INCOME-TAX DEDUCTION  FROM  SALARIES  DURING  THE FINANCIAL YEAR 2005-2006 UNDER SECTION 192 OF THE INCOME-TAX

ACT, 1961

CIRCULAR NO.: 9/ 2005, dated 30-11-2005

Reference is  invited  to Circular No. 6/2004 dated  6.12.2004  wherein  the rates of deduction  of  income-tax  from  the payment of income under the head “Salaries” under  Section  192  of  the  Income-tax  Act,  1961,  during  the  financial  year  2004-2005,  were intimated. The  present  Circular contains the rates of deduction of income-tax from  the  payment of income chargeable under the head “Salaries”  during  the  financial year 2005-2006 and explains  certain  related provisions of the Income-tax Act. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department-

www.incometaxindia.gov.in.

  1. FINANCE  ACT,2005

 

According  to  the Finance Act, 2005, income-tax is required to be deducted under Section 192 of the Income-tax Act 1961  from income chargeable under the head  “Salaries” for the  financial  year 2005-2006 (i.e.   Assessment  Year2006-2007) at the following rates:

RATES OF INCOME-TAX

  1. Normal Rates of tax:
  1. Where the total income does not             Nil

exceed Rs.1,00,000/-.

  1. Where the total income exceeds              10 per cent, of the

Rs.1,00,000 but does not exceed           amount by which the

Rs.1,50,000/-.                                            total income exceeds Rs.1,00,000/-

  1. Where the total income exceeds                Rs.5,000/- plus 20 per cent of the

Rs.1,50,000/- but does not exceed         amount by which the

Rs.2,50,000/-.                                             total income exceeds Rs.1,50,000/-.

4. Where the total income exceeds                  Rs.25,000/- plus 30

Rs.2,50,000/-.                                                per cent of the amount by which the

total income exceeds Rs.2,50,000/-.

 

  1. Rates of tax for a woman, resident in India and below sixty-five years of age:
  1. Where the total income does not                  Nil

exceed Rs.1,35,000/-.

  1. Where the total income exceeds                    10 per cent, of the

Rs.1,35,000 but does not exceed                    amount by which the

Rs.1,50,000/-.                                                    total income exceeds Rs.1,35,000/-

  1. Where the total income exceeds                      Rs.1,500/- plus 20

Rs.1,50,000/- but does not exceed                  per cent of the

Rs.2,50,000/-.                                                     amount by which the

total income exceeds Rs.1,50,000/-.

  1. Where the total income exceeds                       Rs.21,500/- plus 30

Rs.2,50,000/-.                                                      per cent of the

amount by which the

total income exceeds Rs.2,50,000/-.

 

  1. Rates of tax for an individual, resident in India and of the age of sixty-five years or more at any time during the financial year:

 

  1. Where the total income does not                           Nil

exceed Rs.1,85,000/-.

  1. Where the total income exceeds                            20 per cent, of the

Rs.1,85,000 but does not exceed                            amount by which the

Rs.2,50,000/-.                                                             total income exceeds Rs.1,85,000/-

3.  Where the total income exceeds                            Rs.13,000/- plus 30

Rs.2,50,000/-                                                             per cent of the

amount by which the

total income exceeds Rs.2,50,000/-.

Surcharge on income tax:

The  amount  of income-tax computed in accordance with  the  preceding  provisions of this paragraph shall be increased by a surcharge  at the rate of ten percent of such income  tax where the total income exceeds ten lakh rupees.

However,  the total amount payable as income-tax and surcharge  shall not exceed the total amount  payable  as income tax  on  a total income of Rs.10,00,000/- by more  than the amount of income that exceeds Rs.10,00,000/-.

The amount of income-tax as increased by surcharge, if any,  mentioned above shall be further increased by an additional surcharge ( Education Cess on Income Tax) at the rate of two percent of the income-tax and surcharge.

Surcharge and Education Cess are payable by both resident and non-resident assessees.

  1. SECTION  192  OF THE INCOME-TAX ACT,1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”.

Method of Tax Calculation:

3.1  Every  person who is responsible for  paying  any income  chargeable  under the head “Salaries” shall  deduct income-tax  on  the estimated income of the assessee  under the head  “Salaries” for the financial year 2005-2006.  The income-tax is required to be calculated on the basis of the rates  given above and shall be deducted on average at  the time of each payment.  No tax will, however, be required to be deducted at source  in  any  case unless the  estimated  salary income including  the value of perquisites, for the financial year exceeds Rs.1,00,000/- or Rs.1,35,000/- or Rs.1,85,000/-, as the case may be, depending upon the age and gender of the employee.(Some typical examples of computation of tax are given at Annexure-I).

Payment of Tax on Non-monetary Perquisites by Employer:

3.2   An option has been given to  the   employer to pay the tax   on non-monetary perquisites given to an employee.  The employer  may, at his  option, make  payment of the tax on  such perquisites  himself without making   any  TDS  from  the  salary  of the  employee.  The employer will have to   pay  such tax at the time when such tax  was  otherwise  deductible  i.e.  at the  time of payment of income chargeable under the head  salaries to the employee.

Computation of Average Income Tax:

3.3  For the purpose  of  making  the  payment  of  tax mentioned in para 3.2 above, tax  is to be determined at the  average  of   income  tax  computed on the  basis of rate in force  for  the financial  year, on  the  income  chargeable under   the  head  “salaries”,  including the  value   of  perquisites   for  which   tax  has been paid by the employer himself.

ILLUSTRATION:

Suppose that the income chargeable under the head ‘salary’ of a male employee below sixty-five years of age for the year inclusive of all perquisites is Rs.2,40,000/-, out of which, Rs.40,000/- is on account of non-monetary perquisites and  the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.

 

STEPS:

Income Chargeable under the head “Salaries”

inclusive of all perquisites:                                                Rs.  2,40,000

Tax on Total Salaries   :                                                      Rs.    23,000

Average Rate of Tax [(23,000/2,40,000) X 100]:        9.58%

Tax payable on Rs.40,000/-

( 9.58% of 40,000):                                                             Rs.   3,833

Amount required to be deposited each month:             Rs.  319

(3,833/ 12)

The   tax  so   paid  by  the  employer shall be deemed to be  TDS made from the salary of the employee.

Salary From More Than One Employer:

3.4  Sub- section   (2)   of  section   192  deals with  situations where  an  individual  is working under more than   one employer  or has changed from   one employer to  another.   It provides for deduction  of  tax at source by such employer  (as the  tax payer may choose)   from the aggregate salary of  the employee  who is or has been in receipt of salary  from  more than  one  employer.  The employee is now required  to furnish  to  the  present/chosen employer  details  of  the  income  under  the head “Salaries” due or received  from  the former/ other  employer  and  also tax  deducted  at  source  therefrom,  in writing and duly verified by him and by  the   former/other  employer.   The  present/ chosen   employer  will  be  required to deduct tax at source on the aggregate amount of  salary  (including salary received from the former or other  employer).

Relief When Salary Paid in Arrear or Advance:

3.5 Under  sub-section (2A) of section 192 where  the assessee,  being  a Government servant or an employee in  a  company, co-operative society, local authority, university, institution,  association or body is entitled to the relief under  Sub-section (1) of Section 89, he may furnish to the person  responsible  for making the payment referred to  in     Para (3.1), such particulars in Form No.  10E duly verified by him,  and thereupon the person responsible as  aforesaid shall  compute the relief on the basis of such  particulars and take the same into  account  in   making  the deduction  under Para(3.1) above.

