9911796707
TMI BlogSection 192 of the Income-tax Act, 1961 - Deduction of tax at source - Salaries - Income-tax deduction from salaries during the financial year 2004-2005 under section 192X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing rates: Rates of Income-tax 1. Where the total income does not exceed Rs. 50,000 Nil; 2. Where the total income exceeds Rs. 50,000 but does not exceed Rs. 60,000 10 per cent, of the amount by which the total income exceeds Rs. 50,000; 3. Where the total income exceeds Rs. 60,000 but does not exceed Rs. 1,50,000 Rs. 1,000 plus 20 per cent of the amount by which the total income exceeds Rs. 60,000; 4. Where the total income exceeds Rs. 1,50,000. Rs. 19,000 plus 30 per cent of the amount by which the total income exceeds Rs. 1,50,000. (Please also refer to section 88D discussed in Para 7 of the Circular for special provisions in respect of individuals having total income not exceeding Rs. 1,00,000). Surcharge on income tax : The amount of income-tax computed in accordance with the preceding provisions of this paragraph shall be reduced by the amount of rebate of income tax calculated under Chapter VIII-A (Sections 88, 88B, 88C and 88D) and the income tax so reduced shall be increased by a surcharge at the rate of ten per cent of such income tax where the total income exceeds eight hundred and fifty thousand rupees. However, the total amount payable as income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2 above. Steps : Income Chargeable under the head Salary inclusive of all perquisites: Rs. 2,40,000 Tax on Total Salaries : Rs. 37,000 Average Rate of Tax [(37,000/2,40,000) 100] : 15.41% Tax payable on Rs. 40,000 ( 15.41% of 40,000) : Rs. 6,167 Amount required to be deposited each month: (6,167/12) Rs. 514 The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee. 3.4 Salary from more than one employer - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While taking into the account the loss from House Property, the DDO shall ensure that the assessee files the declaration referred to above and encloses therewith a computation of such loss from House Property. Sub-section (2C) lays down that a person responsible for paying any income chargeable under the head salaries shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed. (Annexure-III A & B). These forms are required to be filed by the employee along with the Return of Income for the relevant year. 3.7 Conditions for claim of deduction of interest on borrowed capital for computation of income from house property - (i) For the purpose of computing income/loss under the head Income from House Property in respect of a self-occupied residential house, a normal deduction of Rs. 30,000 - is allowable in respect of Interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs. 1,50,000 is available if such loan has been taken on or after 1-4-1999 for constructing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulations of the Fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule to the Act applies, at the time when the accumulated balance due to an employee is paid, make therefrom the deduction specified in rule 10 of Part A of the Fourth Schedule. 3.10 Where any contribution made by an employer, including interest on such contributions, if any, in an approved Superannuation Fund is paid to the employee, tax on the amount so paid shall be deducted by the trustees of the Fund to the extent provided in rule 6 of Part B of the Fourth Schedule to the Act. 3.11 Salary paid in foreign currency - For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the prescribed rate of exchange. Persons responsible for deducting tax and their duties 4.1 Under clause (i) of section 204 of the Act the persons responsible for paying for the purpose of section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof. 4.2 The tax determined as per para 7 should be deducted fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 7 years, and with fine. 4.6 Furnishing of certificate for tax deducted - According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate to the payee to the effect that tax has been deducted and to specify therein the amount deducted and certain other particulars. This certificate, usually called the TDS certificate, has to be furnished within a period of one month from the end of the relevant financial year. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. In the case of employees receiving salary income including pension, the certificate has to be issued in Form No.16 (Specimen Form 16 enclosed as Annexure-III-B). However, in the case of an employee who is resident in India and whose income from salaries, before allowing standard deduction, does not exceed Rs. 1,50,000, the certificate of deduction of tax shall be issued in Form No. 16AA (Specimen Form 16AA enclosed as Annexure-IV). It is, however, clarified that there is no obligation to issue the TDS certificate (Form 16 or Form 16AA) in case tax at source is not deductible/deducted by virtue of claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, TDS-certificates, returns etc. Detailed instructions in this regard are available in this Departments Circular No.497 (F.No.275/118/87-IT(B) dated 9-10-1987). If a person fails to comply with the provisions of section 203A, he will be liable to pay, by way of penalty, under section 272BB, a sum of ten thousand rupees. Similarly, as per section 139A(5B), it is obligatory for persons ducting tax at source to quote PAN of the persons from whose income tax has been deducted in the statement furnished under section 192(2C), certificates furnished under section 203 and all returns prepared and delivered as per the provisions of section 206 of the Income-tax Act, 1961. 