1689. Exemption limit of taxable income raised from Rs. 10,000 to Rs. 12,000 by Finance (No.2) Act, 1980 – Persons paying salary permitted to make adjustments of tax deducted at source against tax deductible from salaries

1. I am directed to invite your attention to the Board’s Circular No. 278 [F. No. 275/12/80-IT(B)], dated 26-8-1980 regarding deduction of income-tax from salaries during the financial year 1980-81.

2. You are aware that the exemption limit of taxable income has been raised from Rs. 10,000 to Rs. 12,000 by the Finance (No.2) Act, 1980. In the case of employees whose estimated annual salary income exceeded Rs. 10,000 but did not exceed Rs. 12,000 income-tax was deducted at source before the enactment of the said Act and if they were to apply to the Income-tax Officer concerned for refund of such tax deducted at source after March 31, 1981, it would cause hardship to such persons.

3. With a view 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. 12,000 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. 12,000 (hereinafter referred to as “sur­plus payments”). After such determination, he should, for the months of adjustment, 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 in Form No. 21 prescribed  under rule 32 of the Income-tax Rules. 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 person responsible for paying the salaries has been exempted by the Commissioner under rule 34 of the Income-tax Rules, from the requirement of furnishing monthly return in Form No. 21, he should submit, in respect of the employees whose income from salary is likely to be below Rs. 12,000, 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.

6. While giving certificates of tax deduction at source under section 203 of the Income-tax 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 subsequently refunded to the employees concerned.

7. These instructions would apply only to non-Government employees and that also for the financial year 1980-81.

Circular : No. 283 [F. No. 275/35/80/-IT(B)], dated 25-9-1980.

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