     Explanation  :-  For this purpose “University means  a  University  established  or  incorporated  by  or  under  a Central,   State  or  Provincial   Act,  and  includes   an institution  declared  under  section 3 of  the  University Grants  Commission  Act, 1956(3 of 1956), to be  University for the purposes of the Act.

Furnishing of Declaration by Taxpayer in Form 12C

3.6   (i) Sub-section (2B) of section 192 enables a taxpayer to furnish  particulars  of income under any head  other  than “Salaries” and of any tax deducted at source thereon in the prescribed  form  No.12C (Annexure II). (Form no. 12C has since been omitted from the Income Tax Rules. However, the particulars may now be furnished in a simple statement, which is properly verified by the taxpayer in the same manner as in Form 12C.)

(ii) Such income should  not  be a loss under any such head other  than  the  loss under  the  head “Income from House Property” for  the same financial  year.   The person responsible for  making payment (DDO) shall take such other income and tax, if any, deducted  at source from such income, and the loss, if any,  under  the  head “Income from House Property” into  account  for the  purpose of computing tax deductible under  section 192 of  the Income-tax Act. However, this sub-section  shall not in any case have the effect  of reducing the tax deductible (except where the loss under the  head “Income  from  House  Property” has  been  taken  into   account)  from  income under the head “Salaries” below  the   amount  that would be so deductible if the other income and the tax deducted thereon had not been taken into account’. In other words, the DDO can take into account any loss (negative income)only under the head “income from House  Property” and no other head for working out the  amount  of total  tax  to be deducted.  While taking into the  account the loss from House Property, the DDO shall ensure that the assessee  files  the declaration referred to above and  encloses therewith  a computation of such loss from House  Property.

(iii) Sub-section (2C) lays down that a person responsible for paying any income chargeable under the head “salaries” shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in form no. 12BA. (Annexure-III ). Form no. 12BA along with form no. 16, as issued by the employer, are  required to be filed by the employee along with the return of income for the relevant year.

Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property

3.7(i)  For  the  purpose of  computing income / loss  under  the   head `Income   from House  Property’ in  respect   of a  self-occupied residential house, a normal deduction of Rs.30,000/- is allowable in respect of interest on borrowed capital. However, a   deduction   on account of interest   up to  a maximum limit of Rs.1,50,000/- is available if  such  loan   has  been  taken on or after 1.4.1999 for constructing or  acquiring  the residential  house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest upto Rs.1,50,000/-, the employee should furnish a certificate from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the  residential house or for conversion of a part or whole of the capital borrowed, which remains to be repaid as a new loan.

3.7(ii)The essential conditions necessary for availing higher  deduction  of interest of Rs.1,50,000/- are that the  amount of capital  must have been borrowed on or after 01.4.1999 and the acquisition or construction  of residential house must have been completed  within three  years  from the end of the financial year  in  which  capital  was  borrowed.  There is no stipulation  regarding the date  of  commencement of construction. Consequently, the construction of  the  residential  house  could   have  commenced   before   01.4.1999   but,  as   long   as   its   construction/acquisition is completed within  three  years, from the  end  of the financial year in which  capital  was borrowed  the  higher deduction would be available in respect of the capital borrowed after 1.4.1999.   It may also be noted that there  is  no  stipulation   regarding  the   construction/ acquisition of the residential unit being entirely financed by capital borrowed on or after 01.4.1999.The loan taken prior  to 01.4.1999  will carry deduction of interest up to Rs.30,000/ only. However, in any case the total amount of deduction of interest on borrowed capital will not exceed Rs.1,50,000/- in a year.

Adjustement for Excess or Shortfall of Deduction:

3.8  The provisions of sub-section (3) of Section  192 allow  the  deductor to make adjustments for any excess  or  shortfall  in the deduction of tax already made during  the financial  year,  in  subsequent deductions for that employee within  that financial year itself.

TDS on Payment of Balance Under Provident Fund and Superannuation Fund:

3.9  The  trustees of a Recognized Provident Fund,  or  any person  authorized  by the regulations of the  Fund  to  make payment  of  accumulated  balances due  to  employees, shall,  in  cases where sub-rule(1) of rule 9 of Part A  of the Fourth  Schedule  to the Act applies, at the time  when the accumulated  balance  due to an employee is paid,  make therefrom  the deduction specified in rule 10 of Part A  of the Fourth Schedule.

3.10 Where  any  contribution  made  by  an  employer,   including  interest  on such contributions, if any,  in  an approved  Superannuation Fund is paid to the employee,  tax on the  amount so paid shall be deducted by the trustees of the Fund  to the extent provided in rule 6 of Part B of the Fourth Schedule to the Act.

Salary Paid in Foreign Currency:

3.11   For  the purposes of deduction of tax on salary    payable  in  foreign currency, the value in rupees of such  salary  shall  be  calculated  at the  prescribed  rate  of exchange.

4.PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES:

4.1.   Under clause (i) of Section 204 of the Act the “persons responsible for paying” for the purpose of Section 192 means  the  employer  himself or if the employer  is  a  Company, the Company itself including the Principal Officer thereof.

4.2.   The  tax  determined as per para  6  should  be deducted from the salary u/s 192 of the Act.

Deduction of Tax at Lower Rate:

4.3.   Section  197 enables the tax-payer to  make  an  application in form No.13 to his Assessing Officer, and, if the Assessing Officer is satisfied that the total income of the tax-payer  justifies the deduction of income-tax at any lower  rate or no deduction of income tax, he may issue  an appropriate  certificate  to  that effect which  should  be taken  into  account by the Drawing and Disbursing  Officer while  deducting  tax at source.  In the absence of such  a certificate  furnished by the employee, the employer should  deduct  income  tax  on  the salary payable at  the  normal  rates: (Circular No.  147 dated 28.10.1974.)

Deposit of Tax Deducted:

4.4.   According to the provisions of section 200, any person  deducting any sum in accordance with the provisions  of Section  192 or paying tax on non-monetary perquisites  on behalf of the employee under Section 192(1A), shall pay the sum so deducted or tax so calculated on the said non-monetary perquisites, as the case may be, to the credit of the Central Government in prescribed  manner  (vide Rule 30 of the Income-tax  Rules,1962).  In the case of deductions made by, or, on behalf of the  Government,  the payment has to be made on the day  of the  tax-deduction itself.  In other cases, the payment has to be made within one week from the last day of month in which deduction is made.

Penalty for Failure to Deposit Tax Deducted:

4.5  If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole  or any part of the tax to the credit of the  Central Government  within the prescribed time, he shall be  liable to action in accordance with the provisions of section 201. Sub-section  (1A) of section 201 lays down that such person shall  be liable to pay simple interest at twelve per cent per annum  w.e.f.  08.9.2003 on the amount of such tax from the date  on  which such tax was deductible to the date  on which the tax is actually paid.  Section 271C lays down that if  any person  fails  to  deduct tax at source,  he  shall  be  liable to pay, by way of penalty, a sum equal to the amount  of tax  not  deducted by him.  Further, section  276B  lays   down that  if  a person fails to pay to the credit  of  the   Central  Government  within  the prescribed  time  the  tax  deducted  at  source  by him, he shall be  punishable  with  rigorous  imprisonment for a term which shall be between  3  months and 7 years, and with fine.

