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FINANCE (AMENDMENT) ORDINANCE, 1987 – CIRCULAR NO. 494, DATED 22-9-1987
1. Amendments at a glance
| Section/Schedule | Particulars |
| Part III of | Providing for a surcharge of 5 per cent on amount of |
| 1st Sch. | income-tax computed for purpose of deduction of tax at source or payment of advance tax where income of a person exceeds Rs. 59,000 1-2 |
2. Provisions explained
Explanatory Notes
FINANCE (AMDT.)ORDINANCE ACT, 1987
1. The Central Government has promulgated an Ordinance (No. 6 of 1987) on 19th September, 1987. The Ordinance is named as the Finance (Amendment) Ordinance, 1987. By this Ordinance, Part III of the First Schedule to the Finance Act, 1987 has been amended.
FINANCE (AMDT.)ORDINANCE ACT, 1987
2. Part III of the First Schedule to the Finance Act, 1987 prescribes the rates of tax for the following purposes :
( i) deduction of tax at source under section 192 on income chargeable to tax under the head “Salaries”;
( ii) deduction of tax at source under section 80E(9) on payment of annuities;
( iii) advance tax payable by a taxpayer under Chapter XVIIIC [not being ‘advance tax’ in respect of any income chargeable to tax under Chapter XII or Chapter XII-A or sub-section (1A) of section 161 or section 164 or section 164A or section 167A of the Income-tax Act at the rates as specified in that chapter or section];
( iv) computation of tax in a summary manner on the estimated undiclosed income consequent upon search and seizure [first proviso to section 132(5)] ;
( v) computation of tax liability of a non-resident shipping business [Section 172(4)] ;
( vi) computation of tax liability of a person leaving India for good [Section 174(2)] ;
( vii) computation of tax liability of a person who is likely to transfer property to avoid tax [Section 175] ; and
( viii) computation of tax liability in the case of discontinued business
[Section 176(2)].
FINANCE (AMDT.)ORDINANCE ACT, 1987
3. Paragraph 2 of the Ordinance lays down that where the income of a person exceeds Rs. 50,000, the amount of income-tax computed for the purpose of deduction of tax at source as also for the purpose of payment of advance tax shall be increased by a surcharge for the purposes of the Union calculated at the rate of 5 per cent on amount of the income-tax so computed. For example, in the case of an individual having an income of Rs. 52,000 liable for advance tax for the previous year relevant to the assessment year 1988-89, the advance tax payable by him in accordance with the rates specified in Part III of the First Schedule will be Rs. 9,250+ 40% of the income in excess of Rs. 50,000, i.e., Rs. 10,050 (Rs. 9,250 – 40% of Rs. 2,000). On this amount, surcharge for the purposes of the Union will be levied at the rate of 5% i.e., Rs. 503. Thus, the total advance tax including surcharge payable by the individual taxpayer will be Rs. 10,553. The liability to pay surcharge on income chargeable under the head “Salaries” can also be determined in a similar manner.
FINANCE (AMDT.)ORDINANCE ACT, 1987
4. Paragraph 3 of the Ordinance stipulates that in respect of the advance tax instalments paid or payable by a taxpayer on 15th June, 1987 and 15th September, 1987, the surcharge in respect of these two instalments of the advance tax should be paid by the 30th September, 1987.
FINANCE (AMDT.)ORDINANCE ACT, 1987
5. In the example referred to in paragraph 3 above, if the previous year of the person ends on the 31st December, 1987, the person will be liable for the payment of advance tax in three equal instalments of Rs. 3,518 (consisting of Rs. 3,350 as advance tax and Rs. 168 as surcharge for the purposes of the Union) payable on the 15th June 1987, 15th September, 1987 and 15th December, 1987. Paragraph 3 of the Ordinance stipulates that in respect of the instalments of advance tax payable on the 15th June, 1987, and the 15th September, 1987, the surcharge for the purposes of the Union, amounting to Rs. 336, shall be payable by the 30th September, 1987.
FINANCE (AMDT.)ORDINANCE ACT, 1987
6. Failure to comply with the provisions of paragraphs 2 and 3 of the Ordinance will make a taxpayer defaulter and the consequential provisions of the Income-tax Act will automatically apply.
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