FINANCIAL YEAR 1980-81
Instructions for deduction of tax at source during financial year 1980-81 from interest on securities at the rate specified in Part III of First Schedule to Finance (No. 2) Bill, 1980
DRAFT CIRCULAR REFERRED TO IN INSTRUCTIONS
|Rate of||Rate of|
|I.||In the case of a person other than a company :|
|(i)||where the person is resident in India on income by way of interest payable on any security (excluding interest payable on a tax-free security)||10 per cent||Nil|
|(ii)||where the person is not resident in India—|
|(a)||on interest on securities(excluding interest payable a on tax-free security)||income-tax at 30 per cent and surcharge at 3 per cent of the amount of the interest,|
|income-tax and surcharge on income-tax in respect of the interest at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1981, if such interest income had been the total income, whichever is higher|
|(b)||on interest payable on a tax-free security||15 per cent||1.5 per cent|
|II.||In the case of a company—|
|(i)||where the company is a domestic company on interest on securities (excluding interest payable on a tax-free security)||21.5 per cent||1.5 per cent|
|(ii)||where the company is not a domestic company—|
|(a)||on interest payable on a tax-free security||44 per cent||3.3 per cent|
|(b)||on interest on other securities||70 per cent||5.25 per cent|
(1) Exemption or abatement certificates issued before April 1, 1980 authorising deduction of tax at a particular rate expressed as percentage of the amount of interest should be accepted and acted upon, if operative for the financial year ending on March 31, 1981.
(2) Where a certificate is issued by the Income-tax Officer on or after April 1, 1980 authorising deduction of tax at a specified rate in respect of any person, income-tax should be deducted at the rates specified therein.
(3) No tax should be deducted in cases in which, from a certificate issued by the Income-tax Officer or otherwise, you are satisfied that the payee is a person exempt from income-tax under sections 10 to 15 of the Act.
(4) No tax should be deducted from any interest payable on 7 per cent Gold Bonds, 1980 where any such Bonds are held by a resident individual and in the case of the aforesaid Gold Bonds where the holder thereof makes a declaration in writing before the person responsible for making the payment that the total nominal value of 7 per cent Gold Bonds, 1980 held by him (including such Bonds, if any, held on his behalf by any other person) did not in either case exceed Rs. 10,000 at any time during the period to which the interest relates.
(5) No tax should be deducted from interest payable on National Savings Certificates (First Issue) including National Savings Certificates (First Issue) Bank Series or 7-year National Savings Certificates (IV Issue).
(6) No tax should be deducted from any interest payable on National Development Bonds.
(7) No tax should be deducted from any interest payable on any other security of the Central or State Government where the security is held by a resident individual, and the holder makes a declaration in writing before the person responsible for making the payment to the effect that—
(a) he has not previously been assessed under the 1961 Act or under the 1922 Act ;
(b) his total income of previous year in which the interest is due is not likely to exceed the minimum amount not chargeable to income-tax; and
(c) the total nominal value of the securities held by him (including such securities, if any, are held on his behalf by any other person) did not exceed Rs. 2,500 at any time during the said previous year.
(8) No tax should be deducted from any sum payable in respect of any securities owned by a corporation established by or under a Central Act which under any law for the time being in force is exempt from income-tax on its income.
(9) Under section 288B fractions of one rupee contained in the amount of tax will have to be rounded off to the nearest rupee by ignoring amounts less than fifty paise and increasing amounts of fifty paise or more to one rupee. Hence, the amount of tax to be deducted at source should be rounded off to the nearest rupee in accordance with the aforesaid provisions of the Act.
(10) In the case of doubt, the Income-tax Officer should be consulted before making the deduction from interest on Government securities. It may be added that the above enunciated list of securities on which no tax shall be deducted is not exhaustive but is only illustrative.
Circular : No. 267 [F.No. 275/13/80-IT(B)], dated 24-4-1980
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