             Furnishing of Certificate for Tax Deducted:

4.6  According to the provisions of section 203, every  person  responsible for deducting tax at source is required  to furnish  a  certificate to the payee to the effect  that tax has  been  deducted and to specify therein  the  amount deducted  and certain other particulars.  This certificate, usually  called  the “TDS certificate”, has to  be  furnished within  a period of one month from the end of the  relevant   financial  year.  Even the banks deducting tax at the  time   of payment   of   pension  are   required  to  issue   such  certificates.   In the case of

employees receiving  salary income (including pension), the certificate has to be issued in Form  No.16. However, in the case of an employee who is resident in India and whose income from salaries, before allowing standard deduction, does not exceed Rs.1,50,000/-, the certificate of deduction of tax shall be issued in Form No. 16AA ( Specimen form 16AA enclosed as ANNEXURE-IV). It  is, however, clarified that there is no obligation to issue the TDS certificate  (Form  16 or Form 16AA)  in case tax at source  is  not  deductible/deducted  by virtue of claims of exemptions  and  deductions. As per  section  192,   the  responsibility of providing correct and complete particulars  of  perquisites or profits in lieu  of  salary   given to  an employee is placed on the person  responsible for paying  such  income i.e., the person  responsible  for   deducting  tax  at  source.  The form and  manner  of  such particulars are prescribed in Rule 26A, Form 12BA, Form 16 and Form 16AA of  the  Income-tax  Rules .

Information relating to  the nature  and  value of perquisites is to be provided  by  the employer in Form no. 12BA  in  case of salary above  Rs.1,50,000/-. In  other  cases, the information would have to be provided  by the employer  in Form 16 itself.  In either case, Form 16 with Form 12BA or Form 16 by itself will have to be furnished within  a  period  of one month from the end   of  relevant financial year.

An employer, who has paid the tax on perquisites on behalf of the employee as per the provisions discussed   in  paras 3.2 and 3.3, shall furnish to the employee concerned a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate  at which  tax has been paid and certain other particulars in the amended Form 16.

The obligation cast on the employer under Section 192(2C) for furnishing  a  statement  showing the value  of  perquisites  provided to the employee is a serious responsibility of the  employer,  which is expected to be discharged in  accordance  with law  and  rules of valuation framed  thereunder.   Any false  information, fabricated documentation or suppression of requisite information will entail consequences therefore provided under the law. The certificates in form no.12BA and form no. 16 are to be issued on tax-deductor’s  own  stationery within one month  from  the close  of  the  financial year i.e. by April 30  of  every year.   If  he  fails to issue these  certificates  to  the person  concerned,  as required by section 203, he  will  be liable to pay, by way of penalty, under section 272A, a sum which  shall  be  Rs.100/- for every day during  which  the failure continues.

Mandatory Quoting of PAN and TAN:

4.7 According to the provisions of section 203A of the Income-tax   Act,   it  is   obligatory  for  all   persons  responsible for deducting tax at source to obtain and quote the Tax-deduction  Account  No. (TAN)  in  the  Challans, TDS-certificates,  returns  etc.  Detailed instructions  in  this regard  are  available in this  Department’s  Circular No.497 (F.No.275/118/87-IT(B) dated 9.10.1987). If a person  fails  to  comply with the provisions of section  203A,  he will be  liable  to pay, by way of penalty,  under  section 272BB,  a  sum of ten thousand rupees.  Similarly,  as  per Section  139A(5B),  it is obligatory for persons  deducting tax at source to quote PAN of the persons from whose income tax has  been  deducted  in  the  statement  furnished  u/s 192(2C),  certificates  furnished u/s 203 and  all  returns prepared and delivered as per the provisions of Section 206 of the Income Tax Act, 1961.

Annual Return of TDS:

4.8.   According  to the provisions of section 206  of the Income-tax  Act,  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, the prescribed person in the case of every  local authority or other public body or association, every  private employer and every other person  responsible for deducting tax under section 192, from “Salaries” shall, after  the end of each financial year, prepare and deliver, by 30th June following the financial year, an annual return of deduction  of tax to the designated/concerned  Assessing   Officer.   It is now mandatory for all offices of the Government and all companies to file the annual return of TDS on computer media only in accordance with the “Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003” as notified vide Notification No. S.O. 974 (E) dated 26.8.2003. (ANNEXURE-V) . Accordingly, the annual TDS return for financial year 2005-06, which would be required to be filed by 30.6.2006, would be filed by the Government deductors in electronic format only with the e-TDS Intermediary at any of the TIN Facilitation Centres, particulars of which are available at www.incometaxindia.gov.in and at http://tin.nsdl.com . If a person fails to furnish  the annual return in  due  time, he shall be liable to pay by way of penalty  under section 272A, a sum which shall be  Rs.100/-  for every  day  during  which the failure continues. However,  this sum shall not exceed the amount of  tax which was deductible at source.

4.9.   A return filed on the prescribed computer readable media shall be deemed to be  a return  for the purposes of section 206 and the Rules  made thereunder,  and  shall  be admissible  in  any  proceeding thereunder,  without  further  proof of production  of  the original, as evidence of any contents of the original.

Challans for Deposit of TDS:

4.10. While  making the payment of tax  deducted  at source  to the credit of the Central Government, it may  be ensured  that the correct amount of income-tax is  recorded  in the  relevant challan.  It may also be ensured that  the right  type  of challan is used.  The relevantchallan  for making  payment of tax deducted at source from salaries is challan no. ITNS-281.  Where the amount  of  tax deducted  at  source is credited to the Central  Government through  book  adjustment, care should be taken  to  ensure that the correct amount of income-tax is reflected therein.

TDS on Income from Pension:

4.11.   In  the case of pensioners who  receive their   pension from  a  nationalized bank,  the instructions contained  in this circular shall apply in the same  manner as they  apply  to salary-income.  The deductions from  the amount  of  pension under section 80C  on  account  of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioners furnish the relevant details to the banks, may be allowed.  Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other  nationalized  Banks  vide  RBI’s  Pension   Circular(Central  Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64(11CVL)-/92) dated  the  27th  April, 1992, and, these  instructions should be followed by all the  branches of the  Banks,  which have been entrusted with the task  of payment of pensions.  Further all branches of the banks are  bound  u/s 203 to issue certificate of tax deducted in Form  16 to the pensioners also vide CBDT circular no.  761 dated 13.1.98.

Important Circulars:

4.12.   Where  Non-Residents  are deputed to  work  in India  and  taxes are borne by the employer, if any  refund  becomes due to the employee after he has already left India  and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the  tax has been borne by it :Circular No.  707 dated 11.7.1995.

4.13.   TDS certificates issued by Central  Government departments  which are making payments by book  adjustment, should  be  accepted  by  the Assessing  Officers  if  they indicate  that  credit has been effected to the Income  Tax Department  by  book  adjustment  and   the  date  of  such adjustment  is given therein.  In such cases, the Assessing Officers  may  not insist on details like challan  numbers, dates  of  payment into Government Account etc.,  but  they should  in  any  case satisfy  themselves  regarding  the genuineness  of  the  certificates produced before  them  : Circular No.  747 dated 27.12.1996.

4.14  There  is  a specific procedure  laid  down  for  refund  of payments made by the deductor in excess of taxes deducted   at   source,  vide Circular  No. 285 dated 21.10.1980.

4.15  In respect of non-residents, the salary paid for services  rendered  in  India shall be regarded  as  income earned  in  India. It has been specifically provided in the Act that  any  salary  payable  for rest period or leave period  which  is both preceded  or  succeeded by service in India and  forms part of  the  service contract of employment will  also  be regarded as income earned in India.

