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TMI BlogIncome-tax deduction from salaries during the financial year 1998-99 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 ..... t Nil. exceed Rs. 50,000 2. Where the total income exceeds Rs. 50,000 but does not exceed Rs. 60,000 10 per cent of the amount by which the total income exceeds Rs. 50,000 3. Where the total income exceeds Rs. 60,000 but does not exceed Rs. 1,50,000 Rs. 1,000 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. 19,000 plus 30 per cent of the amount by which the total income exceeds Rs. 1,50,000 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 deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial year 1998-99. 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 income including the value of perquisites, for the financial year exceeds Rs. 50,000 (some typical examples of computation of tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 192 of the Income-tax Act. It is, however, provided that this sub-section shall not in any case have the effect of reducing the tax deductible except where the loss under the head "Income from house property" has been taken into account, from income under the head "Salaries" below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account. In other words, the DDO can take into account the loss from house property only for working out the amount of total tax to be deducted. While taking into account the loss from house property, the DDO shall ensure that the assessee files declaration in Form No. 12C and encloses therewith a computation of such loss from house property. 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 already made during the financial year, in the subsequent deductions during that financial year itself. 3.6 The trustees of a recognised provident fund or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person 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 tax is actually paid. Section 271C lays down that if any person fails to deduct tax at source, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted by him. Further, section 276B lays down that 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 three months and seven 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ROM or any other computer readable media as may be specified by the Board shall be deemed to be a return for the purposes of section 206 and the Rules made thereunder, and shall be admissible in any proceeding thereunder, without further proof of production of the original, as evidence of any contents of the original or of any fact stated therein. While receiving such returns on computer media, necessary checks by scanning the documents filed on computer media will 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 nationali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes deducted at source, vide Circular No. 285, dated October 21, 1980. 5. Estimation of income under the head "Salaries" : 5.1 Income chargeable under the head "Salaries". (1) The following income shall be chargeable to income-tax under the head "Salaries"-- (a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not ; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him. (c) any arrears of salary paid or allowed to him in 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" i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 3 of the Income-tax Rules. (6) 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. 5.2 Incomes not included in the head "Salaries" (exemptions) : Any income falling within any of the following clauses shall not be included in computing the income from 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zette, whichever is less. These limits shall not apply in the case where the compensation is paid under any scheme which is approved in this behalf by the Central Government, having regard to the need for extending special protection to the workmen in the undertaking to which the scheme applies and other relevant circumstances. (6) Under section 10(10C), as amended by the Finance Act, 1994, any payment received by an employee of the following bodies at the time of his voluntary retirement is exempted from income-tax to the extent of Rs. 5 lakhs, provided the scheme of voluntary retirement has been framed in accordance with the guidelines prescribed 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 Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential 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 before excluding the house rent allowance or any portion thereof from the total income of the employee. Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance up to Rs. 3,000 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 allowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the Chief Commissioner having regard to the prescribed guidelines : Provided that in a case falling in sub-clause (ii), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital. (c) premium paid by the employer in respect of medical insurance taken for his employees (under any scheme approved by the Central Government) or reimbursement of insurance premium to the employees who take medical insurance for themselves or 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. 