Instructions regarding deduction of tax at source from payments in respect of deposits under NSS, etc.

  1. The Finance (No. 2) Act, 1991 has inserted a new section 194EE in the Income-tax Act, 1961 with effect from the 1st October, 1991, which reads as follows :

“194EE. The person responsible for paying to any person any amount referred to in clause (a) of sub-section (2) of section 80CCA shall, at the time of payment thereof, deduct income-tax thereon at the rate of twenty per cent :

Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than two thousand five hundred rupees :

Provided further that nothing contained in this section shall apply to the payment of the said amount to the heirs of the assessee.”

  1. The new section requires every person responsible for paying any amounts referred to in clause (a) of sub-section (2) of section 80CCA of the Income-tax Act (e.g., withdrawals under the National Savings Scheme) to deduct income-tax at source at the rate of 20 per cent of the amounts paid. Presently, the National Savings Scheme (NSS), operated by the post offices, is the only scheme covered by section 80CCA. However, more such schemes may be notified by the Central Government in future.
  2. The amount of tax deducted at the aforesaid rate of 20 per cent is to be further increased by a surcharge at the rate of 12 per cent of such tax.
  3. No deduction of tax at source is, however, required to be made in the following cases :

(a)   where the amount of payment or the aggregate amount of payments in a financial year is less than Rs. 2,500;

(b)   where the payment is made to the heirs of a deceased assessee (depositor);

(c)   where the depositor, being an individual, resident in India, furnishes a declaration in writing, in Form No. 15-I (copy given), in duplicate, to the payer, to the effect that the tax on his total income for the relevant financial year will be nil.

  1. The responsibilities, obligations, etc., under the Income-tax Act, of the person responsible for deducting tax at source under section 194EE are given below :—

(a)   According to the provisions of section 200, any person deducting tax at source under section 194EE, shall pay, within the prescribed time (laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the tax deducted at source is to be paid to the credit of the Central Government, on the day of the deduction itself. The tax will have to be credited to the Government account by book adjustment in the same manner as for example, the income-tax deducted from the salaries payable to the employees is credited to the Government account. In case of failure to deduct tax at source, the payer will be liable under section 201 to pay simple interest at the rate of 15 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid to the Government account. In addition, he will also be liable to pay, by way of penalty, under section 271C a sum equal to the amount of tax which he failed to deduct at source. In case of failure to pay the tax to the credit of the Central Government within the prescribed time, similar penal provisions, including prosecution, under section 276B are attracted.

(b)   According to the provisions of section 203, the payer is required to furnish to the payee, a certificate to the effect that tax has been deducted and to specify therein the prescribed particulars (vide rule 31 of the Income-tax Rules, 1962). This certificate has to be issued on the tax deductor’s own station­ery, in Form No. 16A (copy given). Further, the certificate has to be issued by the deductor within a period of one month and 14 days from the date of payment. If a person fails to furnish the certificate in due time, he will be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day, during which the failure continues.

(c)   According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain a Tax-deduction A ccount Number (TAN) and quote the same in various challans, certificates, returns, etc. De­tailed instructions in this regard are available in this depart­ment’s Circular No. 497, dated 9-10-1987. A copy of Form No. 49B in which the application has to be made for obtaining the TAN, is enclosed for ready reference. If a person fails to comply with the provisions of section 203A, he shall be liable to pay, by way of penalty under section 272BB, a sum which may extend to Rs. 5,000.

(d)   According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, etc., responsible for deducting tax is required to prepare and deliver, or cause to be delivered, to the designated/concerned Assessing Officer by the prescribed date after the end of the financial year, an annual return of deduc­tion of tax under section 194EE in the prescribed form. The form in which the return has to be filed and the due date for filing it are being notified. If a person fails to furnish in due time the annual return, he shall be liable to pay, by way of penalty, a sum which shall  not be less than Rs. 100 but which may extend to Rs. 200 for every day, during which the failure continues; so, however, that this sum shall not exceed the amount of tax which was deductible at source.

(e)   The payer or tax-deductor is also required to deliver a copy of all the forms (No. 15-I) received by him during a month to the Chief Commissioner or Commissioner of Income-tax having jurisdiction over him within 7 days of the month in which the declarations are furnished to him.

  1. This circular has been issued with a view to helping the persons responsible for making deduction of tax under section 194EE. However, where there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961 and the Finance (No. 2) Act, 1991. In case any assistance is needed, the concerned Assessing Officer or the local public relation officer/income-tax of the department may be approached.

Circular : No. 618, dated 22-11-1991.