New Procedure for TDS Returns and Quarterly Statements with effect from 1st of April, 2005:

4.16.       a) The person deducting the tax (employer in case of salary income), is required to file Quarterly Statements for the periods ending on 30th June, 30th September, 31st December and 31st March of each financial year, duly verified, to the Director General of Income Tax (Systems) or M/s National Securities Depository Ltd (NSDL). These statements are required to be filed on or before the 15th  July, the 15th  October, the 15th  January in respect of the first three quarters of the financial year and on or before the 15th June  following the last quarter of the financial year.

  1. b) The Quarterly Statements are be filed on computer media only in accordance with rule 31A of the Income-tax Rules, 1962. In case of failure in filing of the Quarterly Statement, the person deducting the tax shall be liable for a penalty under section 272A(2)(k) of Rs.100 for each day of default.These Quarterly Statements compulsorily require quoting of the Tax Deduction Account Number (TAN) of the tax deductor and the Permanent Account Number(PAN) of the employees whose tax has been deducted. Therefore, all Drawing and Disbursing Officers of the Central and State Governments/ Departments, who have not yet obtained TAN, must immediately apply for and obtain TAN. Similarly, all employees (including non-resident employees) from whose income, tax is to be deducted may be advised to obtain PAN, if not already obtained, and to quote the same correctly, as otherwise the credit for the tax deducted cannot be given. A penalty under section 272B of Rs.10,000/- has been prescribed for willfully intimating a false PAN.
  1.   ESTIMATION OF INCOME UNDER THE HEAD “SALARIES:

        5.1 Income chargeable under the head “Salaries”.

(1)  The  following  income  shall  be  chargeable  to  income-tax under the head “Salaries” :

(a) any  salary  due from an employer or  a  former

employer  to an assessee in the previous  year,

whether paid or not;

(b) any  salary  paid  or  allowed to  him  in  the

previous year by or on behalf of an employer or

a  former employer though not due or before  it

became due to him.

(c) any arrears of salary paid or allowed to him in

the  previous  year  by  or  on  behalf  of  an

employer  or a former employer, if not  charged

to income-tax for any earlier previous year.

(2) For  the removal of doubts, it is clarified that where any salary paid in advance is included in the  total income  of any person for any previous year it shall not be included  again in the total income of the person when  the salary  becomes  due.   Any salary,  bonus,  commission  or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “Salary”.

Definition of Salary:

(3)   “Salary”  includes   wages,  fees,  commissions, perquisites, profits in lieu of, or, in addition to salary, advance  of salary, annuity or pension, gratuity,  payments   in respect  of  encashment of leave etc.  It also  includes   the annual  accretion  to  the   employee’s  account  in  a  recognized provident fund to the extent it is chargeable to tax under  rule  6 of Part A of the Fourth Schedule of  the Income-tax  Act .Contributions  made by the  employer to the   account of the employee in a recognized provident fund   in    excess  of  12%  of the salary of the  employee,  along with  interest applicable, shall be included in the income of the  assessee  for  the previous year. Any contribution made by the Central Government to the account of the employee under the New Pension Scheme as notified vide Notification No. F.N. 5/7/2003- ECB&PR dated 22.12.2003 (copy enclosed as Annexure-VA) and referred to in section 80CCD (para 5.4(E) of this Circular) shall also be included in the salary income.  Other items included  in  salary,  profits  in  lieu of salary  and  perquisites  are  described  in Section 17 of the Income-tax Act.  The  scope of the term profit in lieu of salary has been amended so as   not to  include  interest  on   contributions  or  any  sum  received  under a Keyman insurance policy including the sum allocated  by way of bonus on such policy.  For the purposes  of  this sub-clause, the expression Keyman insurance  policy   shall  have  the meaning assigned to it in clause  (10D)  of    section  10.   It may be noted that, since  salary  includes   pensions,  tax  at  source would have to  be  deducted  from  pension  also, if otherwise called for.  However, no tax  is   required to be deducted from the commuted portion of pension  as explained in clause (3) of para 5.2 of this Circular.

(4) Section 17  defines the   terms “salary”,  “perquisite”   and   “profits in  lieu   of salary”.

Perquisite includes:

  1. The value of rent free accommodation provided to the employee by his employer;
  2. The value of any concession in the matter of rent in respect of any accommodation provided to the employee by his employer;
  3. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases:
  1. By a company to an employee who is a director of such company;
  1. By a company to an employee who has a substantial interest in the company;
  2. By an employer (including a company)to an employee, who is not covered by (i) or (ii) above and whose income under the head Salaries ( whether due from or paid or allowed by one or more employers), exclusive of the value of all benefits and amenities not provided by way of monetary payment, exceeds Rs.50,000/_.

The rules relating to valuation of such benefits and amenities have been prescribed in Rule 3. It is further provided that ‘profits    in lieu  of salary’ shall include amounts received in  lump  sum or otherwise, prior to employment or after cessation of  employment for the purposes of taxation.  The rules for valuation of perquisite are as under :  –

  1. Accommodation :- For purpose  of valuation  of  the perquisite of unfurnished  accommodation, all employees are divided into two categories: I) Govt. & State  Govt.   employees;  and ii)Others.

For  employees of the Central and State government the value  of  perquisite  shall be equal to  the  licence  fee charged for such accommodation as reduced by the rent actually paid by the employee.

For  all others, i.e., those salaried taxpayers not in employment of  the  Central   government  and  the  State government, the  valuation  of perquisite  in  respect  of accommodation  would  be at prescribed rates, as discussed below:Where the accommodation provided to the employee is owned by the employer, the rate  is 20% of  ‘salary’ in cities having population exceeding four lakh  as  per  the  2001 census.  For  other  places,  the perquisite value would be 15% of salary.

Where the accommodation so provided is taken on lease/ rent by the employer, the prescribed rate is 20% of the salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee.

For furnished accommodation, the value of perquisite as determined by the above method shall be increased by-

  1. 10% of the cost of furniture, appliances and equipments, or
  2. where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable.

– as reduced by any charges paid by the employee himself.

The scope of the word “accommodation” has been widened to include a house, flat, farm  house, hotel  accommodation, motel, service apartment guest house, a caravan,  mobile  home, ship etc.  However, the value  of any accommodation  provided to  an employee  working  at  a  mining site or  an on-shore  oil exploration  site  or  a  project   execution  site or a dam site or a power generation site  or  an off-shore site will  not  be treated  as a perquisite. However, such accommodation should either be located in a “remote area” or where it is not located in a “remote area”, the accommodation should be of a temporary nature having plinth area of not more than 800 square feet and should not be located within 8 kilometers of the local limits of any municipality or cantonment board.  A project execution site for the  purposes of this  sub-rule means a site of project up to the stage of its commissioning.   A “remote area” means an area  located at least 40 kilometers away from a town having a population not exceeding  20,000 as per the latest published all-India census. Off-shore sites of similar nature do not have  to  meet any requirement of distance.