15,000 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee's account, if any), as does not exceed the amount of ten thousand rupees in the previous year. Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a rebate with reference to such amount shall not be allowed under section 88. (2) Under section 80D, in the case of the following categories of persons, a deduction can be allowed for a sum not exceeding Rs. 10,000 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 Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure on the medical treatment of such disease or ailment as may be specified in the rules made in this behalf by the Board, for himself or a dependent relative, the assessee shall be allowed a deduction of a sum of fifteen thousand rupees in respect of that previous year in which such expenditure was incurred. The listed diseases as per the relevant rule 11DD are specified neurological diseases, and 40 per cent. and above disability caused by cancer, full-blown AIDS, chronic renal failure, haemophilia and thalassaemia : Provided that no such deduction shall be allowed unless the assessee furnishes a certificate in such form and from such authority as may be prescribed. The form is Form 10-I, and the prescribed authority is any doctor registered with the Indian Medical Association and holding post-graduate qualifications. For the purposes of this section, "dependant" means a person who is not dependant for his support or maintenance on any person other than the assessee. (5) Under section 80E of the Act a deduction will be allowed in respect of repayment of loan taken for higher education, subject to the following conditions :-- (i) In computing the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Children's Fund. (v) The Indira Gandhi Memorial Trust, (vi) The Rajiv Gandhi Foundation, and to the following bodies to the extent of 100 per cent. of the contribution : (i) The Prime Minister's National Relief Fund, (ii) The Prime Minister's Armenia Earthquake Relief Fund, (iii) The Africa (Public Contributions-India) Fund, (iv) The National Foundation for Communal Harmony, (v) Chief Minister's Earthquake Relief Fund, Maharashtra, (vi) National Blood Transfusion Council, (vii) State Blood Transfusion Council, (viii) Army Central Welfare Fund, (ix) Indian Naval Benevolent Fund, (x) Air Force Central Welfare Fund, (xi) The Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996, (xii) The National Illness Assistance Fund, (xiii) The Chief Minister's Relief Fund or Leiutenant Governor's Relief Fund, in respect of any State or Union Territory, as the case may be, subject to certain conditions. (xiv) The university or educational institution of national eminence approved by the prescribed authority. (xv) The National Sports Fund to be set up by the Central Government, (xvi) The National Cultural Fund set up by the Central Government. (7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity as specified in the Explanation given below section 80DD(4). 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 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 1/5th of the salary ; (4) Any contribution made : (a) by an individual to any provident fund to which the Provident Fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 constituted in India by, or, under any law, enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. (13) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 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 1998-99, 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 and 54EB. Explanation.--For the purposes of this clause-- (i) "eligible issue of capital" means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue is utilised wholly and exclusively either for the purposes of developing, maintaining and operating an infrastructure facility or for gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled 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 one 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 necessary proof etc., therewith, to the satisfaction of the Assessing Officer. 7. Calculation of income-tax to be deducted : 7.1 Salary income for the purpose of section 192 shall be estimated as follows :-- (a) First compute the gross salary as mentioned in para 5.1 excluding all the incomes mentioned in para. 5.2 ; (b) Allow deductions mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary income upto Rs. 1,00,000 Particulars (Rs.) (Rs.) (Rs.) Gross salary income (including allowances) 1,00,000 Contribution to GPF 10,000 Central Government Employees Insurance Scheme 920 L.I.C. premium paid 5,000 Computation of total income and tax payable thereon 1. Gross salary 1,00,000 2. Less : Standard deduction Rs. 25,000 or 33.33% whichever is less) 25,000 75,000 Tax on 75,000 4,000 Less : Tax rebate under section 88 (20% on Rs. ..........) GPF 10,000 CGEIS 920 LIP 5,000 15,920 i.e., 3,184 3,184 Income Tax Payable 816 Example 2 Calculation of income-tax in the case of an employee having gross salary more than Rs. 1,00,000 but less than Rs. 5,00,000. Particulars (Rs.) (Rs.) (Rs.) Gross salary income 