626. Relief in the case of amounts repaid under Additional Emoluments (Compulsory Deposit) Act – Procedure laid down for working out relief under the section
1. Section 8(2) of the Additional Emoluments (Compulsory Deposit) Act, 1974 provides that for the purposes of computing the total income under the Income-tax Act, the amount repaid to an individual is deemed to be salary paid in arrears and the provisions of section 89(1) of the Income-tax Act shall apply. Under section 89(1), relief to be accorded in such cases is to be worked out on the basis of the rules as prescribed in rule 21A(2)( a) of the Income-tax Rules, 1962.
2. Representations have been received by the Board that the claiming of relief under section 89(1), as prescribed, is causing considerable hardship to certain categories of employees, particularly, in those cases of employees where the income of the employee was not taxable but for the repayment of compulsory deposits.
3. The Board have considered these representations and have decided with a view to removing hardship that the following procedure may be adopted by the Disbursing Officers :
a. compute the total income of the relevant previous year excluding the amount, received as repayment of deposit ;
b. allocate the amount received as repayment to the years to which the deposit relates ;
c. add to the amount allocated to each year, the total income of the year; and
d. compute the tax payable on such total income for each year at the rate applicable to that year.
4. If thereafter, it is found that no tax is payable as per (d) above for any of the years to which the repayment has been allocated, the Disbursing Officer need not deduct tax at source from the total income of the employee in the year in which the deposit is being repaid notwithstanding the fact that in the year in which the deposit is repaid the income is taxable.
5. If, however, it is found that by allocating the repayment to the relevant years tax is payable for any year, the Disbursing Officers must deduct tax on the total income including repayment at the rate applicable to the year in which repayment is made. Such employees will have to apply to the Income-tax Officer for claiming relief under section 89(1).
Circular : No. 239 [F. No. 174/72/78-IT(A-I)], dated 16-5-1978.