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TMI BlogRates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2011-2012 and explains certain related provisions of the Income-tax Act.X X X X Extracts X X X X X X X X Extracts X X X X ..... owing rates: RATES OF INCOME-TAX A. Normal Rates of tax: 1. Where the total income does not exceed Rs. 1,80,000/-. Nil 2. Where the total income exceeds Rs. 1,80,000 but does not exceed Rs. 5,00,000/- 10 per cent of the amount by which the total income exceeds Rs. 1,80,000/- 3. Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 8,00,000/-. Rs. 32,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-. 4. Where the total income exceeds Rs. 8,00,000/-. Rs. 92,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 8,00,000/-. B. Rates of tax for a woman, resident in India and below sixty years of age at any time during the financial year: 1. Where the total income does not exceed Rs. 1,90,000/-. Nil 2. Where the total income exceeds Rs. 1,90,000 but does not exceed Rs. 5,00,000/-. 10 per cent, of the amount by which the total income exceeds Rs. 1,90,000/- 3. Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 8,00,000/-. Rs. 31,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-. 4. Where the total income exceeds Rs. 8,00,000/-. Rs. 91,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to provisions of sec 206AA of the Income-tax Act and shall be deducted at the time of each payment. No tax will, however, be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs. 1,80,000/- or Rs.1,90,000/- or Rs. 2,50,000/- or Rs. 5,00,000/-, as the case may be, depending upon the gender and age of the employee.(Some typical examples of computation of tax are given at Annexure-I). Payment of Tax on Non-monetary Perquisites by Employer: 3.2 An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at his option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. The employer will have to pay such tax at the time when such tax was otherwise deductible i.e. at the time of payment of income chargeable under the head "salaries" to the employee. Computation of Average Income Tax: 3.3 For the purpose of making the payment of tax mentioned in para 3.2 above, tax is to be determined at the average of income tax computed on the basis of rate in force for the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the deduction under Para(3.1) above. Explanation :- For this purpose "University means a University established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956(3 of 1956), to be University for the purposes of the Act. With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i) of clause (10C) of section 10 (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year 3.6 (i) Sub-section (2B) of section 192 enables a taxpayer to furnish particulars of income under any head other than "Salaries" (not being a loss under any such head other than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eductions claimed (B) Address of the property (C) Amount of loan, if any; and (D) Name and address of the lender (loan provider) (iii) Sub-section (2C) lays down that a person responsible for paying any income chargeable under the head "salaries" shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in form no. 12BA (Annexure-II). Form no. 12BA alongwith form no. 16, as issued by the employer, are required to be produced on demand before the Assessing Officer in terms of Section 139C of the Income Tax Act. Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property 3.7(i) For the purpose of computing income / loss under the head 'Income from House Property' in respect of a self-occupied residential house, a normal deduction of Rs.30,000/- is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs.1,50,000/- is available if such loan has been taken on or after 1.4.1999 for constructing or acquiring the residential house an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recognized Provident Fund, or any person authorized 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 the accumulated balance due to an employee is paid, make there from the deduction specified in rule 10 of Part A of the Fourth Schedule to the Act. 3.10 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. Salary Paid in Foreign Currency: 3.11 For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the prescribed rate of exchange. 4.PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: 4.1. Under clause (i) of Section 204 of the Act the "persons responsible for paying" for the purpose of Section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TABLE Sl. No. Quarter of the financial year ended on Date for quarterly payment (1) (2) (3) 1 30th June 7th July 2 30th September 7th October 3 31st December 7th January 4 31st March 30th April Mode of Payment of TDS 4.4.2. In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan, the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called to whom the deductor reports the tax so deducted and who is responsible for crediting such sum to the credit of the Central Government, shall- (a) submit a statement in Form No. 24G within ten days from the end of the month to the agency authorised by the Director General of Income-tax (Systems) in respect of tax deducted by the deductors and reported to him for that month; and (b) intimate the number (hereinafter referred to as the Book Identification Number or BIN generated by the agency to each of the deductors in respect of whom the sum deducted has been credited. BIN consist of receipt number of Form 24G, DDO sequence number and date on which tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to pay, by way of penalty , a sum equal to the amount of tax not deducted or paid 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 3 months and 7 years, along fine. Furnishing of Certificate for Tax Deducted: 4.6.1 According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate in Form 16 to the payee to the effect that tax has been deducted and to specify therein the amount deducted and certain other particulars. The certificates in Forms 16 specified above shall be furnished to the employee by 31st day of May of the financial year immediately following the financial year in which the income was paid and tax deducted. Due care should be taken indicating correct CIN/ BIN in TDS certificate. