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TMI BlogIncome-tax deduction from salaries during the financial year 1991-92 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 ..... aragraph (1) of Paragraph A of Part III of the First Schedule to the Finance (No. 2) Act, 1991, giving the tax rates applicable, is at Annexure 1. 3. 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 shortfall 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. 1 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 1991-92 is given hereunder and in the succeeding paragraphs. (i) No tax will be deducted at source in any case unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f medical facility provided to employees and members of their families was required to be included in the taxable income of the employees, except to the extent it was exempted under the administrative circulars issued by the Central Board of Direct Taxes. The Finance (No. 2) Act, 1991 has, however, now provided in the Income-tax Act itself, the extent, and the conditions, relevant for exemption from tax, of the medical facilities provided by the employer. The relevant details are given in para 5 (ix) of this circular. Exemptions/Deductions in computing total income : 5. The exemptions/deductions which can be taken into account for computing the total income of an employee are discussed hereunder : (i) The value of any travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India, or (b) on retirement from service, or after termination of service to any place in India is exempt under clause (5) of section 10 subject, however, to the conditions prescribed in rule 2B of the Income-tax Rules, 1962. For the purpose of this clause, "family" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt may approve having regard to the economic viability of the public sector undertaking/company and other relevant circumstances will be exempt under section 10(10C) of the Income-tax Act. (v) Under section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet the 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) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence". By Notification No. S. 0. 143(E), dated 21-2-1989 ([1989] 176 ITR (St.) 132), S. 0. 144(E), dated 21-2-1989 ([1989] 176 ITR (St.) 133) [as amended by Notification No. 259(E), dated 27-3-1990 ([1990] 183 ITR (St.) 3), GSR. 606 (E), dated 9-6-1989 ([1989] 178 ITR (St.) 43) and S. 0. 267 (E), dated 29-3-1990 ([1990] 183 ITR (St.) 94), the Central Government have specified the following allowances as exempt from tax to the extent and subject to the conditions indicated therein :-- (a) Any allowance granted to meet cost of travel on tour or on transfer, including any allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty ; (b) Any Special Compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance or disturbed area allowance ; (c) Tribal area allowance ; (d) Any allowance granted to an employee working in a transport system to meet his personal expenses during his duty performed in the course of running of such tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically exempt from tax under clauses (10), (10A), (10AA), (10B), (10C), (10D), (11) (12) and (13A) of section 10 of the Act. Thus, house rent allowance to the extent exempt under section 10 (13A) of the Act will not be taken into account for the purpose of computing the amount of the standard deduction. This deduction will be available also to persons drawing pension during the current financial year at the same rate and subject to the same ceiling as to the employees in actual service. It may be noted that the standard deduction in full will be admissible even to those employees who are entitled to conveyance facilities. (b) The tax on employment within the meaning of clause (2) of Article 276 of the Constitution of India, leviable by or under any law shall also be allowed as a deduction in computing the income of the salaried taxpayers under the head "Salaries". (c) A deduction is also allowed under clause (ii) of section 16 in respect of any allowance in the nature of an entertainment allowance specifically granted to the assessee by his employer subject to certain limits. In the case of a Government employee, a sum equal to one-fifth of his salary (exclusive of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of individuals, subject to a ceiling of Rs. 40,000 in respect of - (1) any amount deposited under such schemes (e.g., National Savings Scheme (NSS)) as the Central Government may, by notification in the Official Gazette, specify in this behalf ; (2) any amount paid to effect or keep in force a contract for such annuity plan of the L. I. C. as the Central Government may specify by notification. By Notification No. G.S.R. 903 (E), dated 6-9-1988 ([1998] 173 ITR (St.) 130), the Central Government have specified "Jeevan Dhara" and "Jeevan Akshay" plans of the Life Insurance Corporation of India for the purpose of section 80CCA. It may be noted that the aforesaid deduction will be allowed only in respect of deposits/payments made out of the employee's income chargeable to tax. Also, such deposits/payments made up to 31st March of the financial year will qualify for deduction. It should also be noted that where any amount standing to the credit of the employee under the National Savings Scheme or any other scheme notified by the Central Government, in respect of which deduction has already been claimed under section 80CCA, together with interest accrued thereon, is with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees about the return of the investment either by way of repurchase of the units by the Fund, etc., or on the termination of the Plan. In the case of such repurchase, etc., the amount returned should be included in the computation of the employee's income and charged to tax accordingly. (xii) Under section 80D, introduced with effect from 1-4-1987, in the case of the following categories of persons, a deduction can be 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 ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Relief Fund and the Africa (Public Contributions-India) Fund will, however, be eligible for 100% deduction. Deduction will not be admissible where the aggregate of all contributions during the financial year is less than Rs. 250. (xv) Under section 80GG of the Act, an assessee is 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 25 per cent. thereof or Rs. 1,000 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he employment of the Central Government or any State Government, the deduction will be allowed only if the service of the employee is sponsored by the Central Government. In the case of any other individual, the