Deduction of tax at source-Income-tax deduction from salaries during the financial year 1989-90 under section 192 of the Income-tax Act, 1961 - Income Tax - 537

Deduction of tax at source-Income-tax deduction from salaries during the financial year 1989-90 under section 192 of the Income-tax Act, 1961. Circular No. 537 Dated 12/7/1989 Reference is invited to this Ministry's Circular No. 517 [F. No. 275/66/88-IT(B)], dated June 16, 1988 ([1988] 172 ITR (St.) 85) and Circular No. 527 [F. No. 275/114/88-IT(B)], dated December 9, 1988 ([1989] 175 ITR (St.) 3), wherein the rates of income-tax deduction during the year 1988-89 from payment of income chargeable under the head "Salaries" under section 192 of the Income-tax Act, 1961, etc., were intimated. 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. The Finance Act, 1989, has reduced the rate of tax for individuals in the entry slab of Rs. 18,000 to 25,000 from 25% to 20%. There is no change in the rates of tax for the other slabs of income. An extract of Sub-Paragraph (1) of Paragraph "A" of Part III of the First Schedule to the Finance Act, 1989, is at Annexure-I. Some of the other important changes brought about by the Finance Act, 1989, are: (a) Increase in the rate of surcharge from 5% to 8% in the case of every person having a total income exceeding Rs. 50,000. (b) Amendment of section 16 so as to remove the restriction on standard deduction to persons provided with conveyance by the employer. Further, with a view to providing relief to the salaried employees provision of a separate deduction on account of professional tax paid by them has been made. (c) For purposes of deduction under section 80C, the deposits made in the Home Loan Account Scheme of the National Housing Bank as well as the repayment of housing loan taken from the bank will qualify. (d) Liberalisation of the provisions of section 192(2A) so as to give powers also to employers other than Government or public sector undertaking to deduct tax at source after taking into consideration the relief allowable under section 89(1) in respect of salary paid in arrears or in advance. A very important change brought about by the Direct Tax Laws (Amendment) Act, 1989, is the extension of the scope of the term "income" to include,- (a) any special allowance or benefit specifically granted to the assessee to meet expenses wholly, necessarily and exclusively in the performance of duties; and (b) any allowance granted to the assessee either to meet his personal expenses at the place where he performs his duties or compensate him for the increased cost of living. This amendment shall be effective and shall be deemed to have been effective from 1st April, 1962, and will, accordingly, apply in relation to the assessment year 1962-63 and subsequent years. Thus, to illustrate, allowance like uniform/attire allowance, books/periodical allowance, entertainment allowance, furnishing allowance, etc., will be covered under (a) above. Similarly, allowances like dearness allowance, city compensatory allowance, etc., will be covered under clause (b). Another change introduced by the Direct Tax Laws (Amendment) Act, 1989, is in section 80C, where, in the case of contributions to a recognised provident fund, the limit of Rs. 10,000 has been removed, but the contributions (for the purpose of section 80C) will continue to be restricted to one-fifth of the employee's salary. 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 1989-90 is given hereunder and in the succeeding paragraphs. (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 in Annexure-II. (ii) The value of perquisites by way of free or concessional residential accommodation, or motor car 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 III at Annexure-II illustrates computation of some such perquisites.). Further, 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. 5. Exemptions/deductions in computing total income: (i) (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. S.O. 260 [No. 7534/F. No. 178/131/87-IT(A1)], dated September 18, 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. G.S.R. No. 405 [F. No. 142/7/88-TPL], dated April 28, 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 or 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 an employee from two or more employers 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) [F. No. 142/11/88-TPL], dated June 8, 1988+. According to the said notification, the maximum limit in respect of employees whose retirement takes place from 1st January, 1988, onwards is Rs. 79,920. (ii) 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. (iii) 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. (iv) 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. By Notification No. S. O. 143(E), dated February 21, 1989++, S. O. 144(E), dated February 21, 1989#, and G.S.R. No. 606(E), dated June 9, 1989##, the Central Government have specified the following allowances as exempt from tax to the extent and subject to the conditions indicated therein: (a) Any allowance granted to meet cost of travel on tour or on transfer, including any allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty; (b) Composite hill compensatory allowance; (c) Any special compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance or disturbed area allowance; (d) Tribal area allowance; (e) Any allowance granted to an employee working in a transport system to meet his personal expenses during his duty performed in the course of running of such transport from one place to another; (f) Children education allowance; (g) Any allowance granted to an employee to meet the hostel expenditure of his child; and (h) Any allowance granted to meet the expenditure incurred on conveyance in the performance of duties of an office or employment of profit. It may be noted that the dearness allowance, city compensatory allowance and house rent allowance granted to an employee are not covered by the aforesaid notifications; these allowances will clearly be part of income and will have to be taken into account in the computation of income for the purpose of deduction of tax at source. (v) The Finance Act, 1989, has inserted a new item (i) in sub-clause (iv) of clause (15) of section 10 of the Income-tax Act with effect from April 1, 1990. The newly inserted item provides for exemption of interest payable by the Government on deposits made by an employee of the Central Government or state Government, from out of his retirement benefits, in accordance with such scheme framed in this behalf by the Central Government and notified in the Official Gazette. (vi) (a) Under section 16 of the Income-tax Act, the taxable salary is to be computed after making standard deduction of a sum equal to 331/3% of the salary or Rs. 12,000 whichever is less. 