of such a fund; (d) Under clause (b) of sub-section (2) of section 80C where the assessee is a Hindu undivided family, the deduction is allowable in respect of:- (i) any sums paid in the previous year by the assessee out of his/its income chargeable to tax; (1) to effect or to keep in force an insurance on the life of any member of the family; or (2) as a contribution to any provident fund referred to in sub-clause (iv) to clause (a) where such contribution is to an account standing in the name of any member of the family; or (ii) any sum deposited in the previous year by the assessee out of its income chargeable to tax in a 10-year account or a 15-year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959, as amended from time to time where such sums are deposited in an account standing in the name of any member of the family. (e) According to clause (h) of sub-section (2) of section 80C, deductions under section 80C(1) include any sums paid by the assessee out of his or its income chargeable to tax:- I. as subscription to such security of the Central Government as the Government may, by notification in the Official Gazette, specify in this behalf; or II. for the purpose of purchase or construction of a residential house property, construction of which is completed after 31st day of March, 1987, and the income from which is chargeable to tax under the head "Income from house property" (or which would, if it had not been used for the assessee's own residence have been chargeable to tax under that head) where such payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, Housing Board, etc., the deduction will also be allowable in respect of repayment of loans borrowed by the taxpayer from the Government or any bank or Life Insurance Corporation and certain other categories of institutions engaged in the business of providing long term finance for construction or purchase of house in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company. The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. Payment towards the cost of house property, however, will not include, admission fee or cost of share or initial deposit or the cost of the land (except where the consideration for the purchase of house property is a composite amount and the cost of land cannot be separately ascertained) or the cost of any addition or alteration. Payments towards any expenditure in respect of which the deduction is allowable under the provisions of section 24 of the Income-tax Act will also not be included in payments towards the cost of purchase or construction of a house property. Where the house property in respect of which deduction has been allowed under the new provisions is transferred by the taxpayer at any time before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, no deduction under these provisions shall be allowable in respect of previous year in which the transfer is made and the aggregate amount of deduction allowed in the earlier years shall be chargeable to tax under the head "Income from other sources" of the previous year in which such transfer takes place. The aggregate of the deductions admissible hereunder will not exceed Rs. 10,000. In respect of repayment of loans taken for the purchase or construction of a new residential house property, the construction of which is still continuing, it is clarified for the guidance of drawing and disbursing officers and other persons responsible for the payment of any income chargeable under the head "Salaries", that where the construction of the property does not get completed by the end of the financial year 1988-89, no deduction under this head shall be admissible to the employees in the assessment of the income from the assessment year 1989-90. It may also be noted that repayment of loans made in respect of houses/flats, the construction of which had been completed before 31st March, 1987, will not qualify for deduction under this section. The drawing and disbursing officers should satisfy themselves about the fact of completion of construction of houses before allowing this deduction. (f) subject to the limits specified in (b), (c) and (e) (II) above, the aggregate of the sums which qualify for the purpose of computing the deduction under section 80C shall not exceed:- (1) in the case of any individual being an author, playwright artist, musician, actor, or sportsman (including an athelete) sixty thousand rupees; (2) in the case of any other individual or a Hindu undivided family or any such association of persons or a body of individuals as is referred to in clause (g) of sub-section (2), forty thousand rupees. (g) It may be noted that the deduction provided under section 80C will be available to the taxpayer in respect of such sums paid up to 31st March, of the financial year towards the purchase of National Savings Certificates, etc. (ix) Under section 80CCA of the Income-tax Act, as amended by the Finance Act, 1988, 100% deduction will be allowed to an individual, a Hindu undivided family, and certain categories of persons or bodies of individuals, subject to a ceiling of Rs. 30,000 p.a. in respect of: (1) any amount deposited under the National Savings Scheme; and (2) any amount paid to effect or keep in force a contract for such deferred annuity plan of the L.I.C. as the Central Government may specify by notification. It may be noted that the aforesaid deduction will be allowed only in respect of deposits/payments made out of the employee's income chargeable to tax. It should