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. The Form16 has been revised and TDS certificated only determine tax payable on total income and tax deducted is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signature are being used to authenticate most of the e-transactions on the internet as transmission of information using digital signature is failsafe. It saves time specially in organisations having large number of employees where issuance of certificate of deduction of tax with manual signature is time consuming (circular no 2 of 2007 dated 21-5-2007) Explanation. For the purpose of this rule, challan identification number (CIN) means the number comprising the Basic Statistical Returns (BSR) Code of the Bank branch where the tax has been deposited, the date on which the tax has been deposited and challan serial number given by the bank. 4.6.5. As per section 192, the responsibility of providing correct and complete particulars of perquisites or profits in lieu of salary given to an employee is placed on the person responsible for paying such income i.e., the person responsible for deducting tax at source. The form and manner of such particulars are prescribed in Rule 26A, Form 12BA and Form 16 of the Income-tax Rules . Information relating to the nature and value of perquisites is to be provided by the employer in Form no. 12BA in case of salary paid or payable is above Rs.1,80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4Q (for tax deducted from salaries). As the requirement of filing TDS/TCS certificates has been done away with, the lack of PAN of deductees is creating difficulties in giving credit for the tax deducted. Tax deductors and tax collectors are, therefore, advised to quote correct PAN details of all deductees in the TDS returns for salaries in Form 24Q. Taxpayers liable to TDS are also advised to furnish their correct PAN with their deductors, It may be noted that non-furnishing of PAN by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates u/s 206AA of the Income-tax Act,1961 mentioned in para 4.9 below. 4.8 Section 206AA. 4.8.1 Finance Act (No. 2) 2009, w.e.f. 01/04/2010 has inserted sec. 206AA in the Income-tax Act which makes furnishing of PAN by the employee compulsory in case of payments liable to TDS. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor shall make TDS at a higher of the following rates i. at the rate specified in the relevant provision of this Act; or ii. at the rate or rates in force; or iii. at the rate of twenty per cent. 4.8.2 The deductor has to determine the tax amount in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w mandatory for all Govt. deductors or companies or other deductors who are required to get their accounts audited under section 44AB of the Income Tax Act or where the number of deductee's records in a statement for any quarter of the financial year are twenty or more to file, quarterly statements of TDS on computer media only in accordance with the "Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003" as notified vide Notification No. S.O. 974 (E) dated 26.8.2003 read with Notification No. SO 1261(E) dated 31.05.2010. The quarterly statements are to be filed by such deductors in electronic format with the e-TDS Intermediary at any of the TIN Facilitation Centres, particulars of which are available at www.incometaxindia.gov.in and at http://tin-nsdl.com. If a person fails to furnish the quarterly statements in due time, he shall be liable to pay by way of penalty under section 272A(2)(k), a sum which shall be Rs.100/- for every day during which the failure continues. However, this sum shall not exceed the amount of tax which was deductible at source. 4.9.4. At the time of preparing statements of tax deducted, the deductor is required to quote (i) his tax deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax deduction at source. The above amendments are retrospectively effective from 1/4/09 (AY 2009-10) onwards 4.13. Where Non-Residents are deputed to work in India and taxes are borne by the employer, if any refund becomes due to the employee after he has already left India and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the tax has been borne by it: Circular No. 707 dated 11.7.1995. 4.14 In respect of non-residents, the salary paid for services rendered in India shall be regarded as income earned in India. It has been specifically provided in the Act that any salary payable for rest period or leave period which is both preceded or succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. 5. COMPUTATION 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of any accommodation provided to the employee by his employer; III. