Instructions for deduction of tax at source from salary during financial year 1977-78 at the rates specified in Part III of First Schedule to Finance (No. 2) Bill, 1977
ANNEX I – EXTRACT FROM PART III OF FIRST SCHEDULE TO
FINANCE (NO. 2) BILL, 1977
Paragraph A
Sub-Paragraph I
In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii ) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies,—
Rates of income-tax
| (1) | where the total income does not exceed Rs. 8,000 | Nil; |
| (2) | where the total income exceeds Rs. 8,000 but does not exceed Rs. 15,000 | 15 per cent of the amount by which the total income exceeds Rs. 8,000; |
| (3) | where the total income exceeds Rs. 15,000 but does not exceed Rs. 20,000 | Rs. 1,050 plus 18 per cent of the amount by which the total income exceeds Rs. 15,000; |
| (4) | where the total income exceeds Rs. 20,000 but does not exceed Rs. 25,000 | Rs. 1,950 plus 25 per cent of the amount by which the total income exceeds Rs. 20,000; |
| (5) | where the total income exceeds Rs. 25,000 but does not exceed Rs. 30,000 | Rs. 3,200 plus 30 per cent of the amount by which the total income exceeds Rs. 25,000; |
| (6) | where the total income exceeds Rs. 30,000 but does not exceed Rs. 50,000 | Rs. 4,700 plus 40 per cent of the amount by which the total income exceeds Rs. 30,000; |
| (7) | where the total income exceeds Rs. 50,000 but does not exceed Rs. 70,000 | Rs. 12,700 plus 50 per cent of the amount by which the total income exceeds Rs. 50,000; |
| (8) | where the total income exceeds Rs. 70,000 but does not exceed Rs. 1,00,000 | Rs. 22,700 plus 55 per cent of the amount by which the total income exceeds Rs. 70,000; |
| (9) | where the total income exceeds Rs. 1,00,000 | Rs. 39,200 plus 60 per cent of the amount by which the total income exceeds Rs. 1,00,000 : |
Provided that for the purposes of this Sub-Paragraph,—
(i) no income-tax shall be payable on a total income not exceeding Rs. 10,000;
(ii) where the total income exceeds Rs. 10,000 but does not exceed Rs. 10,540, the income-tax payable thereon shall not exceed seventy per cent of the amount by which the total income exceeds Rs. 10,000.
Surcharge on income-tax
The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of fifteen per cent of such income-tax.
ANNEX II – TYPICAL EXAMPLES OF INCOME-TAX CALCULATION
Example I
| Rs. | ||
| 1. | Total salary income [including Rs. 164 deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974. The scheme has since been discontinued by an Ordinance issued by the President w.e.f. 6-5-1977] | 16,164 |
| 2. | Contribution to general provident fund | 2,000 |
| 3. | Payments towards life insurance premia | 1,000 |
| 4. | Participation in Unit-linked insurance plan, 1971 made under section 19(1)( cc) of the Unit Trust of India Act, 1963 (52 of 1963) | 500 |
| 5. | Deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 | 500 |
| 4,000 | ||
| 6. | Total salary income | 16,164 |
| 7. | Deduct : Amount deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974 | 164 |
| 16,000 | ||
| 8. | Deduct : Amount by way of standard deduction under section 16(i) in respect of expenditure incidental to the employment at Rs. 2,000 plus 10 per cent of the amount by which salary exceeds Rs. 10,000 | 2,600 |
| 13,400 | ||
| 9. | Deduct : Whole of Rs. 4,000 of qualifying contributions towards general provident fund, life insurance premia, Unit-linked insurance plan and deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 | 4,000 |
| 10. | Taxable income | 9,400 |
| 11. | Income-tax payable on Rs. 9,400 | Nil |
Example II
| 1. | Total salary income [including Rs. 470 deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974, since discontinued] | 17,970 |
| 2. | Contribution to general provident fund | 2,000 |
| 3. | Payments towards life insurance premia | 1,500 |