5,00,000 (including allowances) Contribution to GPF 20,000 LIP 2,500 CTD 2,500 Contribution to mutual fund 12,000 Computation of total income and tax payable thereon Particulars (Rs.) (Rs.) (Rs.) 1. Gross salary 5,00,000 2. Less : Standard deduction 20,000 4,80,000 Income-tax on Rs. 4,80,000 1,18,000 Rebate u/s 88 20% of GPF 20,000 LIP 2,500 CTD 2,500 Restricted to in the case of 10,000 Mutual Fund 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 88 GPF 30,000 LIC 20,000 Repayment of House Building advance 10,000 Investment in infrastructural bonds limited 10,000 to Rs. 10,000 as per section 88(2)(xvi) 70,000 14,000 Tax Payable 29,000 Note : If the person had been an actor, author, playwright, musician, sportsman etc., the deduction would have been made @ 25% upto a maximum limit of qualifying amount of Rs. 70,000. Example 6 Illustrating calculation of house rent allowance under section 10(13A) in respect of residential accommodation situated in Delhi) Particulars (Rs.) (Rs.) (Rs.) 1. Salary 49,500 2. Dearness allowances 43,680 3. House rent allowance 9,600 4. CCA 1,200 5. House rent paid 18,000 6. General provident fund 24,000 7. Life Insurance Premium 2,500 8. Cumulative Time Deposit 2,400 9. Contribution to mutual Fund 12,000 Computation of total income and tax payable thereon for the assessment year 1999-2000 1. Salary+DA+CCA 94,380 House rent allowance 9,600 2. Total salary income 1,03,980 3. Less : House rent allowance exempt under section 10(13A) : Least of (a) Actual amount of HRA received= 9,600 (b) Expenditure on rent in excess of 10% of sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Nil Example 8 (Illustrating valuation of perquisites and calculation of tax in the case of an employee of a private company posted at Delhi and repaying housing building loan) Particulars (Rs.) (Rs.) (Rs.) 1. Salary 1,18,000 2. Dearness allowance 36,000 3. House rent allowance 12,000 4. Special duties allowance 2,400 5. Provident Fund 20,000 6. LIP 10,000 7. Deposit in NSC VII issue 20,000 8. Rent paid by the employee for 24,000 house hired by him 9. Repayment of house building loan taken by the employee from LIC 12,000 10. Subscription to eligible issue of capital of a company approved under section 88(2)(xvi) 5,000 11. Subscription to units of mutual fund under section 88(2)(xvii) 5,000 Computation of total income and tax payable thereon 1. Gross Salary 1,68,400 Less : HRA, exempt under section 10(13A) (a) actual amount of HRA received 12,000 (b) expenditure on rent in excess of 8,600 10 per cent of salary (including DA as personal DA is included for retirement benefit 8,600) (c) 50 per cent of salary (including DA) 77,000 (-) 8,600 Total salary income 1,59,800 Less : Standard deduction 20,000 Total taxable inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r). Hence, the same is to be added back as perquisite in view of condition (B) to clause (vi) of sub-section (2) of section 17 1,00,000 - Medical expenditure on treatment abroad is to be exempt only to the extent approved by RBI. Hence out of Rs. 1.5 lakh spent only Rs. 1 lakh to be exempt and the balance Rs. 50,000 are liable to be added back, in view of condition (A) to clause (vi) of sub-section (2) of section 17. 50,000 Gross Total Income 3,55,000 Less : Standard Deduction 20,000 3,35,000 Tax thereon 74,500 Rebate under section 88 PF 12,000 LIC 5,000 PPF 3,000 NSC 10,000 UTI (MEP) 8,000 HBA 10,000 Total 48,000 Admissible at 20 per cent 9,600 Tax Payable Rs. 64,900 Annexure II Form No. 16 [See rule 31(1)(a)] Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source from income chargeable under the head 'Salaries' Name and address of the Employer Name and Designation of the Employee ...............................................................................… ............................................................................… ....................................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a sum of Rs.......................... (in words) ............................. has been deducted at source and paid to the credit of the Central Government. Further certified that the above information is true and correct as per records. Signature of the person responsible for deduction of tax Place : ..................................... Full Name ................................................................. Date : ...................................... Designation .............................................................. Annexure III Containing the Income-tax (Eighth Amendment) Rules, 1995 Annexure IV Containing the Income-tax (Seventh Amendment) Rules, 1998 Annexure V Form for sending particulars of income under section 192(2B) for the year ending 31st March, 19.... 1. Name and address of the employee : 2. Permanent Account Number : 3. Residential status : 4. Particulars of income under any head of income other than "salaries" (not being a loss under any such head other than the loss under the head "Income from house property") received in the financial year (i) Income from house property (in case of loss, enclose compu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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