4.8 Annual return of TDS - 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 section 192, from Salaries shall, after the end of each financial year, prepare and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income. The deductions from the amount of pension on account of standard deduction under section 16 and the tax rebate under section 88B [in the case of pensioners, resident in India, who are 65 years of age or more : refer Para 6(18)] will be allowed by the concerned bank at the time of deduction of tax at source from the pension, before making payment to the concerned pensioner. As regards the tax rebate under section 88 on account of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioners furnish the relevant details to the banks, the tax rebate at the specified rate may also be allowed. Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalized Banks vide RBIs Pension Circular (Central Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64(11CVL)-/92) dated the 27th April, 1992, and, these instructions should be followed by all the branches of the Banks, which have been entrusted with the task of payment of pensions. Further all branches of the banks are bound under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h person in respect of the income of financial year 2005-06 onwards would not be accompanied by any TDS certificate. (b) The person deducting the tax (employer in case of salary income), shall be required to file Quarterly Statements for the periods ending on 30th June, 30th September, 31st December and 31st March in each such financial year and shall file these statements, duly verified, to the prescribed income-tax authority or the person authorized by such authority. The Quarterly Statements would be filed on computer media only in accordance with the Scheme to be notified in this regard by the Central Government. In case of failure in filing of the Quarterly Statement, the person deducting the tax shall be liable for a penalty under section 272A(2)(k) of Rs. 100 for each day of default. These Quarterly Statements would compulsorily require quoting of the Tax Deduction Account Number (TAN) of the tax deductor and the Permanent Account Number (PAN) of the employees whose tax has been deducted. Therefore, all Drawing and Disbursing Officers of the Central and State Governments/Departments, who have not yet obtained TAN, must immediately apply for and obtain TAN before the new pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest applicable, shall be included in the income of the assessee for the previous year. Any contribution made by the Central Government to the account of the employee under the New Pension Scheme as notified vide Notification No. F.No. 5/ 7/2003- ECB&PR dated 22-12-2003 (copy enclosed as Annexure-VA) and referred to in section 80CCD (para 5.4(2) of this Circular) shall also be included in the salary income. Other items included in salary, profits in lieu of salary and perquisites are described in section 17 of the Income-tax Act. The scope of the term profit in lieu of salary has been amended so as not to include interest on contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. For the purposes of this sub-clause, the expression Keyman insurance policy shall have the meaning assigned to it in clause (10D) of section 10. It may be noted that, since salary includes pensions, tax at source would have to be deducted from pension also, if otherwise called for. However, no tax is required to be deducted from the commuted portion of pension as explained in clause (3) of para 5.2 of this Circular. (4) Section 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided in an off-shore site will not be treated as a perquisite. A project site for the purposes of this sub-rule means a site of project upto the stage of its commissioning. A remote area means an area located at least 40 kilometers away from a town having a population not exceeding 20,000 as per the latest published all India census. Off-shore sites of similar nature do not have to meet any requirement of distance. The definition of salary for calculating perquisite value is the same as per earlier Rules. The only change is that medical allowances and reimbursement for treatment of serious illness as prescribed in the proviso below section 17(2)(vi) have now been excluded from the definition of salary for this purpose. For furnished accommodation, the provision of valuation of perquisite of furnishings, fittings and furniture at 10% of original cost per annum or actual hire charges is continued. In case of employer other than Central and State Govt., where accommodation is taken on lease or rent by employer, actual amount of lease rental paid or payable by the employer or 10% of salary whichever is lower, as reduced by the rent, if any, actually paid by the employee, is taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e equal to the actual amount of expenditure incurred by the employer on the running and maintenance of the motor car (including remuneration of the chauffeur, if any), as increased by the amount representing 10% of the actual cost of the motor car on account of normal wear and tear and as reduced by any amount charged from the employee for such use. (c) Where the motor car is owned by the employee but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are