If  an  accommodation is provided by an employer in  a hotel  the value of the benefit in such a case shall be 24% of the  annual salary or the actual charges paid or payable to such  hotel,  whichever is lower, for the period  during which such accommodation is provided as reduced by any rent actually  paid or payable by the employee.  However,  where in cases  the employee is provided such accommodation for a period  not exceeding in aggregate fifteen days on transfer  from one  place  to another, no perquisite value  for  such accommodation provided in a hotel shall be charged. It may  be clarified  that  while services provided as an  integral part of the accommodation, need not be valued separately as  perquisite,  any  other  services over and above  that  for which the employer makes payment or reimburses the employee shall be valued as a perquisite as per the residual clause. In other  words, composite tariff for accommodation will be valued  as per these Rules and any other charges for  other facilities  provided by the hotel will be separately valued under  the  residual clause. Also, if on account of  an employee’s transfer from one place to another, the employee is provided  with accommodation at the new place of posting while  retaining the accommodation at the other place,  the value of perquisite shall be determined with reference to only one  such accommodation which has the lower value as per the  table prescribed in Rule 3 of the Income Tax Rules,  for  a period  up to  90  days. However,  after  that  the  value of perquisite  shall be charged for both accommodations as prescribed.

II  Personal  attendants etc.:  The  value of free service of all personal  attendants including  a  sweeper, gardener and a watchman is to be  taken at   actual  cost  to  the  employer. Where  the  attendant  is   provided  at the residence of the employee, full cost will be  taxed   as  perquisite  in  the   hands  of   the   employee irrespective  of the degree of personal service rendered  to him.  Any amount paid by the employee for such facilities or services shall be reduced from the above amount.

III Gas, electricity & water: For free  supply of  gas, electricity  and  water  for household consumption, the rules provide that the amount paid by the  employer  to  the  agency supplying the amenity shall be the value of perquisite. Where  the supply is made from the employer’s own resources, the  manufacturing  cost per unit incurred by  the  employer would  be taken for the valuation of perquisite.  Any amount paid by the employee  for  such facilities or services shall be  reduced from the above amount.

        IV  Free  or concessional education:  Perquisite on account of free  or concessional education shall be valued in a  manner assuming  that such expenses are borne by the employee,  and would  cover  cases  where  an   employer  is  running, maintaining or  directly  or indirectly  financing   the  educational  institution.   Any amount paid by the  employee for  such facilities or services shall be reduced from  the above  amount.  However, where such educational  institution itself is maintained and owned by the employer or where such  free  educational facilities are provided in any institution by  reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality if the cost of such education  or such benefit per child    exceeds Rs.1000/- p.m.

V  Interest  free  or concessional loans – It  is  common practice, particularly in financial institutions, to  provide interest free or concessional loans to employees or any member of his household.  The value of  perquisite arising from such loans would be the excess of interest  payable at  prescribed  interest rate over interest, if any, actually  paid  by  the employee or any member of his household.  The prescribed interest rate  would  now  be  the rate charged per annum by the State Bank of India as on the 1st day of the relevant financial year in respect of loans of same type and for the same purpose advanced by it to the general public. Perquisite  value  would  be   calculated  on the basis of the maximum outstanding  monthly balance method. For valuing perquisites under this rule, any other method of calculation and  adjustment otherwise adopted by the employer shall  not be relevant.

However, small loans up to  Rs.  20,000/- in the aggregate are exempt.  Loans  for  medical  treatment  specified  in Rule 3A are  also  exempt,  provided the amount of loan for medical reimbursement is not reimbursed  under  any medical insurance scheme.  Where  any medical  insurance reimbursement is received, the perquisite value  at the prescribed  rate shall be charged from the  date  of reimbursement  on  the  amount reimbursed,  but  not  repaid against  the  outstanding loan taken specifically  for  this purpose.

VI    Use  of  assets:  It is common practice for an  asset    owned by  the  employer  to be used by the  employee. This perquisite  is  to  be  charged at the rate of  10%  of  the   original  cost  of the asset as reduced by any charges  recovered from the employee   for such  use.   However, the use of Computers and Laptops would not give rise to any perquisite.

VII   Transfer  of assets:  Often an employee or member  of  his household  benefits  from the transfer of movable  asset (not being  shares  or securities) at no cost or at  a  cost  less than   its  market  value   from  the  employer.    The  difference   between  the  original   cost  of  the  movable   asset(not  being shares or securities) and the sum, if  any,  paid by  the  employee,  shall  be taken  as  the  value  of  perquisite.   In case of a movable asset, which has  already  been put to use, the original cost shall be reduced by a sum  of 10% of such original cost for every completed year of use of the asset.   Owing to a higher degree of obsolescence, in  case of computers and electronic gadgets, however, the value   of perquisite  shall  be worked out by reducing 50%  of  the   actual cost   by  the  reducing   balance  method  for  each  completed  year  of  use.  Electronic gadgets in  this  case means data  storage  and  handling  devices  like  computer, digital  diaries and printers.  They do not include household appliance  (i.e.   white  goods)   like  washing   machines, microwave  ovens, mixers, hot plates, ovens etc.  Similarly, in case of  cars,   the value of perquisite shall be worked out by reducing 20%  of its actual cost by the reducing  balance  method for each completed year of use.

VIII. Employee Stock Option Plan:   Prior  to Finance Act, 2000, stock options were taxed    at two stages   i.e.,  as  perquisite    (on   the   amount  representing  the difference between the exercise price  and the fair  market  value  on the date of  exercise),  and  as  capital  gains at the time of transfer of the same.   With  effect from  1.4.2001 (relevant to  assessment  year 2001-2002) onward, stock options issued  as  per guidelines  of  the Central Government are to  be  taxed  only once, at the time of sale, as capital gains.  In cases, where  perquisite  has  been assessed with  reference  to exercise  of the option by the employee under Section 17(2),  the  fair market value at the time of exercise of the option  shall  be  the cost of acquisition of share for working  out the  capital gains.  The relevant guidelines of the  Central Government  have  been issued vide  Notification  No.1021(E) dt.11.10.2001. Stock  options not in conformity  with  the above   guidelines   (non-qualified   stock  options) shall  continue  to be taxed at both the stages.

It is pertinent to mention that  benefits  specifically exempt   u/s  10(13A),  10(5),    10(14), 17 etc.  would continue to be exempt.  These include benefits  like  travel on tour and transfer,  leave  travel, daily allowance to meet tour expenses as prescribed, medical      facilities  subject to conditions.

5.2 Incomes not included in the Head “Salaries”(Exemptions)

Any income falling within any of the following clauses shall not be included in computing the income from salaries for the purpose of Section 192 of the Act :-

(1) The  value  of   any  travel  concession or  assistance  received  by  or due to an  employee  from  his employer  or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India or   (b)  on  retirement   from  service,  or,  after termination  of  service  to any place in India  is  exempt under clause  (5)  of Section 10 subject, however,  to  the  conditions  prescribed in rule 2B of the Income-tax  Rules,            1962.

For the purpose of this clause, “family” in relation to an individual means :

(i) The spouse and children of the individual;  and

(ii) the   parents,  brothers  and   sisters   of   the

individual  or  any  of  them,  wholly  or  mainly

dependent on the individual.

It may also be noted that the amount exempt under this clause  shall  in  no case exceed the  amount  of  expenses actually incurred for the purpose of such travel.

(2) Death-cum-retirement  gratuity  or   any  other gratuity  which  is  exempt to the  extent  specified  from inclusion  in computing the total income under clause  (10) of Section 10.