deduction will be allowed only if he is a "technician" and the terms and conditions of his service outside India are approved for the purpose of the said section by the Central Government or the prescribed authority. It is pertinent to note that the deduction is to be allowed with reference to the remuneration received by the individual in foreign currency for services rendered outside India. Thus, if the remuneration is paid to the Indian technician, etc., partly in Indian currency and partly in foreign currency, the amount paid in Indian currency, will not be taken into account for purposes of deduction under section 80RRA. Likewise, if a part of the remuneration, although paid in foreign currency relates to service rendered in India, then such part of the remuneration will also not qualify for deduction under section 80RRA. The expression "foreign employer" has been defined in Explanation (b) to section 80RRA to mean (i) the Government of a foreign state ; or (ii) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wife or husband or any child of the individual. It may be noted that any premium or other payments made on a policy as is not in excess of 10% of the actual capital sum assured, will alone qualify for deduction. (ii) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as has been referred to in section 80CCA(1)(ii), on the life of the individual, the wife or husband or any child of the individual, provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity. (iii) Any sum deducted from the salary payable by or on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purpose of securing to him a deferred annuity or making provision for his wife or children, in so far as the sum deducted does not exceed one-fifth of the salary. (iv) Any contribution made : (a) by an individual to any provident fund to which the Provident Funds Act, 1925, applies ; (b) to any provident fund set up by the Central Government, and notified by it in this behalf in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of houses in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, public sector company or a university established by law or a college affiliated to such university, or a local authority. The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. Payment towards the cost of house property, however, will not include, admission fee or cost of share or initial deposit or the cost of any addition or alteration to or renovation or repair of the house property which is carried out after the issue of the completion certificate by competent authority, or after the occupation of the house by the assessee or after it has been let out. Payments towards any expenditure in respect of which the deduction is allowable under the provisions of section 24 of the Income-tax Act will also not be included in payments towards the cost of purchase or construction of a house property. Where the house property in respect of which deduction has been allowed under these provisions is transferred by the taxpayer at any time before the expiry of five years from the end of the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income and furnishing the necessary proof, etc., therewith, to the satisfaction of the Assessing Officer. It may also be mentioned here that the deposits/subscriptions/payments towards the items qualifying for the tax rebate should be made out of the employee's income chargeable to tax. Calculation of income-tax and surcharge : 7. (a) The net salary income in the case of each employee arrived at after allowing the applicable deductions from the gross salary is liable to income-tax during the financial year 1991-92, at the rates referred to in paragraph 2 above. After calculating the tax liability, the tax rebate provided for in section 88 of the Income-tax Act should be allowed as a deduction. The balance amount is the tax payable by the employee which is required to be deducted from the monthly salary in equal instalments. It may be noted here that the tax rebate under section 88 shall not in any case exceed the amount of income-tax on the total income of the assessee with which he is chargeable. (b) Surcharge.--In the case of every person having a total income exceeding Rs. 75,000 the amount of income-tax thus computed, as reduced by the rebate of tax, mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer 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 deducted shall not be less than the amount deductible from income from salaries only. To meet the requirements of these provisions the Central Government have notified the necessary amendments in the Income-tax Rules, 1962, vide Notification No. S. 0. 963(E) dated 29-10-87 (See [187] 168 ITR (St.) 156). Detailed instructions in this regard were issued by the Department--vide Circular No. 504 [F.N. 275/138/87-IT(B)], dated 8-2-88 [1988] 177 ITR (St.) 7), (d) In the case of pensioners who receive their pension from any branch of a nationalised bank, the deduction from the amount of pension on account of standard deduction under section 16, contributions to National Savings Scheme, etc., under section 80CCA, contributions to Mutual Funds, etc., under section 80CCB and the rebate in income-tax under section 88 on account of contributions to provident fund, life insurance, National Savings Certificates, etc., will be allowed by the concerned bank at the time of deduction of tax at so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of tax deducted at source from salaries is No. 9 with "Blue colour Band". Where the amount of tax deducted at source is credited to the Central Government through book adjustment, care should be taken to ensure that the correct amount of income-tax is reflected therein. (b) According 11o the provisions of section 203 every person responsible for deducting tax at source is required to furnish a certificate to the payee to the effect that tax has been deducted and to specify therein the amount deducted and certain other particulars. This certificate, usually called the TDS certificate, has to be furnished within a period of one month from the end of the relevant financial year, in the case of employees receiving salary income. The certificate has to be issued in Form No. 16 which has been prescribed under Board's Notification No. S.0. 148(E), dated 28-2-1991 ([1991] 188 ITR (St.) 89), and circulated by Circular No. 597 dated 27-3-1991 (F. No. 275/42/91-IT(B)) ([1991] 169 ITR (St.) 32). A specimen of the certificate is enclosed as Annexure Ill. This certificate is to be issued on the tax-deductor's own stationery. If he fails to issue the TDS certificate to the person con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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