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TMI BlogDeduction of tax at source-Income-tax deduction from salaries during the financial year 1985-86 under section 192 of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961, were intimated. 2. Sub-section (1) of the said section provides that the person responsible for paying any income chargeable under the head "Salaries" shall, at the time of making payment deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee for that financial year. The provisions of sub-section (3) are intended for making adjustments of excess or shortfalls of inadvertent nature and/or due to unforeseen circumstances. Thus, the aggregate tax calculated on the estimated income divided by twelve and rounded off to the nearest rupee is required to be deducted from the monthly salary. 3. In the Finance Act, 1985, some modifications have been made. An extract of Sub-Paragraph I of Paragraph A of Part III of the First Schedule is at Annexure-I. 4. The substance of the main provisions of law in so far as they relate to income chargeable under the head "Salaries" on which tax is to be deducted at source during the financial year 1985-86 is given hereunder:- (i) No tax will be deductible at source in any case unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sory Deposit) Act, 1974, shall be liable to be included in his total income of the previous year in which it is repaid as already explained in the Ministry's Circular No. 182 (F. No. 275/12/75-IT(J) dated 28-10-1975 [printed at [1975] 101 ITR (St.) 130]. The amount repaid will include 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 qualifies for deduction in accordance with section 80L of the Income-tax Act, 1961. (v) Under section 10(10B), as amended by section 4 of the Finance Act, 1985, with effect from 1-4-1986, any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, at the time of retrenchment is exempt from the payment of income-tax; the amount exempt under these provisions shall not exceed: (i) An amount calculated in accordance with the provisions of clause (b) of section 25F of the Industrial Disputes Act, 1947; or (ii) Fifty thousand rupe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndard deduction on the above basis is to be allowed irrespective of whether any expenditure incidental to employment is actually incurred by the employee or not. This deduction will be available also to persons drawing pension during the current financial year at the same rates and subject to the same ceiling as to the employees in actual service. However, the standard deduction will be limited to Rs. 1,000 only in cases, (i) where the employee is provided with any motor car, motor cycle, scooter or other moped by his employer for use otherwise than wholly and exclusively in the performance of his duties, or (ii) where he is allowed the use of any one or more motor cars, out of a pool of motor cars owned or hired by the employer otherwise than wholly and exclusively in the performance of his duties. The use of any vehicle provided by the employer for journey by the employee from his residence to his office or other place of work as also from office or other place of work to his residence shall not be regarded as use of such vehicles otherwise than wholly and exclusively in the performance of his duties. (b) Para 4 of Circular No. 407, dated 1-2-1985+ read with Circular No. 408, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nised by the Commissioner in accordance with the Rules contained in Part A of the Fourth Schedule to the Act and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952. (c) The additional monetary ceiling of 1/5th of salary or Rs. 10,000, whichever is less, will not be applicable to the contributions to the provident funds referred to in sub-clauses (iii) and (iv) of clause (a) of sub-section (2) of section 80C. Such provident funds are:- A. Government Provident Fund and Railways Provident Fund; B. Provident Funds established by such local authorities and institutions as are mentioned in the Schedule to the Provident Funds Act, 1925, and those notified by the Government from time to time under section 8(3) of that Act; and C. Any provident fund set up by the Central Government and notified by it in the Official Gazette-Public Provident Fund set up under the Public Provident Fund Act, 1968, is an example of such a Fund. d. Under clause (b) of sub-section (2) of section 80C, where the assessee is a Hindu undivided family, the deduction is allowable in respect of- (i) any sum paid in the previous year by the assessee out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to a deduction in respect of house rent paid by him for his own residence at the places specified under rule 11B of the Income-tax Rules, 1962. Such deduction is permissible subject to the following conditions:- (a) the assessee has not been in receipt of any house rent allowance specifically granted to him which qualifies for exemption under section 10(13A) of the Act; (b) he will be entitled to a deduction in respect of house rent paid by him in excess of 10 per cent. of his total income, subject to a ceiling of 15 per cent. thereof or Rs. 400 per month, whichever is less. The total income for working out these percentages will be computed before making any deductions under section 80GG; (c) the assessee does not own; (i) any residential accommodation himself or by his spouse or minor child or where such assessee is a member of a Hindu undivided family, by such family, at the place where he ordinarily resides or performs duties of his office or carries on his business or profession; or (ii) at any other place, any residential accommodation being accommodation in the occupation of the assessee, the value of which is to be determined under clause (i) or, as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, by the Income-tax Officer during regular assessment proceeding before him. The disbursing authority is also required to endorse a certificate in terms of section 10(14) on the tax deduction certificate issued under section 203 of the Act. In this connection, attention is invited to the Explanation to clause (14) of section 10 which clarifies that any allowance granted to the assessee to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at the place where he ordinarily resides shall not be regarded for purposes of that clause as a special allowance granted to meet expenses wholly, necessarily and exclusively incurred in the performance of such duties. This may be kept in view while deciding whether any expenditure from the special allowance has been actually incurred, and, if so, the extent to which it has been incurred to meet the expenses wholly, necessarily and exclusively in the performance of the duties of an office or employment of profit. (xii) Section 80RRA provides that where the gross total income of an individual who is a citizen of India, includes any remuneration received by him in fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment of Revenue, Foreign Tax Division, New Delhi). (It should also be ensured that the deduction is allowed with reference to the remuneration received in foreign currency in respect of the period of service outside India. The fact that deduction is admissible only in relation to the first 36 months of continuous service outside India should also be kept in view). (xiii) Under section 80U: "(1) in computing the total income of an individual, being a resident who, as at the end of the previous year- (i) is totally blind, or (ii) is subject to or suffers from a permanent physical disability (other than blindness) being permanent physical disability, specified in the rules made in this behalf by the Board, and which has the effect of reducing substantially his capacity to engage in a gainful employment or occupation, there shall be allowed a deduction of a sum of ten thousand rupees: Provided that such individual produces before the Income-tax Officer, in respect of the first assessment year for which deduction is claimed under this section- (a) in a case referred to in clause (i), a certificate as to his total blindness from a registered medical practitioner being an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at fifteen per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of a person or the company, as the case may be, referred to in sub-section (1)." (xvi) Attention is also invited to section 276B, where it is provided that if a person without reasonable cause or excuse fails to deduct or after deducting fails to pay the tax as required under the provisions of Chapter XVII-B of the Income-tax Act, 1961, he shall be punishable:- (i) in a case where the amount of tax which he has failed to deduct or pay exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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