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TMI BlogDeduction of tax at source--Income-tax deduction from salaries during 1979-80X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Finance Act, 1978. The rate of surcharge on income-tax has been raised from 15% to 20% of the income-tax. 2. The substance of the main provisions in the law so far as they relate to income from "Salaries" on which tax is to be deducted at source during the financial year 1979-80 is given hereunder:- (i) No tax will be deductible at source in any case unless the estimated salary income for the financial year exceeds Rs. 10,000. Where such income exceeds Rs. 10,000 by a small margin, the person will be entitled to marginal relief as provided in the said Sub-Paragraph. A few typical examples of calculations are given in Annex. II. (ii) the value of the perquisites by way of free residential accommodation and motor cars provided by employers to their employees shall be determined under rule 3 of the Income-tax Rules, 1962, and it shall be taken into account for the purpose of computing the estimated salary income of the employees for the purpose of deduction of tax at source during the financial year 1979-80. (iii) The amount repaid to an employee from the Additional Dearness Allowance Deposit Account under the provisions of the Additional Emoluments (Compulsory Deposit) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 only in cases (a) where the employee is in receipt of a conveyance allowance at any time during the financial year, 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 at any time during the financial year. In this connection, it may be noted that the use of a motor car by the employee 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 allow a deduction of the whole of the first Rs. 5,000, 35% of the next Rs. 5,000 and 20% of the balance of the qualifying amount of payments towards life insurance premia, contributions to provident fund (including contribution to Public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are studying. (viii) Under section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whichever name called) in respect of residential accommodation occupied by the assessee is exempt from income-tax to the extent (not exceeding Rs. 400 p.m.) as may be prescribed having regard to the area or place in which such accommodation is situated and other relevant considerations. Rule 2A of the Income-tax Rules, 1962, prescribes the limits in respect of the amount which is not to be included in the total income of the assessee for the purpose of section 10(13A) of the Income-tax Act. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual payment of rent. (xi) Section 10(14) of the Income-tax Act, 1961, provides for exemption from income-tax of any special allowance or benefit not being in the nature of an entertainment allowance or other perquisite within the meaning of clause (2) of section 17, specially granted to the employee to meet the expenses actually incurred wholly, necessarily and exclusively in the performance of the duties of an office or employment of profit. In view of this provision, disbursing authorities have been authorised, vide Board's Circular No. 196 (F.No. 275/29/76-ITJ) dated 31-3-76 [printed at [1976] 103 ITR (St.) 38-39] not to deduct tax at source from conveyance allowance granted to an employee to the extent it is exempt under the said section. It has been stated therein that the employee in receipt of conveyance allowance would have to furnish the necessary certificate before the disbursing authority in support of the fact that the conveyance allowance is only a reimbursement of expenses laid out wholly, necessarily and exclusively for the performance of duties of an office or employment of profit. The satisfaction of the disbursing authorities would still be liable for scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rency, the amount paid in Indian currency will not be taken into account for the purposes of the deduction under section 80RRA. The expression "foreign employer" has been defined under Explanation (b) to section 80RRA to mean-- (i) the Government of a foreign State; or (ii) a foreign enterprise; or (iii) any association or body established outside India. Where the continuous service outside India exceeds 36 months, the deduction admissible under section 80RRA may be limited to a period of 36 months. In allowing the deduction, documentary evidence should be obtained on the following points:- (a) In the case of an individual who is in the employment of the Central Government or any State Government, the fact of his service being sponsored by the Central Government; and (b) in the case of any other individual being a technician, the fact of the terms and conditions of his service outside India being approved in this behalf by the Central Government (Ministry of Finance, Department of Revenue--Foreign Tax Division, New Delhi). (xiii) The total income computed in accordance with the provisions of the Act should be rounded off to the nearest multiple of ten rupe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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