| 4. | Participation in Unit-linked insurance plan, made under section 19(1)( cc) of the Unit Trust of India Act, 1963 | 500 |
| 5. | Deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 | 500 |
| 4,500 | ||
| 6. | Total salary income | 17,970 |
| 7. | Deduct : Amount deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974 | 470 |
| 17,500 |
| 8. | Deduct : Amount of standard deduction under section 16(i) in respect of expenditure incidental to the employment at Rs. 2,000 plus 10 per cent of the amount by which salary exceeds Rs. 10,000 | 2,750 | |
| 14,750 | |||
| 9. | Deduct : Amount on account of contributions towards general provident fund, life insurance premia, unit-linked insurance plan and deposit in 10-year account or 15-year account under the Post Office (Cumulative Time Deposits) Rules, 1959 : | ||
| Total amount paid Rs. 4,500 but restricted to 30 per cent of Rs. 14,750, i.e., Rs. 4,425 | |||
| – on the first Rs. 4,000 (full) | Rs. 4,000 | ||
| – on the next Rs. 425 at 50 per cent | Rs. 213 | 4,213 | |
| 10. | Taxable income | 10,537 | |
| Rounded off to | 10,540 | ||
| 11. | Income-tax on Rs. 10,540 (i.e., at 15 per cent of Rs. 2,540) : Rs. 381 but restricted to Rs. 378 being 70 per cent of the amount by which the total income exceeds Rs. 10,000 i.e., 70 per cent of Rs. 540 | ||
| Thus, income-tax payable on Rs. 10,540 | 378 | ||
| Surcharge on income-tax at 15 per cent | 57 | ||
| 435 |
Example III
| Rs. | |||
| 1. | Total salary income [including Rs. 2,400 as conveyance allowance at Rs. 200 p.m. received from the employer and Rs. 580 deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974, since discontinued in May 1977] | 30,580 | |
| 2. | Contribution to general provident fund | 3,000 | |
| 3. | Payments towards life insurance premia | 3,000 | |
| 4. | Participation in Unit-linked insurance plan, made under section 19(1)( cc) of the Unit Trust of India Act, 1963 | 2,000 | |
| 5. | Deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 | 2,000 | |
| 10,000 | |||
| 6. | Total salary income | 30,580 | |
| 7. | Deduct : Amount deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974 | 580 | |
| 30,000 | |||
| 8. | Deduct : Amount of standard deduction under section 16(i), in respect of expenditure incidental to the employment restricted to Rs. 1,000 in view of proviso (a) to the aforesaid section16(i) | 1,000 | |
| 29,000 | |||
| 9. | Deduction on account of contributions towards general provident fund, life insurance premia, Unit-linked insurance plan and deposits in 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 : | ||
| Paid Rs. 10,000 in all but limited to 30 per cent of Rs. 29,000, i.e., Rs. 8,700 | |||
| – on the first Rs. 4,000 (full) | Rs. 4,000 | ||
| – on the next Rs. 4,700 at 50 per cent | Rs. 2,350 | 6,350 | |
| 10. | Taxable income | 22,650 | |
| 11. | Income-tax payable on Rs. 22,650 | 2,612.50 | |
| 12. | Surcharge on income-tax at 15 per cent | 391.87 | |
| Total tax payable | 3,004.37 | ||
| Rounded off to | 3,004.00 |
CLARIFICATION 2
1. I am directed to invite a reference to this Department’s Circular No. 195 [F. No. 275/47/76-ITJ], dated 25-3-1976, on the subject of deduction of income-tax from salaries paid during the year 1976-77.
2. The Finance Bill, 1977, as introduced in the Parliament, prescribes the same rates for deduction of tax from “salaries” during the financial year 1977-78 as were in force during the financial year 1976-77. Hence, until further instructions, the tax at source from salaries may be deducted at the same rates as are given in Part III of the First Schedule to the Finance Act, 1976.
3. This may please be brought to the notice of all the disbursing officers and State undertakings under the control of the State Government.
Circular : No. 214 [F. No. 275/13/77-IT(B)], dated 30-3-1977