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases: (i) By a company to an employee who is a director of such company; (ii) By a company to an employee who has a substantial interest in the company; (iii) By an employer (including a company)to an employee, who is not covered by (i) or (ii) above and whose income under the head Salaries (whether due from or paid or allowed by one or more employers), exclusive of the value of all benefits and amenities not provided by way of monetary payment, exceeds Rs.50,000/-. What constitute concession in the matter of rent have been prescribed in Explanation 1 to 4 below 17(2)(ii) of the Income Tax Act, 1961. IV. Any sum paid by the employer in respect of any obligation which would have been paid by the assessee. V. Any sum payable by the employer, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund or other specified funds u/s 17, to effect an assurance on the life of an assessee or to effect a contract for an annuity. VI. With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced by the rent actually paid by the employee. For all others, i.e., those salaried taxpayers not in employment of the Central government and the State government, the valuation of perquisite in respect of accommodation would be at prescribed rates, as discussed below: 1. Where the accommodation provided to the employee is owned by the employer, the rate is 15% of 'salary' in cities having population exceeding 25 lakh as per the 2001 census. The rate is 10% of salary in cities having population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 Census. For other places, the perquisite value would be 7.5 % of the salary. 2. Where the accommodation so provided is taken on lease/ rent by the employer, the prescribed rate is 15% of the salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee. For furnished accommodation, the value of perquisite as determined by the above method shall be increased by- (i) 10% of the cost of furniture, appliances and equipments, or (ii) where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and above that for which the employer makes payment or reimburses the employee shall be valued as a perquisite as per the residual clause. In other words, composite tariff for accommodation will be valued as per these Rules and any other charges for other facilities provided by the hotel will be separately valued under the residual clause. Also, if on account of an employee's transfer from one place to another, the employee is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value as per the table prescribed in Rule 3 of the Income Tax Rules, for a period up to 90 days. However, after that the value of perquisite shall be charged for both accommodations as prescribed. II Personal attendants etc.: The value of free service of all personal attendants including a sweeper, gardener and a watchman is to be taken at actual cost to the employer. Where the attendant is provided at the residence of the employee, full cost will be taxed as perquisite in the hands of the employee irrespective of the degree of personal se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 20,000/- in the aggregate are exempt. Loans for medical treatment specified in Rule 3A are also exempt, provided the amount of loan for medical reimbursement is not reimbursed under any medical insurance scheme. Where any medical insurance reimbursement is received, the perquisite value at the prescribed rate shall be charged from the date of reimbursement on the amount reimbursed, but not repaid against the outstanding loan taken specifically for this purpose. VI Use of assets: It is common practice for an asset owned by the employer to be used by the employee or any member of his household. This perquisite is to be charged at the rate of 10% of the original cost of the asset as reduced by any charges recovered from the employee for such use. However, the use of Computers and Laptops would not give rise to any perquisite. VII Transfer of assets: Often an employee or member of his household benefits from the transfer of movable asset (not being shares or securities) at no cost or at a cost less than its market value from the employer. The difference between the original cost of the movable asset(not being shares or securities) and the sum, if any, paid by the employee, shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, 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 which is exempt to the extent specified from inclusion in computing the total income under clause (10) of Section 10. Any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence service. Gratuity received in cases other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chever 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. The maximum limit of such payment is Rs. 5,00,000 where retrenchment is on or after 1.1.1997. (6) Under Section 10(10C), any payment received or receivable (even if received in installments) by an employee of the following bodies at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company , a scheme of voluntary separation, is exempted from income-tax to the extent that such amount does not exceed five lakh rupees: (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 Cooperative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay, 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 places, 40% of the salary due to the employee for the relevant period, whichever is the least. For this purpose, "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential 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 hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h scheme framed in this behalf by the Central Government and notified in the Official Gazette is exempt from income-tax. By notification No.F.2/14/89-NS-II dated 7.6.89, as amended by notification No.F.2/14/89-NS-II dated 12.10.89, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause. (12) Any scholarship granted to meet the