reimbursed to him by the employer and such reimbursement is for the use of the vehicle partly for official and partly for personal or private purposes, the value of perquisite shall be the actual amount of expenditure incurred by the employer as reduced by the amounts specified in column (I) of the Table below. (d) Where the motor car is owned or hired by the employer and is used partly in the performance of his duties and partly for personal or private purposes, the value of perquisite shall be determined as per the Table below : Small car (upto 1.6 ltrs engine capacity) Large car (above 1.6 ltrs engine capacity) If Chauffeur provided by employer to run the motor car, an additional a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer for part official use. This has been discontinued. Under the new rules even where the supply is made from the employers own resources, the manufacturing cost per unit incurred by the employer would be the value of perquisite. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. V. Free or concessional education : The old rules already provide that value of free education facility would be the expenditure incurred by the employer. Under the new rules free or concessional education shall be valued in a manner assuming that such expenses are borne by the employee, and would cover cases where an employer may be running, maintaining or directly or indirectly financing the educational institution. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. However, where such educational institution itself is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the date of reimbursement on the amount reimbursed, but not repaid against the outstanding loan taken specifically for this purpose. VIII. Travelling, touring, accommodation and other holiday expenses : It is increasingly common for employees to be provided with vacation and holiday facilities. The value of such perquisite shall be the expenditure incurred by the employer. This would also apply to official tours extended as a vacation and family members accompanying taxpayers on official tours. However, leave travel as per section 10(5) and enjoyment of holiday home facilities available uniformly to all classes of employees would remain exempt. IX. Free meals : The provision of free meals varies widely from uniform canteen food, coupons etc. to lavish hotel meals. The scheme of free meals as a staff welfare measure had been recognized and was admissible upto Rs. 35 for each meal. The new rule does not treat as perquisite free food and non-alcoholic beverages to the extent the value thereof does not exceed Rs. 50. Where any amount is recovered from the employee, such amount shall be reduced from the value of perquisite. Such free or subsidized food or non-alcoholic beverages s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained no perquisite would arise. For credit card and club expenses to be exempt for business purposes, the following documentation needs to be maintained by the employer: (a) complete details in respect of such expenditure including the date of expenditure and the nature of expenditure; (b) a certificate by employer to the employee to the effect that the same was incurred wholly and exclusively for the performance of official duties. XII. Use of assets : It is common practice for an asset owned by the employer to be used by the employee. This perquisite is to be charged at the rate of 10% of the original cost of the asset as reduced by any charges recovered from the employee for such use. However, the use of Computers and Laptops would not give rise to any perquisite. XIII. Transfer of assets : Often an employee or member of his household benefits from the transfer of movable asset (not being shares or securities) at no cost or at a cost less than its market value from the employer. The difference between the original cost of the movable asset (not being shares or securities) and the sum, if any, paid by the employee, shall be taken as the value of perquisite. In case of a mov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exempt. These include benefits like travel on tour and transfer, leave travel, daily allowance to meet tour expenses as prescribed, medical facilities subject to conditions. 5.2 Incomes not included in the head Salaries(Exemptions) - Any income falling within any of the following clauses shall not be included in computing the income from salaries for the purpose of section 192 of the Act : (1) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India or (b) on retirement from service, or, after termination of service to any place in India is exempt under clause (5) of section 10 subject, however, to the conditions prescribed in rule 2B of the Income-tax Rules, 1962. For the purpose of this clause, family in relation to an individual means : (i) The spouse and children of the individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. It may also be noted that the amount exempt under this clause shall in no case exceed the amount of expenses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking to which the scheme applies and other relevant circumstances. The maximum limit of such payment is Rs. 5,00,000 where retrenchment is on or after 1-1-1977. (6) Under section 10(10C), any payment received or receivable (even if received in instalments) by an employee of the following bodies at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation, is exempted from income-tax to the extent that such amount does not exceed five lakh rupees: (a) A public sector company; (b) Any other company; (c) An Authority established under a Central, State or Provincial Act; (d) A Local Authority; (e) A Cooperative Society; (f) A university established or incorporated under a Central, State or Provincial Act, or, an Institution declared to be a University under section 3 of the University Grants Commission Act, 1956; (g) Any Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institute of Technology Act, 1961; (h) Such Institute of Management as the Central Government may by notification in the Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his purpose, Salary includes dearness allowance, 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. Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance upto Rs. 3000 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the service of the Central Government or State Government and has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or such other gallantry award as may be specifically notified by the Central Government. Such notification has been made vide Notifications No. S.O.1948(E) dated 24-11-2000 and 81(E) dated 29-1-2001 which are enclosed as per Annexure VIA & VIB. (13) Under section 17 of the Act, exemption from tax will also be available in respect of: (a) the value of any medical treatment provided to an employee or any member of his family, in any hospital maintained by the employer; (b) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or of any member of his family: (i) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; (ii) in respect of the prescribed diseases or ailments as provided in rule 3A(2) of I.T. Rules 1962 , in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines as provided in rule 3(A)(1) of I.T. Rules, 1962 : In a case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and shall, in no case, exceed the amount specified under this clause. Entertainment Allowance : A deduction is also allowed under clause (ii) of section 16 in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by an employer, who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees whichever is less. The deduction hitherto available to non-government employees has been withdrawn. Tax on Employment : The tax on employment within the meaning of clause (2) of Article 276 of the Constitution of India, leviable by or under any law, shall also be allowed as a deduction in computing the income under the head Salaries. 5.4 Deductions under Chapter VI-A of the Act - The following deductions under Chapter VI-A of the Act are available: (1) As per section 80CCC, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to such amount shall be allowed under section 88. For the purposes of deduction under section 80CCD, salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. (3) Under section 80D, in the case of the following categories of persons, a deduction can be allowed for a sum not exceeding Rs. 10,000 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 shall be in accordance with a scheme framed in this behalf by (a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 and approved by the Central Government in this behalf; or (b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999. The categories of persons are: (i) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the assessee and shall accordingly be chargeable to tax as the income of that previous year. B. The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner, along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed: In cases where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority in the prescribed form and manner and a copy thereof is furnished along with the return of income. For the purposes of section 80DD, (a) Administrator means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002); (b) dependant means (i) in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them; (ii) in the case of a Hindu undivided family, a member of the Hindu undivided family, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002).] (5) Under section 80E of the Act a deduction will be allowed in respect of repayment of loan taken for higher education, subject to the following conditions: (i) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income chargeable to tax, by way of repayment of loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education, or interest on such loan. Provided that the amount which may be so deducted shall not exceed forty thousand rupees. (ii) The deduction specified above shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the loan referred to above together with interest thereon is paid by the assessee in full, whichever is earlier. For this purpose (a) approved charitable institution means an institution established for cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed Authority. xv. The National Sports Fund to be set up by Central Government. xvi. The National Cultural Fund set up by the Central Government. xvii.The Fund for Technology Development and Application set by the Central Govt. xviii. The National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple disabilities. (7) 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. 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) the assessee files the declaration in Form No. 10 BA. (Annexure-VII) (c) 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. 