(3)  Any  payment in commutation of  pension  received under  the Civil Pension(Commutation) Rules of the  Central Government  or under any similar scheme applicable to  the members  of the civil services of the Union, or holders  of  civil  posts/posts connected with defence, under the Union, or civil  posts under a State, or to the members of the all India services/Defence Services, or, to the employees of a local  authority or a corporation established by a Central,            State  or Provincial Act, is exempt under sub-clause (i) of clause  (10A)  of  Section  10.   As  regards  payments  in commutation  of  pension received under any scheme  of  any other employer, exemption  will  be  governed by the      provisions of sub-clause (ii) of clause (10A) of section   10.

(4) Any payment received by an employee of the Central Government or a State Government, as cash-equivalent of the leave  salary  in respect of the period of earned leave  at his credit  at the time of his retirement on superannuation            or otherwise,  is  exempt  under  sub-clause(i)  of  clause (10AA) of Section 10.  In the case of other employees, this exemption will be determined with reference to the leave to their  credit at the time of retirement on  superannuation, or otherwise,  subject  to a maximum of ten months’  leave. This exemption  will  be  further limited  to  the  maximum amount  specified  by the Government of India  Notification No.S.O.588(E) dated 31.05.2002 at Rs. 3,00,000/- in relation to such employees who retire, whether on superannuation or otherwise, after 1.4.1998.

(5)  Under   Section 10(10B), the   retrenchment compensation  received by a workman is exempt from income-tax subject   to certain  limits.    The  maximum   amount   of retrenchment compensation exempt is the sum calculated on the  basis provided  in section 25F(b) of the Industrial  Disputes Act, 1947  or  any  amount not less than Rs.50,000/-  as  the Central  Government  may  by   notification  specify  in  the official  gazette, whichever is less.  These limits shall not          apply in  the  case where the compensation is paid under  any scheme  which  is  approved  in this behalf  by  the  Central Government,  having regard to the need for extending  special protection  to  the workmen in the undertaking to  which  the scheme applies and other relevant circumstances. The maximum limit of such payment is Rs. 5,00,000 where retrenchment is on or after 1.1.1977.

(6)  Under Section 10(10C), any payment received or receivable (even if received in instalments) by an  employee  of  the  following  bodies at  the  time  of  his voluntary  retirement  or  termination of his  service,  in accordance  with  any  scheme  or  schemes  of   voluntary retirement  or  in  the case of public sector company  ,  a scheme of voluntary separation, is exempted from income-tax to the  extent  that such amount does not exceed five  lakh            rupees:

  1. a) A public sector company;
  2. b) Any other company;
  3. c) An Authority established under a Central,

State or Provincial Act;

  1. d) A Local Authority;
  2. e) A Cooperative Society;
  3. f) A university established or incorporated or

under a Central, State or Provincial Act,

or, an Institution declared to be a

University under section 3 of the University

Grants Commission Act, 1956;

  1. g) Any Indian Institute of Technology within

the meaning of Clause (g) of Section 3 of

the Institute of Technology Act, 1961;

  1. h) Such   Institute  of   Management  as  the

Central  Government may by notification in

the  Official  Gazette,  specify  in  this

behalf.

It may also be noted that where this exemption has been allowed to any employee for any assessment year, it shall not be allowed  to  him  for  any  other  assessment  year. The exemption  of  amount  received  under VRS  has been extended  to  employees  of  the  Central Government and  State  Government employees and employees of notified institutions having importance throughout India or any State or States.

(7)  Any  sum received under a Life Insurance Policy, including  the  sum allocated by way of bonus on such policy other  than:

  1. any  sum  received under  sub-section  (3)  of section 80DD or sub-section (3) of section 80DDA

or,

  1. any sum received under Keyman insurance policy

or,

iii) any sum received under an insurance policy issued on or after 1.4.2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20 percent of the actual capital sum assured. However, any sum received under such policy on the death of a person would still be exempt.

(8)  any  payment from a Provident Fund to  which  the  Provident  Funds Act, 1925 ( 19 of 1925), applies ( or from any other  provident fund set up by the Central  Government and notified by it in this behalf in the Official Gazette).

(9) Under Section 10(13A) of the Income-tax Act, 1961,any special  allowance specifically granted to an  assessee by his  employer to meetexpenditure incurred on payment of rent (by  whatever  name called) in respect of  residential  accommodation  occupied  by  the assessee  is  exempt  from Income-tax  to  the  extent as may  be  prescribed,  having regard  to the area or place in which such accommodation is situated  and other relevant considerations.  According  to rule 2A of  the  Income-tax Rules, 1962,  the  quantum  of exemption   allowable  on  account  of  grant  of   special allowance to meet expenditure on payment of rent shall be:

(a)  The actual amount of such allowance received by an

employer in respect of the relevant period;  or

(b)  The actual expenditure incurred in payment of rent

in  excess  of  1/10  of the salary  due  for  the

relevant period;  or

(c)  Where  such  accommodation is situated in  Bombay,

Calcutta,  Delhi or Madras, 50% of the salary  due

to the employee for the relevant period;  or

(d)  Where  such accommodation is situated in any other

place,  40% of the salary due to the employee  for

the relevant period,

whichever is the least.

For this purpose, “Salary” includes dearness allowance,

if the terms of employment so provide, but excludes all other

allowances and perquisites.

It  has to be noted that only the expenditure  actually

incurred  on  payment  of rent in  respect  of  residential

accommodation  occupied  by  the assessee  subject  to  the

limits  laid down in Rule 2A, qualifies for exemption  from

income-tax.   Thus,  house  rent allowance  granted  to  an

employee  who  is residing in a house/flat owned by him  is

not exempt  from  income-tax.  The  disbursing  authorities

should  satisfy  themselves in this regard by insisting  on

production  of  evidence of actual payment of  rent  before

excluding  the House Rent Allowance or any portion  thereof

from the total income of the employee.

Though  incurring actual expenditure on payment of rent

is a  pre-requisite  for claiming deduction  under  section

10(13A),  it has been decided as an administrative  measure

that  salaried employees drawing house rent allowance  upto

Rs.3000/-  per  month will be exempted from  production  of

rent  receipt.   It  may,  however,   be  noted  that  this

concession  is  only  for the purpose of  tax-deduction  at

source, and, in the regular assessment of the employee, the

Assessing  Officer will be free to make such enquiry as  he

deems  fit  for the purpose of satisfying himself that  the

employee  has  incurred  actual expenditure on  payment  of

rent.

(10)  Clause (14) of section 10 provides for  exemption of the following allowances :-

(i) Any special  allowance  or benefit granted  to  an employee  to  meet  the expenses incurred  in  the performance of his duties as prescribed under Rule 2BB  subject to the extent to which such  expenses are actually incurred for that purpose.

(ii) Any  allowance  granted to an employee  either  to meet  his  personal expenses at the place  of  his posting  or at the place he ordinarily resides  or to  compensate  him  for  the  increased  cost  of living,  which may be prescribed and to the extent as may be prescribed.

