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TMI BlogDeduction of tax at source-Income-tax deduction from salaries during the financial year 1988-89 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 ..... also invited to this Department's Circular No. 499 (F. No. 275/51/87-IT(B)), dated 1st December, 1987++, wherein the fact of levy of surcharge was intimated to you. 2. Sub-section (1) of section 192 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) of the said section are intended for making adjustment for excess or shortfalls of inadvertent nature and/or due to unforeseen circumstances. The aggregate tax thus calculated on the estimated income divided by 12 and rounded off to the nearest rupee is required to be deducted from the monthly salary. 3. There is no change in the rate of tax for the financial year 1988-89. An extract of sub-paragraph (1) of paragraph A of Part III of the First Schedule to the Finance Act, 1988, is at Annexure-I. However, the Finance Act, 1988, has modified the provisions relating to "standard deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees who retire or become incapacitated or die on or after 1st January, 1986, or whose employment is terminated on or after the said date. Vide Notification No. GSR 405, dated 28-4-1988##, the enhanced limit of Rs. 1,00,000 will be applicable for all the three purposes mentioned in the said clause in relation to the employees mentioned therein who retire or become incapacitated prior to such retirement or die on or after the first day of April, 1988, or whose employment is terminated on or after the said date. (b) Sub-clause (i) of clause (10AA) of section 10 provides for exemption of any payment received by an employee of the Central Government or a State Government as cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement on superannuation or otherwise (c) In the case of other employees, the exemption under section 10(10AA) will be determined with reference to the leave to his credit at the time of retirement on superannuation or otherwise, subject to a maximum of eight months' leave. This exemption will be limited to the amount payable for such unutilised leave on the basis of the average salary of the empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from income-tax to the extent as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations. According to rule 2A of the Income-tax Rules, 1962, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be:- (a) The actual amount of such allowance received by an employee in respect of the relevant period; or (b) The actual expenditure incurred in payment of rent in excess of 1/10th of the salary due for the relevant period; or (c) Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or (d) Where such accommodation is situated in any other place, 40% of the salary due to the employee for the relevant period, whichever is the least. For this purpose, "Salary" includes dearness allowance, i.e. if the terms of employment so provide, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uties. (b) In respect of salary paid during the financial year 1988-89, the value of any benefit or amenity granted or provided free of cost or at concessional rate by an employer to an employee (not being a director of the company or a person who has substantial interest in the company) is not regarded as perquisites received by the employee unless the employee's income under the head "Salary" exclusive of the value of any benefit or amenity not provided for by way of monetary payment exceeds Rs. 24,000. In cases where salary is received from more than one employer, the aggregate salary from these employers will have to be taken into account for the purpose. (viii) (a) Under section 80C of the Act, while computing the taxable income, the disbursing officer should allow deduction of the whole of the first Rs. 6,000, 50% of the next Rs. 6,000 and 40% of the balance of the qualifying amount of payment made by the employee out of his income chargeable to tax towards life insurance premium, contributions to provident fund set up by the Central Government or to which the Provident Funds Act, 1925, applies (including contribution to public provident fund constituted under the Public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the previous year by the assessee out of his/its income chargeable to tax; (1) to effect or to keep in force an insurance on the life of any member of the family; or (2) as a contribution to any provident fund referred to in sub-clause (iv) to clause (a) where such contribution is to an account standing in the name of any member of the family; or (ii) any sum deposited in the previous year by the assessee out of its income chargeable to tax in a 10-year account or a 15-year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959, as amended from time to time where such sums are deposited in an account standing in the name of any member of the family. (e) According to clause (h) of sub-section (2) of section 80C, deductions under section 80C(1) include any sums paid by the assessee out of his or its income chargeable to tax:- I. as subscription to such security of the Central Government as the Government may, by notification in the Official Gazette, specify in this behalf; or II. for the purpose of purchase or construction of a residential house property, construction of which is completed after 31st day of March, 1987, and the income from wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of any income chargeable under the head "Salaries", that where the construction of the property does not get completed by the end of the financial year 1988-89, no deduction under this head shall be admissible to the employees in the assessment of the income from the assessment year 1989-90. It may also be noted that repayment of