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. To provide uniformity in the allowance of standard deduction, the Finance Act, 1989, has deleted the proviso to clause (1) of section 16, thereby allowing the standard deduction in full even to those employees who are entitled to conveyance facilities. This amendment will apply in relation to the assessment year 1990-91 and subsequent years. (b) The Finance Act, 1989, has amended the provisions of section 16 of the Income-tax Act, so as to provide that the tax on employment, within the meaning of clause (2) of article 276 of the Constitution leviable by or under any law shall be allowed as a deduction in computing the income of the salaried taxpayers under the head "Salaries". (c) A limited deduction is also allowed under clause (ii) of section 16 in respect of entertainment allowance. In the case of Government employees, this deduction is limited to one fifth of the employee's salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less. In the case of other employees, deduction will be allowable only if the conditions laid down in the aforesaid clause are fulfilled. (vii) (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 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 Certificate (VIII 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. "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 and Miscellaneous Provisions Act, 1952. (c) The monetary ceiling of 1/5th of salary will not be applicable to the contribution to the provident funds 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. It is clarified that for purposes of (a), (b) and (c) of this sub-paragraph, contribution to any fund shall not include any sums in repayment of loan taken from that fund. (d) 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 purposes 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, or National Housing Bank, or 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, public sector company or a university established by law or a college affiliated to such university. 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 of 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 of 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 1989-90, no deduction under this head shall be admissible to the employees in the assessment of the income for the assessment year 1990-91. It may also be noted that repayment of loans made in respect of houses/flats the construction of which had been completed before March 31, 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. III. As subscription to any such deposit scheme of the National Housing Bank as the Central Government may, by notification in the Official Gazette, specify in this behalf. The deposits made in the Home Loan Account Scheme of the National Housing Bank will qualify for deduction from the gross total income of taxpayers subject to the existing ceiling rates. (e) subject to the limits specified in (b), (c) and (d) (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, artiste, 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. (f) 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. (viii) 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 per annum 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 annuity plan of the Life Insurance Corporation as the Central Government may specify by notification. By Notification No. G.S.R. 903(E), dated September 6, 1988$, the Central Government have specified "Jeevan Dhara" and "Jeevan Akshay" plans of the Life Insurance Corporation of India for the purpose of section 80CCA. It may be noted that the aforesaid deduction will be allowed only in respect of deposits/payments made out of the employees' income chargeable to tax. Also, such deposits/payments made up to 31st March of the financial year will qualify for deduction. 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 Life Insurance Corporation of India 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 National Savings Scheme or the amount received on account of the deferred annuity plans of the Life Insurance Corporation and the said amount shall be included in the computation of the employees' 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. (ix) Under section 80D 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 State of Goa and the Union Territories of Dadra and Nagar Haveli and 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. (x) 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 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 and the Prime Minister's Armenia Earthquake 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 1989-90. Deduction will not be admissible where the aggregate of all contributions for the year is less than Rs. 250. (xi) 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 11B 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(13A) 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, Vadodara (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 Vishakapatnam. 