1688. Exemption limit of taxable income raised from Rs. 10,000 to Rs. 12,000 by Finance (No. 2) Act, 1980 – Person paying salary to State Government employees permitted to make adjustment of tax deducted at source against tax deductible from salaries

1. I am directed to invite your attention to Board’s Circular No. 278 [F. No.275/12/80-IT(B)], dated 26-8-1980 regarding deduction of income-tax from salaries during the financial year 1980-81.

2. You are aware that the exemption limit of taxable income has been raised from Rs. 10,000 to Rs. 12,000 by the Finance (No.2) Act, 1980. In the case of employees where estimated annual salary income exceeded Rs. 10,000 but did not exceed Rs. 12,000 income-tax was deducted at source before the enactment of the said Act and if they were to apply to the Income-tax Officer concerned for refund of such tax deducted at source after March 31,1981, it would cause hardship to such persons.

3. With a view to mitigate such hardship, it has been decided that the persons responsible for paying the income in respect of salaries should be permitted, as a special case, to make adjustments of the tax deducted at source, on behalf of this group of employees, against the tax deductible from salaries of employees with estimated annual salary incomes exceeding Rs. 12,000 and payable to the credit of the Central Government during the subsequent months of the current financial year. Such adjustments in respect of the state Government employees will be made in the following manner.

4. The “person responsible for paying” the salaries, should in the first instance, determine the amount of tax deducted and paid to the credit of the Central Government in the earlier months on account of the employees whose estimated annual salary income is likely to be below Rs. 12,000 (hereinafter referred to as “surplus payment”). After such determination, he should, for the months of adjustment, reduce the total of the tax deducted during the month and the progressive figures by the amount of “surplus payment” and intimate the net amount to the Accountant General for payment to the account of the Central Government. While sending the information he should also intimate the Accountant General the names of such employees in duplicate and the amount of tax deducted from the salary of each employee which has been refunded to them as “surplus payment”. The Accountant General will send one copy of the list received from the Treasury Officers/Pay and Accounts Officers to the respective Zonal Accounts Officers together with the cheque/draft to the amount of tax deducted at source for the month/months.

5. In such cases while giving certificates of tax deducted at source under section 203 in individual cases, the person responsible for payment should take due care to indicate therein the amount of tax deducted in excess as result of raising of the exemption limit and refunded to the employees concerned.

6. It may be added that if any adjustment referred to in para 3 is not made during the financial year 1980-81 in the case of any employee and the surplus payment refunded to him, it should not be made thereafter and such an employee may be advised to claim a refund from the Income-tax Officer concerned in the normal course.

7. These instructions would also apply, mutatis mutandis, to all the Central Government employees. In such cases the list showing the names of the employees referred to in pare 4 above should be sent to the Commissioner of Income-tax, Delhi, Central Revenue Building, Indraprastha Estate, New Delhi-110002, by the principal Accounts Officers.

Circular : No. 291 [F. No. 275/35/80-IT(B)], dated 4-2-1981.

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