However, the allowance referred to in (ii) above should not be in the nature of a personal allowance granted to the assessee to remunerate or compensate him  for  performing duties  of  a  special  nature relating to  his  office  or employment unless such allowance is related to his place of

posting or residence. The  CBDT has prescribed guidelines for the purpose  of clauses  (i)  and (ii) of Section 10(14) vide  notification No.SO617(E)  dated 7th July, 1995  (F.No.142/9/95-TPL)which has been   amended  vide  notification   SO  No.403(E)   dt 24.4.2000  (F.No.142/34/99-TPL).  The transport allowance granted  to  an  employee to meet his expenditure  for  the purpose of commuting between the place of his residence and the place  of  duty is exempt to the extent of  Rs.800  per month  vide  notification  S.O.No. 395(E) dated  13.5.98

(11) Under Section 10(15)(iv)(i) of the Income-tax Act, interest  payable by the Government on deposits made by  an employee of the Central Government or a State Government or a public   sector  company  from   out  of  his  retirement  benefits,  in  accordance with such scheme framed  in  this  behalf  by  the  Central  Government and  notified  in  the   Official   Gazette   is  exempt    from   income-tax. By  notification No.F.2/14/89-NS-II dated 7.6.89, as amended by

notification No.F.2/14/89-NS-II dated 12.10.89, the Central Government  has notified a scheme called Deposit Scheme for Retiring  Government Employees, 1989 for the purpose of the said clause.

(12)Clause (18) of Section 10 provides for exemption of any income  by way of pension received by an individual  or family  pension received by any member of the family of  an individual  who has  been  in the service  of  the  Central  Government  or State Government and has been awarded “Param  Vir Chakra”  or  “Maha Vir Chakra” or “Vir Chakra” or  such other  gallantry  ward as may be specifically notified  by  the Central  Government.   Such notification has been  made vide  Notifications No.S.O.1948(E)  dated  24.11.2000  and 81(E) dated  29.1.2001 which are enclosed as per Annexure- VIA & VIB

(13)  Under  Section 17 of the Act, exemption from  tax will also be available in respect of:-

(a)  the  value  of  any medical treatment provided  to  an  employee  or any member of his family, in any hospital maintained by the employer;

(b)  any  sum  paid  by  the employer  in  respect  of    any expenditure  actually incurred by the employee on  his medical treatment or of any member of his family:

(i) in any hospital maintained by the Government or any local  authority or any other hospital approved  by the   Government  for  the   purposes  of   medical treatment of its employees;

(ii)in respect of the prescribed diseases or ailments as  provided in Rule  3A(2) of I.T.  Rules  1962 , in any hospital  approved  by  the  Chief Commissioner having  regard  to  the prescribed  guidelines as provided in Rule 3(A)(1)of I.T.  Rule, 1962 :

In a case falling in sub-clause (ii)above, the employee  shall  attach  with his return  of  income  a   certificate  from  the hospital specifying the  disease  or ailment  for which medical treatment was required and  the receipt for the amount paid to the hospital.

(c)  premium  paid  by the employer in respect  of  medical

insurance  taken  for his employees (under any  scheme approved  by the Central Government) or  reimbursement of insurance premium to the employees who take medical insurance  for themselves or for their family  members (under any scheme approved by the Central Government);

(d)  reimbursement, by the employer, of the amount spent by an employee in obtaining medical treatment for himself or  any  member  of his family from  any  doctor,  not exceeding in the aggregate Rs.15,000/- in an year.

(e)  As  regards  medical  treatment   abroad,  the  actual   expenditure  on  stay  and  treatment  abroad  of  the  employee  or  any  member of his family, or,  on  stay  abroad  of one attendant who accompanies the  patient, in  connection  with such treatment, will be  excluded from  perquisites  to  the  extent  permitted  by  the Reserve Bank of India. It may be noted that  the  expenditure  incurred on travel abroad by the patient/attendant, shall  be  excluded  from   perquisites  only  if  the  employee’s  gross  total  income, as  computed  before including  the said expenditure, does not exceed  Rs.2 lakhs.

For the purpose of availing exemption on expenditure incurred on medical treatment, “hospital” includes a dispensary or clinic or nursing home, and  “family” in relation to an individual  means  the  spouse   and  children  of  the individual. Family  also  includes  parents,  brothers  and sisters  of  the  individual  if they are  wholly  or  mainly dependent on the individual.

5.3 Deductions u/s 16 of the Ac

Entertainment Allowance:

A deduction is  also  allowed under  clause  (ii)  of section  16 in respect of any allowance in the nature of an entertainment   allowance  specifically   granted by an employer to   the assessee, who is in receipt of a salary from the Government, a   sum  equal  to   one-fifth   of   his  salary(exclusive  of  any  allowance,   benefit  or   other perquisite) or five thousand rupees whichever is less. The deduction  hitherto available to non-government  employees has been withdrawn.

Tax On Employment:

The tax on employment (Professional Tax) within the meaning of clause (2) of Article 276 of the Constitution of India, leviable by or  under  any  law,  shall also be allowed as a  deduction  in            computing the income under the head “Salaries”.

It may be clarified that “Standard Deduction” from gross salary income of Rs. 30,000/- or Rs. 20,000/-, depending upon the amount of salaries, which was being allowed up to financial year 2004-05 shall not be allowed from financial year 2005-06 onwards

5.4  Deductions under chapter VI-A of the Act

In computing the taxable income of the employee, the  following deductions under Chapter VI-A of the Act are to be allowed from his gross total income:

  1. As per section 80C, an  employee will be entitled  to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,00,000/-:

(1)  Payment of insurance premium to effect or to  keep in force  an  insurance on the life of the individual, the spouse or any child of the individual

(2)  Any  payment made to effect or to keep in force  a  contract for a deferred annuity, not being an annuity plan  as is  referred to in item (7) herein below on the life  of the individual,  the  spouse or any child  of  the individual, provided that such contract does not contain a provision  for the exercise by the insured of an option  to receive  a  cash  payment  in lieu of the  payment  of  the annuity;

(3) Any sum deducted from the salary payable by, or, on  behalf  of  the Government to any individual, being  a  sum deducted  in accordance with the conditions of his  service for the  purpose  of securing to him a deferred annuity  or making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary;

(4) Any contribution made :

(a) by an individual to any Provident Fund to which the

Provident Fund Act, 1925 applies;

(b) to  any  provident  fund  set  up  by  the  Central Government,  and  notified by it in this behalf  in the Official Gazette, where such contribution is to an  account standing in the name of an individual, or spouse or children ;

              [The Central Government has since notified Public Provident Fund vide Notification S.O. No. 1559(E) dated 3.11.05.]

(c) by an employee to a Recognized Provident Fund;

(d) by an employee to an approved superannuation fund;

It  may be noted that “contribution” to any Fund  shall

not include any sums in repayment of loan;

(5) Any subscription :-

(a) to  any such security of the Central Government  or

any  such deposit scheme as the Central  Government

may,  by  notification  in  the  Official  Gazette,

specify in this behalf;

(b) to  any  such saving certificates as defined  under

section  2(c) of the Government Saving  Certificate

Act, 1959 as the Government may, by notification in

the  Official  Gazette,  specify  in  this  behalf.

                     [The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05.]

(6)  Any  sum  paid as contribution in the case  of  an  individual, for himself, spouse or any child,

(a)  for  participation  in the Unit  Linked  Insurance  Plan, 1971 of the Unit Trust of India;

(b)  for  participation  in any  unit-linked  insurance  plan  of  the  LIC  Mutual Fund  notified  by  the Central  Government under clause (23D) of  section 10.

                      [The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.]

(7)  Any subscription made to effect or keep in force a contract  for  such  annuity  plan of  the  Life  Insurance  Corporation  as the Central Government may by  notification in the Official Gazette, specify;

[The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No. 1562(E) dated 3.11.05.]