loans made in respect of houses/flats, the construction of which had been completed before 31st March, 1987, will not qualify for deduction under this section. The drawing and disbursing officers should satisfy themselves about the fact of completion of construction of houses before allowing this deduction. (f) subject to the limits specified in (b), (c) and (e) (II) above, the aggregate of the sums which qualify for the purpose of computing the deduction under section 80C shall not exceed:- (1) in the case of any individual being an author, playwright artist, musician, actor, or sportsman (including an athelete) sixty thousand rupees; (2) in the case of any other individual or a Hindu undivided family or any such association of persons or a body of individuals as is referred to in clause (g) of sub-section (2), forty thousand rupees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed for a sum not exceeding Rs. 3,000 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in force an insurance on the health of the categories of persons mentioned below provided that such insurance is in accordance with the Scheme framed by the General Insurance Corporation of India as approved by the Central Government popularly known as "Mediclaim". The categories of persons are: (a) where the assessee is an individual, any sum paid to effect or to keep in force an insurance on the health of the assessee or on the health of the wife or husband, dependent parents or dependent children of the assessee; (b) where the assessee is a Hindu undivided family, any sum paid to effect or to keep in force an insurance on the health of any member of the family; (c) where the assessee is an association of persons or a body of individuals consisting in either case, only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, any sum paid to effect or to keep in force an insurance on the health of any member of such association or body or on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23. (d) The accommodation occupied by him for the purpose of his own residence is situated in any of the following places, namely:- (i) Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior, (Lashkar), Hyderabad, Indore, Jabalpore, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Pune, Srinagar, Surat, Vadodra (Baroda) or Varanasi (Banaras) or the Urban agglomeration of each of such places; or (ii) Bombay, Calicut, Cochin, Ghaziabad, Hubli-Dharwar, Madras, Solapur, Trivandrum or Vishakhapatnam. Explanation.-" Urban agglomeration" in relation to a place means the area for the time being included in the urban agglomeration of such place for the purpose of grant of house rent allowance by the Central Government to its employees under the orders issued by it from time to time in this regard. The disbursing authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessees. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. (xiii) The Direct Tax Laws (Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under this section, documentary evidence should be obtained on the following points:- (i) In the case of an individual who is in the employment of the Central Government or any State Government, the fact of his service having been sponsored by the Central Government; (ii) In the case of any other individual being a technician, the fact of the terms and conditions of his service outside India having been approved in this behalf by the Central Government (Ministry of Finance, Department 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). (3) The Finance Act, 1987, had made the following amendment to section 80RRA with effect from the first day of April, 1988:- In section 80RRA of the Income-tax Act, 1961, in sub-section (1) for the words "of an anount equal to fifty per cent. thereof", the following shall be substituted with effect from the first day of April, 1988, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employer (as the tax payer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head "Salary" due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer). (b) Sub-section (2A) of section 192 provides that in respect of salary payment of employees of Government or public sector undertakings, deduction of tax at source may be made after allowing relief under section 89(1). Retired Government servants can also avail of this facility of section 89(1) relief through their drawing and disbursing officers/disbursing banks. (c) Sub-section (2B) enables a taxpayer to furnish particulars of income other than salaries to his employer who shall deduct out of the salary payment, the tax due on the total income subject to the condition that the total amount of tax dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns in such form and verified in such manner and setting forth such particulars as may be prescribed". (c) According to the provision of section 200 of the Income-tax Act, any person deducting any sum in accordance with the provisions of section 192 shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government. If he fails to deduct tax at source or after deducting fails to pay the tax to the credit of the Government, he shall be liable to action in accordance with the provisions of section 201. In this connection attention is also invited to the provisions of section 276B of the Income-tax Act, 1961, as substituted by the Direct Tax Laws (Amendment) Act, 1987, according to which if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine. 6. While making the payment of tax deducted at source to the credit of the Central Government it may kindly be ensured that the correct amount of income-tax is recorded in the relevant challan. It may also be ensured that the right type of challan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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