cost of education is not to be included in total income as per subsection (16) of section 10 of Income Tax Act. (13) Clause (18) of Section 10 provides for exemption of any income by way of pension received by an individual who has been in the service of the Central Government or State Government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as may be specifically notified by the Central Government or family pension received by any member of the family of such individual. "Family" for this purpose shall have the meaning assigned to it in Section 10(5) of the Act. Such notification has been made vide Notifications No.S.O.1948(E) dated 24.11.2000 and 81(E) dated 29.1.2001, which are enclosed as per Annexure VA & V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions from income from Salaries u/s 16 of the Act Entertainment Allowance: 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 by an employer to the assessee, who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary(exclusive of any allowance, benefit or other perquisite) or five thousand rupees whichever is less. No deduction on account of entertainment allowance is available to non-government employees. Tax On Employment: The tax on employment (Professional Tax) 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 under the head "Salaries". It may be clarified that "Standard Deduction" from gross salary income, which was being allowed up to financial year 2004-05 is not allowable from financial year 2005-06 onwards. 5.4 Deductions under Chapter VI-A of the Act In computing the taxable income of the employee, the following deductions under Chapter VI-A of the Act are to be allowed from his gross total income: A. As per sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India; b. for participation in any unit-linked insurance plan of the LIC Mutual Fund referred to in clause (23D) of section 10 and as notified by the Central Government. [The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.] (7) Any subscription made to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify; [The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No. 1562(E) dated 3.11.05 and Jeevan Akshay-III vide Notification S.O. No. 847(E) dated 1.6.2006 ] (8) Any subscription made to any units of any Mutual Fund, referred to in clause(23D) of section 10, or from the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under any plan formulated in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of any Development Authority, Housing Board etc. The deduction will also be allowable in respect of re-payment of loans borrowed by an assessee from the Government, or any bank or Life Insurance Corporation, or National Housing Bank, or certain other categories of institutions engaged in the business of providing long term finance for construction or purchase 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, or a public sector company, or a university established by law, or a college affiliated to such university, or a local authority, or a cooperative society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act. 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 afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme framed and notified by the Central Government, in the Official Gazette for these purposes. [The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E) dated 28.7.2006] (17) Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf. (18) Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004. (19) Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981. It may be clarified that the amount of premium or other payment made on an insurance policy [other than a contract for deferred annuity mentioned in sub-para (2)] shall be eligible for deduction only to the extent of 20 percent of the actual capital sum assured. In calculating any such actual capital sum, the following shall not be taken into account: (i) the value of any premiums agreed to be returned, or (ii) any benefit by way of bonus or otherwise over and above the sum actually assured which may be received under the policy. B. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overall limit of Rs one lakh under section 80CCE of the Income Tax Act, 1961. It is therefore, clarified that contribution made by an employee alone will be eligible to deduction limit of upto Rs.one lakh. The contribution made by the Central Government or any other employee to a pension scheme u/s 80CCD(2) shall be excluded from the limit of one lakh rupees provided under Section 80CCE. Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any financial year,-- (a) on account of closure or his opting out of such pension scheme; or (b) as pension received from the annuity plan purchased or taken on such closure or opting out, the whole of the amount referred to in clause (a) or clause (b) above shall be deemed to be the income of the assessee or his nominee, as the case may be, in the financial year in which such amount is received, and shall accordingly be charged to tax as income of that financial year. For the purposes of ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, and who is a senior citizen, the deduction available is "twenty thousand rupees" rather than fifteen thousand as specified above. Explanation.