Deduction of tax at source from withdrawals of deposits made in the National Savings Scheme--Section 194EE of the Income-tax Act, 1961--Instructions regarding - Income Tax - 618/1991

Deduction of tax at source from withdrawals of deposits made in the National Savings Scheme--Section 194EE of the Income-tax Act, 1961--Instructions regarding Circular No. 618 Dated 22/11/1991 The Finance (No.2) Act, 1991, has inserted a new section 194EE in the Income-tax Act, 1961, with effect from 1st October, 1991, which reads as follows: 194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent.: Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees: Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee . 2. The new section requires every person responsible for paying any amounts referred to in clause (a) of sub-section (2) of section 80CCA of the Income-tax Act (e.g., withdrawals under the National Savings Scheme) to deduct income-tax at source at the rate of 20% of the amounts paid. Presently, the National Savings Scheme (NSS), operated by the post offices, is the only scheme covered by section 80CCA. However, more such schemes may be notified by the Central Government in future. 3. The amount of tax deducted at the aforesaid rate of 20% is to be further increased by a surcharge at the rate of 12% of such tax. 4. No deduction of tax at source is, however, required to be made in the following cases: (a) Where the amount of payment or the aggregate amount of payments in a financial year is less than Rs.2,500. (b) Where the payment is made to the heirs of a deceased assessee (depositors); (c) Where the depositor, being an individual, resident in India, furnishes a declaration in writing, in Form No.15-I, in duplicate, to the payer, the effect that the tax on his total income for the relevant financial year will be Nil . 5. The responsibilities, obligations, etc., under the Income-tax Act, of the person responsible for deducting tax at source under section 194EE are given below:-- (a) According to the provisions of section 200, any person deducting tax at source under section 194EE, shall pay, within the prescribed time (laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the tax deducted at source is to be paid to the credit of the Central Government, on the day of the deduction itself. The tax will have to be credited to the Government account by book adjustment in the same manner as for example, the income-tax deducted from the salaries payable to the employees is credited to the Government account. In case of failure to deduct tax at source, the payer will be liable under section 201 to pay simple interest at the rate of 15% per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid to the Government account. In addition, he will also be liable to pay, by way of penalty, under section 271C a sum equal to the amount of tax which he failed to deduct at source. In case of failure to pay the tax to the credit of the Central Government within the prescribed time, similar penal provisions, including prosecution, under section 276B are attracted. (b) According to the provisions of section 203, the payer is required to furnish to the payee, a certificate to the effect that tax has been deducted and to specify therein the prescribed particulars (vide rule 31 of the Income-tax Rules, 1962). This certificate has to be issued on the tax deductor's own stationery, in Form No.16A. Further, the certificate has to be issued by the deductor within a period of one month and 14 days from the date of payment. If a person fails to furnish the certificate in due time, he will be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs.100 but which may extend to Rs.200 for each day, during which the failure continues. (c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain a tax deduction account number (TAN) and quote the same in various challans, certificates, returns, etc. Detailed instructions in this regard are available in this department's Circular No.497 dated 9-10-1987 (See [1988] 169 ITR (St.) 54). A copy of the Form No.49B in which the application has to be made for obtaining the TAN, is enclosed for ready reference. If a person fails to comply with the provisions of section 203A, he shall be liable to pay, by way of penalty under section 272BB, a sum which may extend to Rs. 5,000. (d) According to the provisions of section 206 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, etc., responsible for deducting tax is required to prepare and deliver, or cause to be delivered, to the designated/ concerned Assessing Officer by the prescribed date after the end of the financial year, an annual return of deduction of tax under section 194EE in the prescribed form. The form in which the return has to be filed and the due date for filing it are being notified. If a person fails to furnish in due time, the annual return, he shall be liable to 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; so, however, that this sum shall not exceed the amount of tax which was deductible at source. (e) The payer or tax deductor is also required to deliver a copy of all the Forms (No. 15-I) received by him during a month to the Chief Commissioner or Commissioner of Income- tax having jurisdiction over him within 7 days of the month in which the declaration are furnished to him. 6. This circular has been issued with a view to helping the persons responsible for making deduction of tax under section 194EE. However, where there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any assistance is needed, the concerned Assessing Officer or the local Public Relations Officer/Income-tax Officer of the Department may be approached. (Sd.) Rajesh Chandra, Under Secretary, Central Board of Direct Taxes. Form No. 15-I [ See rule 29C(3A)] Declaration under section 197A(1) of the Income-tax Act, 1961 to be made by an individual claiming receipt of any amount referred to in clause (a) of sub-section (2) of section 80CCA without deduction of tax FORM NO. 16A [ See rule 31(1)( b )] Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961 Form No. 49B [ See rule 114A] Form of application for allotment of tax deduction account number under section 203A