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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 ..... he 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 are given at annexure-I). 3.2. Sub-section (2) of section 192 deals with situations w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt 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-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereunder, 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 nationalised bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income. The deduction from the amount of pension on account of standard deduction under section 16 and the tax rebat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended 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 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 relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 Act, the standard deduction available is as under : ''in the case of an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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) Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 of an assessee, being an individual, these shall be deducted, in accordance with and subject to the provisions of this section, any amount paid by him in the previous year, out of his income 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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. 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) the assessee files the declaration in Form No. 10BA (annexure-VII). (c) 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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 Fund Act, 1925 applies ; (b) to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of an individual, or a minor, or of whom he is a guardian ; (c) by an employee to a recognised provident fund ; (d) by an employee to an approved superannuation fund. It may be noted that contribution to any fund shall not include any sums in repayment of loan ; (5) Any deposit in a ten year account or a fifteen year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 head Income from house property (or which would, if it has not been used for assessee's own residence, have been chargeable to tax under that head) where such payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board, etc. The deduction will also be allowable in respect of repayment of loans borrowed by an assessee from the Government, or any bank or the Life Insurance Corporation, or the National Housing Bank, or certain other categories of institutions engaged in the business of providing long-term finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 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 generating, or for generating and distributing, power or for providing telecommunication services whether basic or cellular ; (ii) infrastructure facility shall have the meaning assigned to it in clause (ca) of sub-section (12) of section 80-IA ; (iii) public company shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956) ; (iv) public financial institution shall have the meaning assigned to it in section 4A of the Companies Act, 1956. (15) Subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form : Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low 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 mentioned in para. 5.3 from the figure arrived at (a) ; (c) Allow deductions mentioned in para. 5.4 from the figure arrived at (b) ensuring that aggregate of the deductions mentioned in para. 5.4 does not exceed the figure of (b) and if it exceeds, it should be restricted to that amount. This will be the amount of income under the head Salaries on which income tax would be required to be deducted. This income should be rounded off to the nearest miltiple of ten rupees. 7.2 Income-tax on the estimated income from salary as shown in para 7.1 shall be calculated at the rates given in para. 2. 7.3 The amount of tax rebates computed under para. 6 shall be deducted from the income-tax calculated according to para. 7.2. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution 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 35,000 i.e., Rs. 7,000 7,000 1,11,000 Tax Payable Example 3 Calculation of income-tax in the case of an employee where salary income exceeds Rs. 5,00,000. Particulars (Rs.) (Rs.) Gross salary income (including allowances) 6,00,000 Contribution to GPF 30,000 LIP 10,000 CTD 36,000 Computation of total income and tax payable thereon (Rs.) (Rs.) 1. Gross salary 6,00,000 2. Less : Standard deduction Nil 6,00,000 Income-tax on Rs. 6,00,000 1,54,000 Rebate u/s 88 20% of GPF 30,000 LIP 10,000 CTD 36,000 76,000 or Rs. 12,000 whichever is less 12,000 Tax payable 1,42,000 Note : Where a person makes investment as per sections 88(2)(i) to 88(2)(xv) the qualifying amount is Rs. 60,000. However where as further investment of Rs. 10,000 and above is made in the shares, debentures or units of Mutual Fund as per section 88(2)(xvi) and sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 salary (including DA as presumed that DA is taken for retirement benefit (18,000 9318 = 8682) 8,682 (c) 40% of salary (+Basic) Rs. 46,590 95,298 Less : Standard deduction under section 16(i) @ 33.33% or 25,000 whichever is less 25,000 Total income (rounded off) 70,300 Tax on total Income 3,060 Rebate u/s 88 GPF 24,000 LIP 2,500 CTD 2,400 Contribution to Mutual Fund 10,000 39,900 @ 20% 7,980 Tax on total income 3,060 Less : Tax rebate restricted to Rs. 3,060 Tax Payable Nil Note : Tax rebate is restricted to tax on total income. Example 7 (Illustrating valuation of perquisites and calculation of tax in the case of an employee of a private company, posted at Delhi) Particulars (Rs.) (Rs.) (Rs.) 1. Salary 1,08,000 2. Bonus 12,000 3. Free gas, electricity, water, etc. (actual bills paid by company) 6,000 4. Furnished flat provided to the employee for which actual rent paid by the company 78,000 5. Rent received from the employee 12,000 6. Furniture at cost (including television, fridge, washing machine and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39,800 Tax on total income 16,960 Tax rebate under section 88 (i) Provident fund 20,000 (ii) LIP 10,000 (iii) NSC VIII Issue 20,000 (iv) Repayment of HBA 10,000 (v) Subscription to eligible issue of capital of a company approved under section 88(2)(xvi) 5,000 (vi) Subscription to Units of Mutual Fund under section 88(2)(xvii) 5,000 70,000 @ 20% 14,000 Net Tax payable 2,960 Example 9 (Income-tax calculation in the case of an employee whose medical treatment expenditure was bornE by the employer) Particulars (Rs.) (Rs.) 1. Gross annual salary 1,95,000 2. Medical expenditure directly paid by employer 25,000 to private practitioner 3. Medical expenditure directly paid to hospital 50,000 approved by Chief Commissioner of Income-tax 4. Reimbursement of medical expenses incurred by the employee in a hospital approved by Chief Commissioner 10,000 5. Expenditure on travelling abroad (including that of attendant) 1,00,000 6. Expenditure incurred on stay and treatment abroad 1,50,000 7. Out of (6) amount permitted by Reserve Bank of India 1,00,000 8. Contribution to PF 12,000 9. LIC premium paid 5,000 10. Contribution to PPF 3,000 11. Purchase of NSC (VIII) 10,000 12. Repayment of Principal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .................................... ............................................................................ PAN/GIR NO. TAN PAN/GIR NO TDS Circle where annual return/statement under section 206 is to be filed Period Assessment Year 19 - 19 From To Details of salary paid and any other income and tax deducted 1. Gross Salary* Rs...... 2. Less: Allowance to the extent exempt under section 10 Rs...... Rs....... 3. Balance (1-2) Rs....... 4. Deductions : (a) Standard deduction Rs...... (b) Entertainment allowance Rs...... (c) Tax on Employment Rs...... 5. Aggregate of 4 (a to c) Rs...... 6. Income chargeable under the head salaries (3-5) Rs...... 7. Add : Any other income reported by the employee Rs...... 8. Gross total income (6+7) . . . . . 9. Deductions under Chapter VI-A Gross Qualifying Deductible Amount Amount Amount (a) Rs...... Rs...... Rs...... (b) Rs...... Rs...... Rs...... (c) Rs...... Rs...... Rs...... (d) Rs...... Rs...... Rs...... 10. Aggregate of deductible Rs...... amount under Chapter VI-A 11. Total income (8-10) Rs...... 12. Tax on total income Rs...... 13. Rebate and Relief under Chapter VIII I. Under section 88 (please specify). Gross Qualifying Tax Rebate/ Amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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