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1693. Exemption limit raised – Employees drawing salary between Rs. 8,000 and Rs. 10,000 – Adjustment of tax deducted at source during financial year 1977-78 against tax deductible from salaries

1. Attention is invited to Board’s Circular No. 225 [F. No. 275/13/77-IT(B)], dated 30-6-1977 on the above subject.

2. The exemption limit of taxable income was raised from Rs. 8,000 to Rs. 10,000 by the Finance (No. 2) Act, 1977. It has been represented that, before the enactment of the said Act, income-tax was deducted at source in the case of employees whose estimated annual salary income exceeded Rs. 8,000 but did not exceed Rs. 10,000 and that it would cause hardship to such persons if they were to apply to the Income-tax Officers concerned for refund of such tax deducted at source after March 31, 1978.

3. In order 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. 10,000 and payable to the credit of the Central Government during the subse­quent months of the current financial year. Such adjustments will be made in the following manner :

4. The “persons 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. 10,000 (hereinafter referred to as “sur­plus payment”). After such determination, he should reduce the total of the tax deducted during the month and the progressive figures by the amount of “surplus payment” under columns 8 and 9 of the monthly return for the months of adjustment, in Form No. 21 prescribed under rule 32. A list showing names of the employees and the amount of “surplus payment” against each should also be enclosed with the said monthly return. Simultaneously, action should be taken to revise the returns in Form No. 21 filed for the months earlier up to the month in which the adjustment of “surplus payment” is made, and send them to the Income-tax Offi­cer concerned so as to put matters beyond doubt. Even where any persons responsible for paying the salaries has been exempted by the Commissioner of Income-tax, under rule 34 from the require­ment of furnishing the monthly return in Form No. 21, he should submit, in respect of the employees whose income from salary is likely to be below Rs. 10,000, the monthly returns separately for each month only up to and along with the return in respect of such employees for the month in which the adjustment of tax deducted at source is made.

5. A certificate should also be furnished with the monthly return for the month in which adjustment of “surplus payment” is made to the effect that the concerned employees have been reimbursed the amount of tax deducted earlier and which has been adjusted in that month.

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

7. These instructions would apply only to non-Government employ­ers for the financial year 1977-78.

Circular : No. 235 [F. No. 275/88/77-IT(B)], dated 19-12-1977

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