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TMI BlogProvisions at a glance , Provisions explainedX X X X Extracts X X X X X X X X Extracts X X X X ..... ake compulsory deposits 15 11 Authorities 16 12 Appeal and revision 17 13 Rectification of mistakes 18 14 Collection and recovery of compulsory deposit and penalty 19 15 Rounding off of "current income", "correct income", compulsory deposit and penalty 20 15 Miscellaneous provisions 21 Paragraphs 2 Manner of making compulsory deposits 10 (e) and (4) (part) of the Scheme Circular NO. 148, dated 15-11-1974 Explanatory Notes COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Introduction 1. The President promulgated the Compulsory Deposit Scheme (Income-tax Payers) Ordinance, 1974 on 17-7-1974 to provide for compulsory deposits by certain categories of income-tax payers in the higher income brackets. This Ordinance has since been replaced, with minor modifications, by the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974). Under section 19 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (hereafter in this circular referred to as "the Act"), the Central Government is empowered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expression "current income" means: ( a ) in the case of a person required to pay advance tax under the Income-tax Act during the financial year immediately preceding the relevant assessment year, the aggregate of the total income [exclusive of capital gains and income referred to in section 2( 24 )( ix ) of the Income-tax Act] and the net agricultural income which forms the basis for computation of advance tax payable by him during that financial year; ( b ) in the case of any other person ( e.g., persons having income chargeable to tax only under the head "Salaries", persons who have previously been assessed by way of regular assessment but in whose cases the Income-tax Officer has not issued a notice for payment of advance tax) the aggregate of the total income [exclusive of capital gains, and income referred to in section 2( 24 )( ix ) of the Income-tax Act] of the period which would be the previous year for the relevant assessment year and the net agricultural income as estimated by him of that period. For this purpose, the "total income" of the depositor will be computed in accordance with the provisions of the Income-tax Act, after taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Rs. 15,100. Example II Current income 15,500 Since the current income does not exceed rs.15,620, the compulsory deposit required to be made will be equal to Rs. 500, i.e., the amount by which the current income exceeds Rs. 15,000. Example III Current income 20,000 The compulsory deposit required to be made will be Rs. 800, i.e., 4% of Rs. 20,000. Example IV Current income 30,000 The compulsory deposit required to be made will be Rs. 1,300, i.e., Rs. 1,000 being 4 per cent of Rs. 25,000 plus 6 per cent of the balance of Rs. 5,000. COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 5. Since salaried employees, including those with income exceeding Rs. 15,000 per annum, will be required to deposit the entire increase in their salary and one-half of their additional dearness allowance under the Additional Emoluments (Compulsory Deposit) Act, 1974, the deposits made by them under the aforesaid Act during the financial year immediately preceding the relevant assessment year will be set off against the deposits required to be made under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case of a person who is not liable to pay advance tax, the compulsory deposit will be made voluntarily before the end of the financial year immediately preceding the relevant assessment year. COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 8. The depositors will, in cases referred to above where the compulsory deposits are required to be made voluntarily, have the choice of making the deposits either in one lump sum on or before the due date or in quarterly instalments so however that not more than one payment will be made in one quarter, namely, April to June, July to September, October to December and January to March. [Section 5 of the Act and paragraph 3 of the Scheme] COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Order by the Income-tax Officer for compulsory deposits in certain cases 9. As already explained in paragraph 3, persons liable to pay advance tax are required to make compulsory deposits on the basis of the aggregate of the total income [exclusive of capital gains and income referred to in section 2( 24 )( ix ) of the Income-tax Act] and net agricultural income which forms the basis for the computation of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice on a bank at the place the deposit office is situated. The deposit office will issue a pass book to each depositor in which the deposits made by him or recovered from him from time to time will be credited. The deposit office will also issue a receipt in respect of each individual deposit made by the depositor. [Paragraphs 2( e ) and 4 (Part) of the Scheme] COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Interest payable on compulsory deposits 11. Compulsory deposits will carry simple interest at a rate equal to the maximum bank deposit rate which currently stands at 10 per cent per annum. With a view to facilitating the calculation of interest, it has been provided that interest will be calculated from the first day of the month immediately following the month in which the deposit is credited to the account of the depositor to the last date of the month immediately preceding the month in which the instalment of compulsory deposit becomes repayable. Where there is any increase or reduction in the bank deposit rate, interest in respect of any period after the first day of the month immediately following the month in which the bank deposit rate is incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Compulsory Deposit) Act, 1974, a certificate from the officer responsible for payment of salaries as to the amount so deducted will also be enclosed by the depositor with the return of his income. [Section 9 of the Act and paragraph 5 of the Scheme] COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Penalty for failure to make compulsory deposits 15. The Act provides for levy of penalty in case of default in making compulsory deposits. In the case of a person required to pay advance tax during the financial year immediately preceding the relevant assessment year, penalty will be exigible if compulsory deposit is not made voluntarily before the expiry of the date on which the last instalment of advance tax is payable or the deposit made before such date falls short of the requisite amount. In case of failure to make compulsory deposit within the time allowed, the penalty imposable will be equal to 25 per cent of the compulsory deposit required to be made. If the compulsory deposit made within the time allowed falls short of the requisite amount, the penalty will be equal to 25 per cent of the amount of shortfall. In the case of any person who is not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in relation to an appeal under section 221 of the Income-tax Act. The Appellate Assistant Commissioner's order could be the subject of appeal to the Income-tax Appellate Tribunal or revision by the Commissioner. Reference will also lie from Income-tax Appellate Tribunal's decision to the High Court on questions of law and further appeal from the High Court's order will lie to the Supreme Court. [Section 12 of the Act] COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Rectification of mistakes 18. The Income-tax Officer, the Appellate Assistant Commissioner, the Commissioner and the Appellate Tribunal, will have the power to amend his or its orders with a view to rectifying any mistake apparent from the record within four years from the date on which such order is passed. No amendment enhancing the compulsory deposit or any penalty imposed under the Act will, however, be passed unless the authority concerned has given notice to the depositor of its intention to do so and has allowed the depositor a reasonable opportunity of being heard. [Section 13 of the Act] COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Collection and recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. ( 1 ) Where compulsory deposit is made by a representative-assessee who is assessable under the Income-tax Act in respect of the total income of an individual, Hindu undivided family or trustee of a discretionary trust, the provisions of Chapter XV of the Income-tax Act, relating to liability in such cases, will apply in relation to the compulsory deposits and penalties imposable under the Act as they apply in relation to income-tax payable and penalties imposable under the Income-tax Act. ( 2 ) The amount of compulsory deposit and interest thereon will not be liable to attachment under a decree or any order of any court. ( 3 ) No suit, prosecution or other legal proceedings will lie against the Government or against any officer of the Government for anything which is done or intended to be done in good faith under the Act or the Scheme. ( 4 ) Depositors will be able to nominate one or more persons who will be entitled to the repayment of compulsory deposits in the event of the death of the depositor. A provision has also been made for cancellation of the nomination or for making a fresh nomination. ( 5 ) Other procedural or ancillary matters have been provided for in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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