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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 ..... sory 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 to frame a scheme or schemes in relation to compulsory deposits and the Central Government have, in exercise of this power, framed the Compulsory Deposit (Income-tax Payers) Scheme, 1974 (hereafter in this circular referred to as "the Scheme"). The Act has come into force with effect from 17-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation 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 account the various exemptions and deductions allowed under the law (including the deduction allowable with reference to qualifying savings through specified media, e.g., contributions to provident funds, payments towards life insurance premia). Similarly, the "net agricultural income" will be computed after allowing deduction in respect of expenses, etc., as provided in the rules for the computation of such income conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E (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 the Act for that assessment year. Thus, in a case where the current income of a taxpayer amounts to Rs. 30,000 and a sum of Rs. 400 has been deducted from his salary income as compulsory deposit under the Additional Emoluments (Compulsory Deposit) Act, the compulsory deposits required to be made by him under the Act will be reduced by Rs. 400. In other words, in such a case the compulsory deposit under the Act will amount to Rs. 900 only [Rs. 1,300 as calculated in Example IV in the preceding paragraph minus Rs. 400 deducted under the Additional Emoluments (Compulsory Deposit) Act]. In this connection, it may be mentioned that the amount deducted under the Additional Emoluments (Compulsory Deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 advance tax payable by them. The quantum of compulsory deposits in such cases cannot subsequently be varied by the Income-tax Officer. In the case of persons who are not liable to pay advance tax, the compulsory deposit has to be made on the basis of the aggregate of such total income and the net agricultural income as estimated by them. It is not unlikely that persons who are not liable to pay advance tax may not make compulsory deposits on the basis of their estimate. In order to provide for such cases, the Act empowers the Income-tax Officer to direct that the persons concerned should make a compulsory deposit with reference to his "correct income". For this purpose, "correct income" means: (a) where the person has furnished a return of his inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 increased or reduced shall be calculated at the rate so increased or reduced. [Section 7 (Part) of the Act and paragraph 9 of the Scheme] COMPULSORY DEPOSIT SCHEME (INCOME-TAX PAYERS) ACT, 1974 Repayment of compulsory deposits 12. The amount of compulsory deposit made by or recovered from a depositor in any financial year will be repayable in five equal instalments commencing from the expiry of two years from the end of the financial year in which the deposit was made or recovered. Interest on these deposits up to the due date of each instalment will be paid along with the instalment. For obtaining repayment the depositor will be required to make an application to the deposit office in Form E and produce the pass book issued to him. The Income-tax Officer has been empowered to permit earlier repayment of the depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 required to pay advance tax under the Income-tax Act, penalty will be imposed if compulsory deposit is not made voluntarily before the end of the financial year immediately preceding the relevant assessment year or the deposit made within the time allowed falls short of 75 per cent of the compulsory deposit required to be made on the basis of the depositor's "correct income". Where no compulsory deposit is made within the time allowed, the penalty imposable will be equal to 25 per cent of the compulsory deposit calculated with reference to the correct income. If the compulsory deposit made within the time allowed falls short of 75 per cent of the compulsory deposit required to be made, the penalty will be equal to 25 per cent of the amount by which the compulsory deposit actually made falls short of the compulsory deposit calculated with reference to the correct income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess 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 compulsory deposit and penalty 19. Where any compulsory deposit or penalty has to be made or paid in pursuance of an order passed under the Act, the Income-tax Officer will serve a notice of demand on the depositor in Form D appended to the Scheme. The sum specified in the notice of demand will have to be deposited or paid within 35 days of the service of notice. The Income-tax Officer has, however, been empowered to extend the time for making the deposit or payment or to allow deposits or payments to be made by instalments subject to such conditions as he may think fit to impose. Where the depositor fails to make the compulsory deposit voluntarily within the time allowed under section 5 or fails to make the deposit or pay the penalty as required by a notice of demand, the depositor will be deemed to be in default. The provisions of Chapter XVIID of the Income-tax Act relating to recovery of arrears of tax will ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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