FORM NO. 15-I

[See rule 29C(3A)]

Declaration under section 197A(1) of the Income-tax Act, 1961 to be made by an individual claiming receipt of any amount referred to in clause (a) of sub-section (2) of section 80CCA without deduction of tax

I,………………………………………………,son/daughter/wife of ………………………………… resident of……………………….@ do hereby declare :

  1. that the particulars of my account under the National Sav­ings Scheme and the amount of withdrawal are as under :
Particulars of the PostOffice where the account

under the National Savings

Scheme is maintained  and

the account number

Date on which theaccount was opened The amount ofwithdrawal from

the account

  1. that my present occupation is………………………..;
  2. that the tax on my estimated total income including the amount referred to, in clause (a ) of sub-section (2) of section 80CCA, mentioned in paragraph 1 above, computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on………….relevant to the assessment year 19….—19….will be nil;
  3. *that I have not been assessed to income-tax at any time in the past but I fall within the jurisdiction of the Chief Commis­sioner or Commissioner of Income-tax,…………;

or

that I was last assessed to income-tax for the assessment year 19….—19…. by the Assessing Officer …………. Circle/Ward/District and the permanent account number allotted to me is………………………;

  1. that I am resident in India within the meaning of section 6 of the Income-tax Act, 1961.
………………………………………………
Signature of the declarant

Verification

I,…………….., do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.

Verified today, the…………day of………..19……

Place……………. ………………………………………………
Signature of the declarant

Notes :

  1. @ Give complete postal address.
  2. The declaration should be furnished in duplicate.
  3. *Delete whichever is not applicable.
  4. Before signing the verification, the declarant should satis­fy himself that the information furnished in the declaration is true, correct and complete in all respects.
  5. Any person making a false statement in the declaration shall be liable to prosecution under section 277 of the Income-tax Act, 1961, and on conviction be punishable—

(i)   in a case where tax sought to be evaded exceeds one lakh rupees, with rigorous imprisonment which shall not be less than six months but which may be extend to seven years and with fine;

(ii)   in any other case, with rigorous imprisonment which shall not be less than three months but which may extend to three years and with fine.

[FOR USE BY THE PERSON TO WHOM THE DECLARATION IS FURNISHED]

  1. Name and address of the person responsible for paying the amount referred to in clause (a) of sub-section (2) of section 80CCA
  2. Date on which the declaration was furnished by the declarant
  3. Amount and date of withdrawal from account number…….under the National Savings Scheme

Forward to the Chief Commissioner or Commissioner of Income-tax.

……………………………………………………………………
Place………………… [Signature of the person responsi­blefor paying any amount referred to
Date…………………… in clause (a) of sub-section (2)of section 80CCA]

FORM NO. 16A

[See rule 31(1)(b)]

Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961

[For interest on securities, dividends or insurance commission]

Name and address of the TDS circle Name and address of the person
person deducting tax where Annual to whom payment made or in
………………………………………………… Return under whose account it is credited
section 206 is to
………………………………………………… be delivered ……………………………………………….
………………………………………………… …………………………. ……………………………………………….
………………………………………………… …………………………. ……………………………………………….
………………………………………………… …………………………. ……………………………………………….
………………………………………………… …………………………. ……………………………………………….
TAX DEDUCTION A/C NO. NATURE OF PAN/GIR NO. OF THE PAYEE
OF THE DEDUCTOR PAYMENT
PAN/GIR NO. OF THE FOR THE PERIOD ………………..
DEDUCTOR 19….. TO 19…..

DETAILS OF PAYMENT, TAX DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT

Date of Amount Amount of Rate at Date & Name of
payment/ paid/ income-tax which Challan No. bank and
credit credited deducted deducted of deposit of branch
(Rs.) (Rs.) tax into where tax
Central deposited
Government
Account

Certified that a sum of Rs. (in words) …………………. has been deducted at source and paid to the credit of the Central Government as per details given above.

Place…………….. ………………………………………………………..
Date……………… Signature of person responsible for deduction of tax
Full Name……………………………………..
Designation…………………………………..

FORM NO. 49B

[See rule 114A]

Form of application for allotment of tax deduction account number under section 203A

To

The Assessing Officer,

……………………………………….

……………………………………….

Sir,

Whereas I/we am/are liable to deduct tax in accordance with Chapter XVII under the heading ‘B. – Deduction at source’ of the Income-tax Act, 1961;

And whereas no tax deduction account number has been allotted to me/us;

I/We hereby request that a tax deduction account number be allot­ted to me/us;

I/We give below the necessary particulars :

  1. Full name and address
  2. Status [whether individual, HUF, company, etc.]
  3. If an individual—

(a)   name of father (or husband)

(b)   age

  1. If firm/HUF/AOP/BOI/company, the names and addresses of partners/members/directors
  2. Source(s) of income
  3. Particulars of business, if any:
  Name Address Nature of business

i)   Head Office

ii)   Branch(es)

  1. Date on which the tax was last deducted in accordance with Chapter XVII under the heading ‘B. – Deduction at source’ of the Income-tax Act, 1961
  2. The nature of payments from which tax has been or will be deducted
  3. Whether permanent account number has been allotted or not, if so, state the number
……………………………………
Signed
(Applicant)

Verification

I/We……………………………………………………..in my/our capacity as………………………………………………..

[name]                                                                                                                                                         [designation]

do hereby declare that what is stated above is true to the best of my/our information and belief.

Verified today this the……………………………..day of……………………..19……at…………………………

[place]

……………………………..
Signed (Applicant)

 

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