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TMI BlogIncome-tax deduction from salaries during the financial year 1997-98 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 ..... not exceed Rs. 40,000 Nil. 2. Where the total income exceeds Rs. 40,000 but does not exceed Rs. 60,000 10 per cent. of the amount by which the total income exceeds Rs. 40,000 3. Where the total income exceeds Rs. 60,000 but does not exceed Rs. 1,50,000 Rs. 2,000 plus 20 per cent. of the amount by which the total income exceeds Rs. 60,000 4. Where the total income exceeds Rs. 1,50,000 Rs. 20,000 plus 30 per cent. of the amount by which the total income exceeds Rs. 1,50,000. It may be noted that the income-tax exemption limit for individuals has been maintained at Rs. 40,000 and that there is no surcharge applicable. 3. Section 192 of the Income-tax Act, 1961 : Broad scheme of tax deduction at source from "Salaries", etc. : 3.1 Every person who is responsible for paying any income chargeable under the head "Salaries" shall be deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial year 1997-98. The income-tax is required to be calculated on the basis of the rates given above and shall be deducted on average at the time of each payment. No tax will, however, be deducted at source in any case unless the estimated salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d "Salaries" alone is taken into account for computing tax deductible, then such aggregation under sub-section (2B) is not permissible. In other words, a loss from any other source cannot be adjusted by the DDO against salary income. 3.5 The provisions of sub-section (3) of section 192 allow the deductor to make adjustments for any excess or shortfall in the deduction of tax made during the financial year, in the subsequent deduction during that financial year itself. 3.6 The trustees of recognised provident funds, or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule to the Act applies, at the time when accumulated balance due to an employee is paid, make therefrom the deduction specified in rule 10 of Part A of the Fourth Schedule. 3.7 Where any contribution made by an employer, including interest on such contributions, if any, in an approved superannuation fund is paid to the employee, tax on the amount so paid shall be deducted by the trustees of the fund to the extent provided in rule 6 of Part B of the Fourth Schedule to the Act. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if a person fails to pay to the credit of the Central Government within the prescribed time 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. 4.6 According to 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. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. In the case of employees receiving salary income including pension, the certificate has to be issued in Form No. 16 which has been prescribed under the Board's Notification No. S.O. 148(E), dated February 28, 1991, Income-tax (Sixth Amendment) Rules, 1991 : 188 ITR (St.) 89. A specimen of the certificate is enclosed as Annexure-II. This certificate is to be issued on the tax deductor's own stationery. If he fails to issue the TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be carried out and the media may be duly authenticated by the Assessing Officer. 4.10 While making the payment of tax deducted at source to the credit of the Central Government, it may 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 is used. The relevant challan for making payment 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. 4.11 In the case of pensioners who receive their pension from a nationalised bank, the instructions contained in this circular shall apply in the same manner as they apply to salary income. The deductions from the amount of pension on account of standard deduction under section 16 and the tax rebate under section 88B (in the case of pensioners, resident in India, who are 65 years of age or more : refer para 6) will be allowed by the concerned bank at the time of deduction of tax at source from the pension, before making payment to the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year. (2) For the removal of doubts, it is clarified that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as "salary". (3) "Salary" includes wages, fees, commissions, perquisites, profits in lieu of, or in addition to salary, advance of salary, annuity or pension, gratuity, payments in respect of encashment of leave, etc. It also includes the annual accretion to the employee's account in a recognised provident fund to the extent it is chargeable to tax under rule 6 of Part A of the Fourth Schedule to the Income-tax Act. Contributions made by the employer in excess of 12 per cent. of the salary in the employee along with interest applicable, shall be included in the income of the assessee for the previous year. Other items included in salary, profits in lieu of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om salaries for the purpose of section 192 of the Act :_ (1) 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" in relation to an individual means :_ (i) The spouse and children of the individual ; and (ii) The parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. It may also be noted that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel. (2) Death-cum-retirement gratuity or any other gratuity is exempt to the extent specified from inclusion in computing the total income under clause (10) of section 10. (3) Any payment in commutation of pension received under the Civil Pension (Commutation) Rules of the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under rule 2BA of the Income-tax Rules, 1962 :_ (a) A public sector company ; (b) Any other company ; (c) An authority established under a Central, State or Provincial Act ; (d) A local authority ; (e) A co-operative society ; (f) A university established or incorporated or under a Central, State or Provincial Act, or, an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 ; (g) Any Indian Institute of Technology within the meaning of Clause (g) of section 3 of the Institute of Technology Act, 1961 ; (h) Such institute of management as the Central Government may by notification in the Official Gazette, specify in this behalf. It may also be noted that where this exemption has been allowed to any employee for any assessment year, it shall not be allowed to him for any other assessment year. It may be further noted that any such scheme in relation to a company referred to at (b) above, and a co-operative society referred to at (e) above, has to be approved by the Chief Commissioner, or, as the case may be, Director-General of Income-tax. (7) Any sum received under a life insurance policy, including the sum al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n administrative measure that salaried employees drawing house rent allowance up to Rs. 600 per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent. (10) Clause (14) of section 10 provides for exemption of the following allowances :_ (i) Any special allowance or benefit granted to an employee to meet the expenses incurred in the performance of his duties as prescribed under rule 2BB subject to the extent to which such expenses are actually incurred for that purpose. (ii) Any allowance granted to an assessee either to meet his personal expenses at the place of his