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TMI BlogInstructions for deduction of tax at source from salary during financial year 1975-76 at the rates specified in Part III of First Schedule to Finance Bill, 1975 and Finance (Amendment) Act, 1975X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Finance bill, 1975, insofar as it relates to levy of income-tax on "salaries" is enclosed [Annex 1]1. It is requested that pending the passing of the Finance Bill, 1975, deduction of tax from "salaries" may be made during the financial year 1975-76 accord ing to the rates in the said Schedule. Three typical examples of calculations are given in Annex II. 2. The substance of the main provisions in the law insofar as they relate to income from "salaries" on which tax is to be deducted at source during the financial year 1975-76 is given hereunder : (1) No tax will be deductible at source in any case unless the estimated salary income for the financial year exceeds Rs. 6,000. (2) The Income-tax (Amendment) Rules, 1974 and the Income-tax (Third Amendment) Rules, 1974 notified by the Central Board of Direct Taxes on February 28, 1974 and September 21, 1974 respec tively have made certain modifications in the provisions relating to the valuation of the perquisites by way of free residential accommodation and motor cars provided by employers to their employees. The salient features of the new provisions have been explained in Board's Circular No. 130, dated 16-3-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted only with reference to the salary derived from employment during the financial year without taking into account the pension received by the employee. Further, the standard deduction will be limited to Rs. 1,000 only in cases (a) where the employee is in receipt of a conveyance allowance, or (b) where he is provided with any motor car, motor cycle, scooter or other moped by his employer (for use otherwise than wholly or exclusively in the performance of his duties) or where he is allowed the use of any one or more motor cars (otherwise than wholly or exclusively in the performance of his duties) out of a pool of motor cars owned or hired by the employer. In this connection, it may be noted that the use of a motor car by the employees for the purposes of going from his residence to the place where the duties of employ ment are to be performed or from such place back to his residence will not be regarded as use of the motor car in the performance of his duties. (6) While computing the taxable income, the disbursing officers should allow a deduction of the whole of the first Rs. 4,000, 50 per cent of the next Rs. 6,000 and 40 per cent of the balance of the qualifying amount of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 300 p.m. to Rs. 400 p.m. As a logical corollary to this, the ceiling limit of Rs. 300 p.m. laid down in section 10(13A) for exemption of house rent allowance from income-tax is proposed to be raised to Rs. 400 p.m. by the Finance Bill, 1975. The proposed amendment will take effect from 1-4-1975 and will accordingly apply in relation to the assessment year 1975-76 and subsequent years. (9) The Finance Bill, 1975 seeks to make retrospective amendment in section 10(14) with effect from April 1, 1962 (the date from which the Act came into force) to clarify that any allowance [other than house rent allowance which is exempt from income-tax under section 10(13A) granted to a person to meet his personal expenses at the place where the duties are ordinarily performed or at the place where he ordinarily resides will not be regarded, for the purpose of section 10(14) a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties. The proposed amendment is with a view to getting over the difficulty arising from the interpretation placed by the Bombay High Court on the provision of section 10(14) in the case of CIT v. D.R. Phathak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has extended the scope of this benefit. Deduction under section 80FF will be available not only in respect of expenditure incurred on the higher education of dependent children but also in respect of such expenditure incurred on any brother or sister of the assessee wholly or mainly dependent on him and extends to a course in business management in addition to that in medicine, architecture, engineering and technology. Further to what has been indicated in para 2(7) of this Ministry's Circular No. 161, dated 23-3-1975, an assessee will be entitled to the higher deduction of Rs. 1,000 in respect of a dependent studying for a degree or post-graduate course in business management and a deduction of Rs. 500 in respect of a dependent studying for diploma course in business management. However, where the asses see has incurred expenditure on the higher education of more than two dependents, the deduction will be allowed only in respect of two such dependents as may be chosen by him. Circular : No. 166 [F. No. 275/12/75-ITJ], dated 9-6-1975. CLARIFICATION 3 1. Attention is invited to para 2(3) of this Ministry's Circular No. 161, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e slabs of income beyond Rs. 15,000 remain unchanged. An extract of the new Sub-Paragraph I of Paragraph A of Part III of the First Schedule is enclosed as Annex I. 3. It is requested that deduction of income-tax may be made during the financial year 1975-76 according to the rates in the new schedule. In this connection, it may be noted that it is permissible under section 192(3) to reduce (or increase) the amount of tax to be deducted at source for the purpose of adjust ing any excess (or deficiency) arising out of any previous deduc tion (or failure to deduct it) during the financial year. 4. Three typical examples of calculations on the basis of the new provisions are given for guidance in Annex II. 5. It may please be noted that with the raising of the exemption limit from Rs. 6,000 to Rs. 8,000, no tax is deductible at source unless the estimated salary income of a person during the finan cial year 1975-76 is likely to exceed Rs. 8,000. Circular : No. 176 [F. No. 275/12/75-ITJ], dated 16-8-1975. ANNEX I - EXTRACT FROM PART III OF FIRST SCHEDULE TO FINANCE (AMENDMENT) ACT, 1975 Paragraph A Sub-Paragraph I In the case of every individual or Hindu u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ife insurance premia 500 1,230 4. Total salary income 9,680 5. Deduct : Amount deposited under the Additional Emolu ments (Compulsory Deposit) Act, 1974 180 9,500 6. Deduct : Standard deduction 20 per cent of salary in respect of expenditure incidental to employment 1,900 7,600 7. Deduct : Whole of the qualifying contributions towards general provident fund and life insurance premia 1,220 8. Taxable income 6,380 9. Income-tax payable on Rs 6,380 Nil Example II 1. Total salary income (including Rs. 240) deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974 18,565 2. Contributions to general provident fund 1,200 3. Payment towards life insurance premia 1,600 2,800 4. Total salary income 18,565 5. Deduct : Amount deposited under the Additional Emolu ments (Compulsory Deposit) Act, 1974 240 18,325 6. Deduct : Standard deduction in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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