also be noted that where any amount standing to the credit of the employee under the National Savings Scheme in respect of which deduction has already been claimed under section 80CCA, together with interest accrued thereon is withdrawn in any previous year, or where any amount is received on account of the surrender of the policy or as annuity or bonus in accordance with the deferred annuity plan of the L.I.C. in any previous year, the whole of such amount shall be deemed to be the income of the employee of that previous year in which such withdrawal is made or such amount is received, and shall be chargeable to tax as the income of the previous year. The drawing and disbursing officers should satisfy themselves about the actual deposits or payments made by the employees by calling for such particulars/information as they deem necessary before allowing the deduction. Similarly, the drawing and disbursing officers should ascertain from the employees about the withdrawals made by them from the N.S.S. or the amount received on account of the deferred annuity plans of the L.I.C., and the said amount shall be included in the computation of the employee's income and charged to tax accordingly. For this purpose, the drawing and disbursing officers should call for such proof/particulars/information as they deem necessary. (x) Under section 80D of the Income-tax Act introduced with effect from 1st April, 1987, in the case of the following categories of persons, a deduction can be allowed for a sum not exceeding Rs. 3,000 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in force an insurance on the health of the categories of persons mentioned below provided that such insurance is in accordance with the Scheme framed by the General Insurance Corporation of India as approved by the Central Government popularly known as "Mediclaim". The categories of persons are: (a) where the assessee is an individual, any sum paid to effect or to keep in force an insurance on the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the assessee; (b) where the assessee is a Hindu undivided family, any sum paid to effect or to keep in force an insurance on the health of any member of the family; (c) where the assessee is an association of persons or a body of individuals consisting in either case, only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, any sum paid to effect or to keep in force an insurance on the health of any member of such association or body or on the health of the dependent children of the members of such an association or body. (xi) No deduction should be made from the salary income in respect of any donations for charitable purposes. The tax relief on such donations as admissible under section 80G of the Income-tax Act, will have to be claimed by the taxpayer separately at the time of finalisation of the assessment. However, in cases where contributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, the Prime Minister's Drought Relief Fund, the National Children's Fund or the Indira Gandhi Memorial Trust are made, 50 per cent. of such contributions may be deducted in computing the total income of the employee. The donation to the Prime Minister's National Relief Fund will be eligible for hundred per cent. deduction. Thus, deduction in this respect may be allowed while computing the total income for the purpose of deduction of income-tax at source for financial year 1988-89. Deduction will not be admissible where the aggregate of all contributions for the year is less than Rs. 250. (xii) Under section 80GG of the Act, an assessee is entitled to a deduction in respect of house rent paid by him for his own residence at the places specified under rule 11-B of the Income-tax Rules, 1962. Such deduction is permissible subject to the following conditions:- (a) the assessee has not been in receipt of any house rent allowance specifically granted to him which qualifies for exemption under section 10(13-A) of the Act; (b) he will be entitled to a deduction in respect of house rent paid by him in excess of 10 per cent. of his total income, subject to a ceiling of 25 per cent. thereof or Rs. 1,000 per month, whichever is less. The total income for working out these percentages will be computed before making any deductions under section 80GG; (c) the assessee does not own: (i) any residential accommodation himself or by his spouse or minor child or where such assessee is a member of a Hindu undivided family, by such family, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession; or (ii) at any other place, any residential accommodation being accommodation in the occupation of the assessee, the value of which is to be determined under sub-clause (i) of clause (a), or as the case may be, clause (b) of sub-section (2) of section 23. (d) The accommodation occupied by him for the purpose of his own residence is situated in any of the following places, namely:- (i) Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior, (Lashkar), Hyderabad, Indore, Jabalpore, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Pune, Srinagar, Surat, Vadodra (Baroda) or Varanasi (Banaras) or the Urban agglomeration of each of such places; or (ii) Bombay, Calicut, Cochin, Ghaziabad, Hubli-Dharwar, Madras, Solapur, Trivandrum or Vishakhapatnam. Explanation.-" Urban agglomeration" in relation to a place means the area for the time being included in the urban agglomeration of such place for the purpose of grant of house rent allowance by the Central Government to its employees under the orders issued by it from time to time in this regard. The disbursing authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessees. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. (xiii) The Direct Tax Laws (Amendment) Act, 1987, has substituted clause (14) of section 10 by a new clause, and accordingly all specific allowances exempt from tax in computing income from salary will be notified by the Central Government in the Gazette of India. (xiv) Section 80RRA of the Income-tax Act provides that where the gross total income of an individual who is a citizen of India, includes any remuneration received by him in foreign currency from any employer (i.e., a foreign employer or an Indian concern) for any services rendered by him outside India, 50 per cent. of such remuneration or more as amended by the Finance Act, 1987, as clarified below in sub-clause (3) will be deducted in computing the taxable income. It also provides that where the assessee renders continuous service abroad for more than 36 months, the remuneration received by him for any period of service after the expiry of the said 36 months will not qualify for any deduction. In the case of any employee of Central Government or any State Government, or a person who was, immediately before taking up the service outside India, in the employment of the Central Government or any State Government, the deduction will be allowed only if the service of the employee is sponsored by the Central Government. In the case of any other individual, the deduction will be allowed only if he is a "technician" and the terms and conditions of his services outside India are approved for the purpose of the said section by the Central Government or the prescribed authority. It is pertinent to note that the deduction is to be allowed with reference to the remuneration received by the individual in foreign currency for services rendered outside India. Thus, if the remuneration is paid to the Indian technician, etc., partly in Indian currency and partly in foreign currency, the amount paid in Indian currency will not be taken into account for purposes of deduction under section 80RRA. Likewise, if a part of the remuneration, although paid in foreign currency relates to services rendered in India, then such part of the remuneration will also not qualify for deduction under section 80RRA. (2) The expression "foreign employer" has been defined in Explanation (b) to section 80RRA to mean, (i) the Government of a foreign state; or (ii) a foreign enterprise; or (iii) any association or body established outside India. While allowing the deduction under this section, documentary evidence should be obtained on the following points:- (i) In the case of an individual who is in the employment of the Central Government or any State Government, the fact of his service having been sponsored by the Central Government; (ii) In the case of any other individual being a technician, the fact of the terms and conditions of his service outside India having been approved in this behalf by the Central Government (Ministry of Finance, Department of Revenue, Foreign Tax Division, New Delhi). (It should also be ensured that the deduction is allowed with reference to the remuneration received in foreign currency in respect of the period of service outside India. The fact that deduction is admissible only in relation to the first 36 months of continuous service outside India should also be kept in view). (3) The Finance Act, 1987, had made the following amendment to section 80RRA with effect from the first day of April, 1988:- In section 80RRA of the Income-tax Act, 1961, in sub-section (1) for the words "of an anount equal to fifty per cent. thereof", the following shall be substituted with effect from the first day of April, 1988, namely:- "of an amount equal to:- (i) fifty per cent. of the remuneration; or (ii) seventy-five per cent. of such remuneration as is brought into India by, or on behalf of, the assessee in accordance with the Foreign Exchange Regulation Act, 1973, and any rules made thereunder. whichever is higher", However, the said exercise of the verification of the excess amount allowable as a deduction under section 80RRA cannot be made by the drawing and disbursing officer. The drawing and disbursing officer should only allow a deduction equal to 50% of the remuneration at source. (xv) Under section 80U, in computing the total income of a resident individual who is totally blind or suffers from any of the permanent physical disabilities, a deduction of Rs. 15,000 is allowed. The Board has by Notification No. S.O. 529(E), dated 17th July, 1985$$, specified the physical disabilities which will be reckoned as permanent physical disabilities for purposes of deduction under this section. According to the said notification, a physical disability shall be regarded as a permanent physical disability for purpose of clause (ii) of sub-section (1) of section 80U of the Income-tax Act, if it falls in any one of the categories specified below, namely:- (a) permanent physical disability of more than 50 per cent. in one limb, or (b) permanent physical disability of more than 60 per cent. in two or more limbs. (c) permanent deafness with hearing impairment of 71 decibels and above; or (d) permanent and total loss of voice. The deduction of Rs. 15,000 from the total income is allowed by the employer subject to the production of a certificate from the Income-tax Officer in favour of the