posting or at the place he ordinarily resides or to compensate him for the increased cost of living, which may be prescribed and to the extent as may be prescribed. However, the allowance referred to in (ii) above should not be in the nature of a personal allowance granted to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for their family members (under any scheme approved by the Central Government) ; (d) reimbursement by the employer of the amount spent by an employee in obtaining medical treatment for himself or any member of his family from any doctor, not exceeding in the aggregate Rs. 10,000 in any year ; (e) As regards medical treatment abroad, the actual expenditure on stay and treatment abroad of the employee or any member of his family, or, on stay abroad of one attendant who accompanies the patient, in connection with such treatment, will be excluded from perquisites to the extent permitted by the Reserve Bank of India. As regards the expenditure incurred on travel abroad by the patient/attendant, it shall be excluded from perquisites only if the employee's gross total income, as computed before including the said expenditure, does not exceed Rs. 2 lakhs. 5.3. Deductions under section 16 of the Act : Under section 16 of the income-tax the standard deduction available is of a sum equal to thirty three and one-third per cent. of the salary or twenty thousand rupees, whichever is less ; In the case of an assessee, where salary is due from, or paid or allowed by, more than one emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategories 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. (3) Under section 80DD, deduction of Rs. 15,000 is allowed in the case of resident individuals who incur expenditure on the medical treatment (including nursing), training and rehabilitation of a handicapped, dependent relative suffering from permanent physical disability (including blindness) or mental retardation, specified in rule 11A of the Income-tax Rules, 1962. The deduction will be available to individuals without any restriction with regard to their total income. The permanent physical disability or mental retardation of the dependent relativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome chargeable to tax, by way of repayment of loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education, or interest on such loan : Provided that the amount which may be so deducted shall not exceed twenty five thousand rupees. (ii) The deduction specified above shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the loan referred to above together with interest thereon is paid by the assessee in full, whichever is earlier. For this purpose_ (a) "approved charitable institution" means an institution established for charitable purposes and notified by the Central Government under clause (2C) of section 10, or, an institution referred to in clause (a) of sub-section (2) of section 80G ; (b) "financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) ; or any other financial institution which the Central Government may, by notification in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, which is certified by a physician, surgeon, occulist or psychiatrist as the case may be, working in a Government hospital and which has the effect of reducing considerably such individual's capacity for normal work or engaging in a gainful employment or occupation. The expression "Government hospital" will include a departmental dispensary or a hospital maintained by a local authority as specified in the Explanation given below section 80DD. 6. Tax rebate : An assessee, being an individual, will be entitled to tax rebates under Chapter VIII of the Act as given below :_ (1) Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the wife or husband or any child of the individual. (2) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (8) hereinbelow 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 ; (3) Any sum deducted from the salary payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blished under the Unit Trust of India Act, 1963, under any plan formulated in accordance with any scheme as the Central Government, may, by notification in the Official Gazette, specify in this behalf. (10) Any contribution made by an individual to any pension fund set up by any mutual fund notified under clause (23D) of section 10, or, by the Unit Trust of India established under the Unit Trust of India Act, 1963, as the Central Government may, by notification in the Official Gazette, specify in this behalf ; (11) Any subscription made to any such deposit scheme of, or, any contribution made to any such pension fund set up by, the National Housing Bank, as the Central Government may, by notification in the Official Gazette, specify in this behalf. (12) Any subscription made to any such deposit scheme (not being a scheme the interest on deposits whereunder qualifies for deduction under section 80L), as the Central Government may, by notification in the Official Gazette, specify for the purpose of being floated by, (a) public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes, or, (b) any authority c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , any sum specified in section 88(2)(xv), no deduction under these provisions shall be allowed in respect of such sums paid in such previous year in which the transfer is made and the aggregate amount of deduction of income-tax so allowed in the earlier years shall be added to the tax on the total income of the assessee with which he is chargeable for such assessment year. It may be noted that the amount which will qualify for tax rebate in respect of this item will not exceed Rs. 10,000. In respect of repayment of loans taken for the purchase or construction of a new residential house property the construction of which does not get completed by the end of the financial year 1997-98, no tax rebate in respect of these items shall be admissible to the employees. (14) Subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company in the prescribed form : Provided that where a deduction is claimed and allowed under this clause with reference to the cost of any equity shares or debentures, the cost of such shares or debentures shall not be taken into account for the purposes of sections 54EA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rebate. In the case of individuals, the limit on investments made as above, excluding that mentioned in paras 14 and 15, will be Rs. 60,000 and in the case of authors, sportsmen, etc., Rs. 70,000. (17) An assessee, being an individual resident in India, who is of the age of sixty five years or more at any time during the previous year shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this chapter) on his total income, with which he is chargeable for any assessment year, of an amount equal to hundred per cent. of such income-tax or an amount of ten thousand rupees, whichever is less. (18) The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information as they deem necessary before allowing the aforesaid rebate. In case the DDO is not satisfied about the genuineness of the employee's claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the rebate on such amount by filing his return of income and furnishing the necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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