2,000 per month, whichever is less. The total income for working out these percentages will be computed before making any deduction under section 80GG. (d) The assessee does not own: (i) any residential accommodation hims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 6. An assessee, being an individual, will be entitled to tax rebates under Chapter VIII of the Income-tax Act as given below: (1) Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the wife or husband or any child of the individual. (2) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (8) herein below on the life of the individual, the wife or husband or any child of the individual, provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity; (3) Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purpose of securing to him a deferred annuity or making provision for his wife or children, in so far as the sum deducted does not exceed 1/5th of the salary; (4) Any contribution made : (a) by an individual to any Provident Fund to which the Provident Fund Act, 1925 applies; (b) to any provident fund set up by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Official Gazette, specify in this behalf. (11) Any subscription made to any such deposit scheme of, or, any contribution made to any such pension fund set up by, the National Housing Bank, as the Central Government may, by notification in the Official Gazette, specify in this behalf. (12) Any subscription made to any such deposit scheme (not being a scheme the interest on deposits whereunder qualifies for deduction under section 80L), as the Central Government may, by notification in the Official Gazette, specify for the purpose of being floated by (a) public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes, or, (b) any authority constituted in India by, or, under any law, enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. (13) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head Income from house property (or which would, if it has not been us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 20,000. (14) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee. It is clarified that any payment towards any development fees or donation or payment of similar nature does not qualify for rebate under these provisions. (15) Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company or by any public finance institution, which is approved by the Board. (16) Subscription to any units of any mutual fund referred to in clause (23D) of Section 10 and approved by the Board for this purpose. Total amount qualifying for rebate under section 88 : (17) There is an overall limit of Rs. 1,00,000 invested in various items mentioned in sub-paras (1) to (16) of para 6, which qualifies for rebate under section 88. Out of this, amounts invested in items mentioned in sub-paras (1) to (14) can be up to a maximum of Rs. 70,000. Further, instalments paid towards purchase or construction of a residential house, as discussed in sub-para (13) would qualify for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the amount of income tax (as computed before allowing the rebate under Chapter VIII of the Income-tax Act) on his total income, with which he is chargeable for any assessment year, of an amount equal to one hundred percent of such income tax or an amount of twenty thousand rupees, whichever is less. Rebate to women residents: (20) Under Section 88C, as inserted by Finance Act, 2000, an assessee, being a woman resident in India, and below the age of sixty-five years, at any time during the previous year, shall be entitled to a deduction from the amount of income-tax (as computed before allowing the rebate under Chapter VIII of the Income-tax Act) on her total income, with which she is chargeable for any assessment year, of an amount equal to hundred percent, of such income tax or an amount of five thousand rupees, whichever is less. Rebate to certain individuals: (21) Section 88D, as inserted by the Finance (No. 2) Act, 2004 provides that an assessee, being an individual resident in India: (a) whose total income for the financial year does not exceed Rs. 1,00,000, shall be entitled to a deduction from the amount of income-tax chargeable on his total income (as computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iption/payment made by the employee, he should not allow the same, and the employee would be free to claim the rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the Assessing Officer. Calculation of income-tax to be deducted 7.1 Salary income for the purpose of Section 192 shall be estimated as follows:- (a) First compute the gross salary as mentioned in para 5.1 excluding all the incomes mentioned in para 5.2. (b) Allow deductions mentioned in para 5.3 from the figure arrived at (a) above. (c) Allow deductions mentioned in para 5.4 from the figure arrived at (b) above ensuring that aggregate of the deductions mentioned in para 5.4 does not exceed the figure of (b) and if it exceeds, it should be restricted to that amount. This will be the amount of income under the head Salaries on which income tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees. 7.2 Income-tax on the estimated income from salary as shown in para 7.1 shall be calculated at the rates given in para 2 of this Circular. 