--For the above "senior citizen" means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year. The insurance referred to above shall be in accordance with a scheme made in this behalf by-- (a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or (b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).] F. Under section 80DD, where an assessee, who is a resident in India, has, during the previous year,- (a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or (b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them; (ii) in the case of a Hindu undivided family, a member of the Hindu undivided family,dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year; (c) "disability" shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996)and includes "autism", "cerebral palsy" and "multiple disability" referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999); (d) "Life Insurance Corporation" shall have the same meaning as in clause (iii) of sub-section (8) of section 88; (e) "medical authority" means the medical authority as referred to in clause (p) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to above is paid in full by the assessee , whichever is earlier. For this purpose - (a) "approved charitable institution" means an institution established for charitable purposes and approved by the prescribed authority 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 the Official Gazette, specify in this behalf; (c) "higher education" means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so; (d) "initial assessment year" means the assessment year relevant to the previous year, in which the assessee starts paying the interest on the loan. (e) relative", in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her place, any residential accommodation being accommodation in the occupation of the assessee, the value of which is to be determined under clause (a) of sub section (2) or, as the case may be, clause (a) of sub-section (4) of section 23: The Drawing and Disbursing Authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the assessee. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of rent. J. Under section 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of fifty thousand rupees. However, where such individual is a person with severe disability, a higher deduction of one lakh rupees shall be allowable. Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner along with the return of income, in respect of the assessment year for which the deduction is claimed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at shall be increased by educational cess as applicable (2% for primary and 1% for secondary education) to arrive at the total tax payable. 6.4 The amount of tax as arrived at para 6.3 should be deducted every month in equal installments. Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year. DDOs/ PAOs who fail to comply with the provisions of Sec 192 of the Income-tax Act, 1961, would be liable to pay interest u/s 201 (1A) of the Income-tax Act along with penal consequences. 7. MISCELLANEOUS: 7.1 These instructions are not exhaustive and are issued only with a view to help the employers to understand the various provisions relating to deduction of tax from salaries. Wherever there is any doubt, reference may be made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962, the Finance Act 2011 and the relevant circulars / notifications. 7.2 In case any assistance is required, the Assessing Officer/the local Public Relation Officer of the Income-tax Department may be contacted. 7.3 These instructions may be brought to the notice of all Disburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- only) (-) 50,000 2 Taxable income 2,70,000 Less: Deduction U/s 80C (i) GPF Rs.25,000/- (ii) LIP Rs.10,000/- = Rs.35,000/- (-)35,000 3 Total Income 2,35,000 4 Income Tax thereon/payable 5,500 Add: (i). Education Cess @2% (ii). Secondary and Higher Education Cess @1% 110 55 5 Total Income Tax payable 5,665 6 Rounded off to 5,670 Example 3 For Assessment Year 2012-2013 Calculation of Income Tax in the case of a male employee below age of sixty years where medical treatment expenditure was borne by the employer (With valid PAN furnished to employer). S.No. Particulars Rupees 1 Gross Salary 3,00,000 2 Medical Reimbursement by employer on the treatment of self and dependent family member 30,000 3 Contribution of GPF 20,000 4 LIC Premium 20,000 5 Repayment of House Building Advance 25,000 6 Tuition fees for two children 60,000 7 Investment in Unit-Linked Insurance Plan 20,000 Computation of Tax S.No. Particulars Rupees 1 Gross Salary 3,00,000 Add: Perquisite in respect of reimbursement of Medical Expenses In excess of Rs.15,000/- in view of Section 17(2)(v) (+) 15,000 2 Taxable income 3,15,000 Less : Deduction U/s 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , water etc. (Actual bills paid by company) 40,000 4(a) Flat at concessional rate (for ten months). = Rs.3,60,00 3,60,000 4(b) Hotel rent paid by employer (for two months) 1,00,000 4(c) Rent recovered from employee. 60,000 4(d) Cost of furniture. 2,00,000 5 Subscription to Unit Linked Insurance Plan 50,000 6 Life Insurance Premium 10,000 7 Contribution to recognized P.F. 42,000 8 Investment in long term infrastructure bonds (80CCF) 20,000 COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON: S.No. Particulars Rupees 1 Salary 7,00,000 2 Bonus 1,40,000 3 Total Salary for Valuation of (1+2): Perquisites i.e. Rs.70,000 per month. 