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TMI BlogDeduction of tax at source-Income-tax deduction from salaries during 1976-77X X X X Extracts X X X X X X X X Extracts X X X X ..... 12/75-ITJ) dated 16th August, 1975, on the subject of deduction of income-tax from salaries paid during the year 1975-76. The Finance Bill introduced in Parliament on the 15th March, 1976, inter alia, prescribes the rates at which income-tax has to be deducted during the financial year 1976-77 from income chargeable under the head "Salaries". These rates will be applicable to deduction of tax from the salaries paid or payable on or after the 1st April, 1976. An extract of Sub-paragraph I of Paragraph A of Part III of the First Schedule to the Finance Bill, 1976, in so far as it relates to levy of income-tax on "Salaries" is enclosed (Annexure I). It is requested that pending the passing of the Finance Bill, 1976, deduction of tax from "Sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude an element of interest also. While the repayment of principal sum will be regarded as salary paid during the relevant financial year and assessed to tax accordingly, the interest element will qualify for exemption under section 80L of the Income-tax Act, 1961. (iv) The amount of deposit made by a tax payer under the Compulsory Deposit Scheme (Income-tax payers) Act, 1974, is not allowable as deduction in computing his taxable income. Accordingly, such deposit has to be ignored for the purposes of determining the amount of income-tax deductible at source. (v) Under section 15 of the Income-tax Act, 1961, the taxable salary is to be computed after providing a standard deduction in respect of expenditure, incidental to employment. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle, 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 employment 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. (vi) Under section 80C of the Income-tax Act, 1961, while computing the taxable income, the disbursing officers should al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology or business management, a deduction of Rs.1,000 and where the dependant is studying for a diploma course in these subjects or for any other degree or post-graduate course, a deduction of Rs.500 for each dependant is to be allowed. In cases where the taxpayer has incurred expenditure on the education of more than two dependants, the deduction under the proposed provision will be allowed at the above rates with reference to two such dependants as may be chosen by him. It may be noted that deduction at this rate is to be allowed irrespective of the actual amount spent by the assessee provided some amount is spent by the assessee on such education. The benefit of this deduction can be allowed at the stage of deduction of tax at source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluding the House Rent Allowance from the taxable income of the employee. (ix) No deduction should be made from the salary income in respect of any donations for charitable purposes. The tax relief on such donations admissible under section 80G of the Income-tax Act will have to be claimed by the taxpayer separately at the time of the finalisation of the assessment. However, in cases where contributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, the Prime Minister's Drought Relief Fund, or the Prime Minister's National Relief Fund are made 50% of such contributions may be deducted in computing the taxable income of the employee. Care should be taken to see that the aggregate of such contributions for the year is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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