employer as laid down in this Ministry's Circular No. 272, dated 27th May, 1980, (printed at [1980] 124 ITR (St.) 3). The certificate once issued will continue to be in force till it is withdrawn by the Income-tax Officer. (xvi) 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) Sub-section (2) of 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 tax payer 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 the former or other employer). (b) Sub-section (2A) of 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). Retired Government servants can also avail of this facility of section 89(1) relief through their drawing and disbursing officers/disbursing banks. (c) 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. To meet the requirements of these provisions, the Central Government have notified necessary amendments in the Income-tax Rules, 1962, vide Notification No. S.O. 963(E), dated 29th October, 1987@. Detailed instructions in this regard were issued by the Department vide Circular No. 504 [F. No. 275/138/87-IT(B)] dated 8th February, 1988. (xvii) The total income computed in accordance with the provisions of the Act should be rounded off to the nearest multiple of ten rupees by ignoring the fraction which is less than five rupees and increasing the fraction which amounts to five rupees or more, to ten rupees. The net amount of tax deductible should similarly be rounded off to the nearest rupee. The amount of income-tax computed in accordance with the preceding provisions of this sub-paragraph shall, in the case of every person having a total income exceeding fifty thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of five per cent. of such Income-tax: Provided that no such surcharge shall be payable by a non-resident. 5. (a) According to the provisions of section 203A of the Income-tax Act, it is obligatory for all persons responsible for deducting tax at source to quote the Tax Deduction Account Number (TAN) in the challans, TDS-Certificates, periodical returns etc. Detailed instructions in this regard are available in this Department's Circular No. 497 [F. No. 275/118/87-IT(B)], dated 9th October, 1987 (printed at [1988] 169 ITR (St.) 54. If a person fails to comply with the provisions of section 203A, he shall, on an order passed by the ITO, pay, by way of penalty, a sum which may extend to Rs. 5,000. (b) In this connection attention is invited to the provisions of section 206 of the Income-tax Act, 1961, which reads as under: "206. The prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association every private employer and every other person responsible for deducting tax under the foregoing provisions of this Chapter shall prepare, within the prescribed time after the end of each financial year, and deliver or cause to be delivered to the prescribed Income-tax Authority, such returns in such form and verified in such manner and setting forth such particulars as may be prescribed". (c) According to the provision of section 200 of the Income-tax Act, any person deducting any sum in accordance with the provisions of section 192 shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government. If he fails to deduct tax at source or after deducting fails to pay the tax to the credit of the Government, he shall be liable to action in accordance with the provisions of section 201. In this connection attention is also invited to the provisions of section 276B of the Income-tax Act, 1961, as substituted by the Direct Tax Laws (Amendment) Act, 1987, according to which if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine. 6. While making the payment of tax deducted at source to the credit of the Central Government it may kindly be ensured that the correct amount of income-tax is recorded in the relevant challan. It may also be ensured that the right type of challan is used. The relevant challan for making payment of tax deducted at source from salaries is No. 9 with "Blue Colour Band". Where the amount of tax deducted at source is credited to the Central Government through book adjustment, care should be taken to ensure that the correct amount of income-tax is reflected therein. 7. These instructions are not exhaustive and are issued only with a view to helping the employers to understand the various relevant provisions. Wherever, there is a difference of opinion, a reference should always be made to the provisions of the Income-tax Act, 1961, and the relevant Finance Act through which the changes in the tax structure are made. 8. These instructions may please be brought to the notice of all disbursing officers and State undertakings under the control of the State Governments. 9. In case any assistance is required, the Income-tax Officer concerned and/or Assessing Officer/the Local Public Relations Officer may be approached for the same, who will, if necessary, obtain the orders of higher authorities in the matter. 10. Copies of this circular are available with the Director of Inspection (Research, Statistics and Public Relations), 6th Floor, Mayur Bhavan, Connaught Circus, New Delhi-110 001. (Sd.) B.E. Alexander, Under Secretary, Central Board of Direct Taxes. * See [1988] 169 ITR (St.) 54. ** See [1988] 170 ITR (St.) 241. + See [1988] 171 ITR (St.) 7. ++ See [1988] 169 ITR (St.) 55. # See [1988] 170 ITR (St.) 271. ## See page 76 supra. $ See page 76 supra. $$ See Income-tax (4th Amendment) Rules, 1985: [1985] 155 ITR (St.) 86. @ See Income-tax (8th Amendment) Rules, 1987: [1987] 168 ITR (St.) 156.