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. (xii) Section 80RRA 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, an amount equal to the following shall be allowed as deduction in computing the total income of the individual: (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. 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 an 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 service, 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 service rendered in India, then such part of the remuneration will also not qualify for deduction under section 80RRA. 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: (a) In the case of 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; (b) 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). (xiii) Under section 80U in computing the total income of a resident individual who is totally blind or suffers from a permanent physical disability, a deduction of Rs. 15,000 is allowed. The Board has by Notification No. S. O. 529(E), dated July 17, 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 permanent physical disability shall be regarded as a permanent physical disability for the purpose of clause (ii) of sub-section (i) of section 80U, 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 May 26, 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. The Finance Act, 1989, has amended the provisions of section 80U so as to extend the concession presently available under this section to mentally retarded persons also in specified cases. 6. 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 as modified by the Finance Act, 1989, are given below: (a) Sub-section (2) of section 192 deals with a situation 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 the former or other employer). (b) Sub-section (2A) of section 192 provides that in respect of salary payment of employees of Government, company, co-operative society, local authority, university, institution, association or body 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 October 29, 1987@. Detailed instructions in this regard were issued by the Department, vide Circular No. 504 [F. No. 275/138/87-IT(B)], dated February 8, 1988@@. 7. 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 amount to five rupees or more, to ten rupees. The net amount of tax deductible should be similarly 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 eight per cent. of such income-tax: Provided that no such surcharge shall be payable by a non-resident. 8. (a) According to the provisions of section 203 of the Income-tax Act, every person responsible for deducting tax at source is required to furnish a certificate to the effect that tax has been deducted and to specify therein, inter alia, the amount deducted and other particulars that may be prescribed. The certificate has to be furnished within the prescribed period of one month to the person to whose account credit is given or to whom payment is made or the cheque or warrant is issued, as the case may be. By Notification No. S. O. 937(E), dated October 20, 1988***, old rule 31 of the Income-tax Rules, 1962, has been substituted by a new rule which provides for a unified form of certificate to be issued in Form No. 16. Detailed instructions regarding the issue of certificates for tax deducted at source have been issued in Board's Circular No. 529 [F. No. 275/3/89-IT(B)], dated February 13, 1989+++. If a person fails to furnish a certificate as required by section 203, he shall, on an order passed by any income-tax authority under section 272A of the Income-tax Act, pay, by way of penalty, a sum which shall not be less than Rs. 100, but which may extend to Rs. 200 for every day during which the failure continues. (b) 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 October 9, 1987$$$. If a person fails to comply with the provisions of section 203A, he shall on an order passed by the Assessing Officer under section 272BB pay, by way of penalty, a sum which may extend to Rs. 5,000. (c) According to the provisions of section 206 of the Income-tax Act, read with rules 36A and 37 of the Income-tax Rules, 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 provisions of Chapter XVII of the Income-tax Act, shall prepare, within the prescribed time after the end of each financial year, and deliver or cause to be delivered by the 30th April following the financial year to the designated Income-tax Officer the annual return of deduction of tax under section 192 from "salaries" in Form No. 24 prescribed under rule 37 of the Income-tax Rules. It may be noted that the third copy of the TDS Certificate issued to the employees should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall, on an order passed by the income-tax authority, pay, by way of penalty a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees during which the failure continues. (d) According to the provisions 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, 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 three months and seven years and with fine. 9. 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. 10. 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 and the relevant Finance Act through which the changes in the tax structure are made. 11. These instructions may please be brought to the notice of all Disbursing Officers and State undertakings under the control of the State Government, etc. 12. In case any assistance is required, the 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. 13. Copies of this circular are available with the Director of Income-tax (Research, Statistics, Printing 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] 170 ITR (St.) 271. ** See [1988] 172 ITR (St.) 76. + See [1988] 172 ITR (St.) 76. ++ See [1989] 176 ITR (St.) 132. # See [1989] 176 ITR (St.) 133. ## See [1989] 178 ITR (St.) 43. $ See [1988] 173 ITR (St.) 130. $$ See [1985] 155 ITR (St.) 86. @ See [1987] 168 ITR (St.) 156. @@ See [1988] 171 ITR (St.) 7. *** See [1988] 174 ITR (St.) 25. +++ See [1989] 176 ITR (St.) 239. $$$ See [1988] 169 ITR (St.) 54.