7.3 The amount of tax rebates computed under para 6 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 3,000 Nil Nil Balance tax 2,000 1,48,000 2,38,000 Less: tax rebate u/s 88D : 2,000 Nil Nil Income tax payable Nil 1,48,000 2,38,000 Add: surcharge Nil Nil 23,800 Add: Education Cess Nil 2,960 5,236 Total tax payable Nil 1,50,960 2,67,036 Example 2 Calculation of Income Tax in the case of assessee having handicapped dependent. Particulars (Rupees) 1. Gross Salary 3,20,000 2. Amount spent on treatment of a dependant, being person with disability (but not severe disability) 7,000 3. Amount paid to LIC with regard to annuity for the maintenance of a dependant, being person with disability (but not severe disability) 50,000 4. GPF Contribution 25,000 5. LIP Paid 10,000 COMPUTATION OF TAX Gross Salary 3,20,000 Less: Standard Deduction 30,000 2,90,000 Less: Deduction u/s 80DD (Restricted to Rs. 50,000 only) 50,000 Taxable Income 2,40,000 Income Tax thereon 46,000 Rebate u/s 88 GPF 25,000 LIP 10,000 Total 35,000 Rebate @ 15% on Rs. 35,000 5,250 Tax Payable 40,750 Add: Surcharge Nil Add: Education Cess 815 Total tax Payable 41,565 Example 3 Calculation of Income Tax in the case of an employee where medical treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Education Cess @ 2% 470 Total Tax Payable 24,000 Note: Part of the dearness allowance merged with the basic pay and shown as Dearness Pay is also included in the definition of Salary for working out the amount of exemption under section 10(13A). Example 5 Illustrating valuation of perquisite and calculation of tax in the case of an employee of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months. Employee owns a car (cubic capacity of engine exceeds 1.61) used partly for personal and partly for official work and actual running and maintenance charges including chauffers salary are reimbursed by employer, but no documents are maintained regarding details of journeys - Rs. 1. Salary 1,08,000 2. Bonus 12,000 3. Free gas, electricity, water etc. (Actual bills paid by company) 6,000 4 (a) Furnished flat provided to the employee for which actual rent paid by the company per annum 78,000 (b) Hotel rent paid by employer (for two months) 30,000 (c) Rent recovered from employee 5,000 5. Car expenses reimbursed 40,200 6. Furniture at cost 50,000 7. Subscription to infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii. LIP 10,000 iii. NSC VIII Issue 20,000 iv. Repayment of HBA 12,000 v. Subscription to eligible issue of Co. approved u/s 88(2)(xvi) 20,000 Total 82,000 Rebate @ 20% = 16,200 14,960 (restricted) Net Tax Payable NIL Note: Part of the dearness allowance merged with the basic pay and shown as Dearness Pay is also included in the definition of Salary for working out the amount of exemption under section 10(13A). Example 7 Income Tax calculation in the case of an employee who claims loss under the head income from house property. Particulars: Rs. 1. Gross salary 4,00,000 2. Housing Loan repaid (Principal) 30,000 3. Interest payable on housing loan (Loan taken after 1-4-1999) 2,00,000 4. Donation paid to National Children fund 5,000 5. NSC Purchased 10,000 6. GPF 20,000 COMPUTATION OF TAXABLE INCOME AND TAX THEREON: 1. Salary Income 4,00,000 Gross salary Less: Standard Deduction 30,000 Taxable salary 3,70,000 2. Income from house property Annual value Nil Interest payable on loan u/s 24 2,00,000 Loss from House property (Maximum allowable) 1,50,000 Gross total income 2,20,000 Less : Deduction u/s 80G 50% of Rs. 5,000 2,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear ending 31st March, 2002 1. Name and address of the employee 2. Permanent Account Number 3. Residential status 4. Particulars of income under any head of income other than salaries (not being a loss under any such head other than the loss under the head Income from house property) received in the financial year (i) Income from house property .................................. (in case of loss, enclose computation thereof) (ii) Profits and gains of business or profession .................................. (iii) Capital gains .................................. (iv) Income from other sources (a) Dividends (b) Interest (c) Other incomes (specify) Total .................................. 5. Aggregate of sub-items (i) to (iv) of item 4 6. Tax deducted at source (enclose certificates) issued under section 203 Place ....................... Date ....................... ........................................................ Signature of the employee Verification I,.........................., do hereby declare that what is stated above is true to the best of my knowledge and belief. Verified today, the .............. day of ................ 2002. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond tier of his money anytime. This withdrawable account does not constitute pension investment, and would attract no special tax treatment. (iii) Individuals can normally exit at or after age 60 years for tier-I of the pension system. At the exit the individual would be mandatorily required to invest 40 per cent of pension wealth to purchase an annuity (from an IRDA- regulated life insurance company). In case of Government employees the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirment. The individual would received a lump-sum of the remaining pension wealth, which he would be free to utilize in any manner. Individuals would have the flexibility to leave the pension system prior to age 60. However, in this case, the mandatory annuitisation would be 80% of the pension wealth. Architecture of the new Pension System (iv) It will have a central record keeping and accounting (CRA) infrastructure, several pension fund managers (PFMs) to offer three categories of schemes viz. option A, B and C. (v) The participating entities (PFMs and CRA) would give out easily understood information about past perf ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