8,40,000 Valuation of perquisites 4(a) Perq. for flat:Lower of (15% of salary for ten months =Rs.1,05,000/-) and (actual rent paid=3,60,000) 1,05,000 4(b) Perquisites for hotel : Lower of (24% of salary of 2 mths=33,600) and (actual payment=1,00,000) 33,600 4(c) Perquisites for furniture(Rs.2,00,000) @ 10% of cost 20,000 4(c)(i) Total of [4(a)+(b)+(c)] (1,05,000+ 33,600+ 20,000) Less: rent recovered = Rs.158,600 (-)Rs. 60,000 Rs. 98,600 4(d) Add perq. for free gas, electricity, water etc. Rs.40,000 (+) 98, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NO.12BA {See rule 26A(2)(b)} Statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary with value thereof (1) Name and address of employer : (2) TAN (3) TDS Assessment Range of the employer : (4) Name, designation and PAN of employee : (5) Is the employee a director or a person with : substantial interest in the company (where the employer is a company) (6) Income under the head "Salaries" of the employee : (other than from perquisites) (7) Financial Year : (8) Valuation of Perquisites S.No. Nature of perquisite (see rule 3) Value of perquisite as per rules (Rs.) Amount, if any recovered from the employee (Rs.) Amount of perquisite chargeable to tax Col.(3) - Col.(4) (Rs.) (1) (2) (3) (4) (5) 1 Accommodation 2 Cars/Other automotive 3 Sweeper, gardener, watchman or personal attendant 4 Gas, electricity, water 5 Interest free or concessional loans 6 Holiday expenses 7 Free or concessional travel 8 Free meals 9 Free Education 10 Gifts, vouchers etc. 11 Credit card expenses 12 Club expenses 13 Use of movable assets by employees 14 Transfer of assets to employees 15 Val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be compressed, if required, only by using licensed version of Winzip 8.1 or ZipItFast 3.0 (or higher version) compression utility to ensure quick and smooth acceptance of the file. 1.1.6 There is no overwriting/striking on Form 27A. If there is any, then the same should be ratified by an authorized signatory. 1.1.7 No bank challan or copy of TDS/TCS certificate or physical copies of certificates or no/low deduction of TDS is required to be furnished along with the statements. 1.1.8 TAN of deductor is mandatory to be mentioned in the statement. Statement shall not be accepted if TAN is not quoted. 1.1.9 TAN details (name, address, etc.,) of the deductor as provided in the quarterly e-TDS/TCS statement should be same as in the TAN database maintained by ITD (these details can be verified with the TIN-FC or the ITD web-site www.incometaxindia.gov.in). If they are different the deductor shall submit a TAN change request application to update the ITD TAN database or a copy of the acknowledgment of TAN change request already submitted. 1.1.10 Each branch or Drawing and Disbursement Officer (DDO) of a deductor/collector furnishing separate quarterly e-TDS/TCS statement should furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly e-TDS/TCS statement; 2.1.2.3 striking and overwriting, if any, on Form 27A are not duly ratified by the person who has signed Form 27A; 2.1.2.4 more than one quarterly e-TDS/TCS statement is furnished in one computer media; 2.1.2.5 more than one computer media is used for furnishing one quarterly e-TDS/TCS statement; 2.1.2.6 quarterly e-TDS/TCS statement is compressed using a compression utility other than winzip 8.1 or ZipItFast 3.0 (or higher version) compression utility; 2.1.2.7 quarterly e-TDS/TCS statement is not in conformity with the file formats prescribed by ITD; 2.1.2.8 TAN stated in quarterly e-TDS/TCS statement is not present in TAN Master database and deductor/collector does not submit any proof of TAN stated in the statement; 2.1.2.9 deductor/collector does not have a TAN; 2.1.2.10 name/address of deductor/collector displayed on TAN Master database does not match with name/address stated on Form 27A and deductor/collector does not provide TAN change request; 2.1.2.11 mismatch of control totals as per with Form 27A and as per e-file; 2.1.2.12 the quarterly statement has not been successfully passed through the latest version of FVU; 2.1.2.13 Quarterly e- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given as GPF will be withdrawn for new recruits in Central government service. Government will make no contribution into this account. These assets would be managed through exactly the above procedures. However, the employee would be free to withdraw part or all of the 'second tier' of his money anytime. This withdrawable account does not constitute pension investment, and would attract no special tax treatment. (iii) Individuals can normally exit at or after age 60 years for tier-I of the pension system. At the exit the individual would be mandatorily required to invest 40 percent of pension wealth to purchase an annuity (from an IRDA- regulated life insurance company). In case of Government employees the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirment. The individual would received a lump-sum of the remaining pension wealth, which he would be free to utilize in any manner. Individuals would have the flexibility to leave the pension system prior to age 60. However, in this case, the mandatory annuitisation would be 80% of the pension wealth. Architecture of the new Pension System (iv) It wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income -tax Act, 1961 (43 of 1961)), the Central Government, hereby specifies the gallanty awards for the purposes of the said Section and for that purpose makes the following amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number S.O.1048(E), dated the 24th November 2000, namely:- In the said notification, in the Table, against serial numbers 1,2 and 3 under cloumn (3) relating to "Circumstances for eligibility" the words "to civilians" shall be omitted. ANNEXURE-VIII FORM NO. 10BA (See rule 11B) DECLARATION TO BE FILED BY THE ASSESSEE CLAIMING DEDUCTION U/S 80 GG I/We……………………………………………………………… (Name of the assessee with permanent account number) do hereby certify that during the previous Year………….I/We had occupied the premise………………………….(full address of the premise) for the purpose of my/our own residence for a perio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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