(8) Any subscription made to any units of any Mutual Fund, notified under clause(23D) of section 10, or from  the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under  any  plan formulated  in  accordance with any scheme as  the  Central Government,  may, by notification in the Official  Gazette, specify in this behalf;

      [The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose. The Notification issued in this regard is available at the website of the Income Tax Department at www.incometaxindia.gov.in]

The investments made after 1.4.2005 in plans formulated in accordance with Equity Linked Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for deduction under section 80C

(9).   Any  contribution made by an individual to  any  pension  fund  set  up by any Mutual  Fund  notified  under clause  (23D) of section 10, or, by the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the Central  Government  may,  by notification in  the  Official Gazette, specify in this behalf;

[The Central Government has since notified UTI-Retirement Benefit Pension Fund vide Notification S.O. No. 1564(E) dated 3.11.05.]

(10)  Any subscription made to any such deposit  scheme of, or,  any contribution made to any such pension fund set  up by, the National Housing Bank, as the Central Government may,  by  notification in the Official Gazette, specify  in this behalf;

(11) Any subscription made to any such deposit  scheme, as the Central Government  may,  by notification in the Official  Gazette, specify  for  the  purpose of being floated by  (a)  public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes,  or, (b) any authority constituted in India  by,   or, under  any  law,  enacted  either for  the  purpose  of    dealing   with   and  satisfying   the  need  for   housing   accommodation  or for the purpose of planning,  development or improvement of cities, towns and villages, or for both.

(12)  Any  sums paid by an assessee for the purpose  of purchase  or construction of a residential house  property, the income  from which is chargeable to tax under the  head “Income from house property” (or which would, if it has not been   used  for  assessee’s   own  residence,  have been chargeable  to tax under that head) where such payments are  made towards or by way of any instalment or part payment of the amount  due under any self-financing or other scheme of any Development Authority,   Housing   Board  etc.

The deduction  will also be allowable in respect of  re-payment of loans  borrowed  by an assessee from the Government,  or any bank or Life Insurance Corporation, or National Housing Bank,  or certain other categories of institutions  engaged in the   business  of  providing   long  term  finance  for construction or purchase of houses in India.  Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, or a public sector company,  or  a university established by law, or  a  college affiliated  to  such university, or a local authority, or  a   cooperative  society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act.

The stamp duty, registration fee and   other  expenses incurred for the purpose of transfer  shall   also  be  covered.   Payment  towards  the  cost  of  house property,  however, will not include, admission fee or cost of share  or initial deposit or the cost of any addition or alteration  to,  or,  renovation  or repair  of  the  house property  which  is  carried  out after the  issue  of  the completion certificate by competent authority, or after the  occupation  of  the house by the assessee or after  it  has been  let out.  Payments towards any expenditure in respect of which the deduction is allowable under the provisions of  section  24 of the Income-tax Act will also not be included in payments towards the cost of purchase or construction of a house  property.

Where the house property in respect  of which  deduction has been allowed under these provisions is transferred  by the tax-payer at any time before the expiry of five  years from the end of the financial year in  which possession  of  such  property  is obtained by  him  or  he receives back,  by  way of refund or  otherwise,  any  sum specified in section 80C(2)(xviii), no deduction under  these provisions shall be allowed in respect of such sums paid in such  previous  year in which the transfer is made and  the aggregate amount of deductions of income so allowed  in  the earlier years shall be added to the total income of the assessee of such previous year and shall be liable to tax accordingly.

(13) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee.

         It is clarified that any payment towards any development fees or donation or payment of similar nature does not qualify for deduction under these provisions.

(14)  subscription  to  equity   shares  or  debentures

forming  part of any eligible issue of capital made by a public company or by any public finance institution , which is approved by the Board.

(15)  Subscription  to  any units of  any  mutual  fund referred  to in clause (23D) of Section 10 and approved  by the Board for this purpose.

     It may be clarified that the amount of premium or other payment made on an insurance policy [other than a contract for deferred annuity mentioned in sub-para (2)] shall be eligible for deduction only to the extent of 20 percent of the actual capital sum assured. In calculating any such actual capital sum, the following shall not be taken into account:

  1. the value of any premiums agreed to be returned, or
  1. any benefit by way of bonus or otherwise over and above the sum actually assured which may be received under the policy.
  1. As  per section 80CCC, where an assessee being  an            individual  has in the previous year paid or deposited  any            amount  out  of his income chargeable to tax to  effect  or            keep  in  force  a contract for any annuity  plan  of  Life            Insurance  Corporation  of India or any other  insurer  for            receiving  pension  from  the Fund referred  to  in  clause            (23AAB)  of  section 10, he shall, in accordance with,  and            subject  to  the provisions of this section, be  allowed  a            deduction  in  the computation of his total income, of  the            whole  of the amount paid or deposited (excluding  interest            or bonus  accrued or credited to the assessee’s account, if any)  as does not exceed the amount of ten thousand     rupees in the previous year.

Where  any amount paid or deposited by the assessee has            been taken into account for the purposes of this section, a            rebate/ deduction  with reference to such amount shall not be  allowed under section 88 up to assessment year 2005-06 and under section 80C from assessment year 2006-07 onwards.

  1. As per the provisions ofsection 80CCD, where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004, has in the previous year paid or deposited any amount in his account under a pension scheme as notified vide Notification No. F.N. 5/7/2003- ECB&PR dated 22.12.2003 (copy enclosed as Annexure-VA), he shall be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed ten per cent of his salary in the previous year.

Where, in the case of such an employee, the Central Government makes any contribution to his account under such pension scheme, the employee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government as does not exceed ten per cent of his salary in the previous year.

Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is re­ceived by the assessee or his nominee, in whole or in part, in any financial year,—

(a) on account of closure or his opting out of such pension scheme; or

  1. b) as pension received from the annuity plan purchased or taken on such closure or opting out,

the whole of the amount referred to in clause (a) or clause (b) above shall be deemed to be the income of the assessee or his nominee, as the case may be, in the financial year in which such amount is received, and shall accordingly be charged to tax as income of that financial year.

For the purposes of deduction under section 80CCD, “salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

The aggregate amount of deduction under sections 80C, 80CCC and 80CCD shall not exceed Rs.1,00,000/- (Section 80CCE)

  1. Under  section  80D,  in  the  case  of  the  following            categories  of  persons, a deduction can be allowed for  a            sum not  exceeding  Rs.10,000/-  per annum  to  the  extent            payment is made by cheque out of their income chargeable to            tax to  keep  in  force an insurance on the health  of  the            categories  of  persons mentioned below provided that  such            insurance  shall  be in accordance with a scheme framed  in            this behalf by –

(a) the General Insurance Corporation of India formed under Section   9   of  the    General   Insurance Business  (Nationalization)Act, 1972 and approved by the Central Government in this behalf;  or

(b) any  other  insurer  and   approved  by  the  Insurance    Regulatory  and Development Authority established under    sub-section   (1)  of  Section  3  of   the   Insurance    Regulatory  and  Development Authority Act, 1999.

The categories of persons are :

(i) where  the  assessee is an individual, any sum paid  to

effect  or to keep in force an insurance on the  health

of  the  assessee  or  on the health  of  the  wife  or

husband, dependent parents or dependent children of the

assessee.

(ii) where the assessee is a Hindu Undivided Family, any sum

paid  to effect or to keep in force an insurance on the

health of any member of the family.

However,  the  deduction can be allowed for a  sum  not

exceeding  Rs.  15,000/- per annum where the assessee or  his

wife or  husband,  or dependent parents or any member of  the

family  (in case the assessee is a Hindu Undivided Family) is

a senior  citizen which means an individual resident in India

who is  of  the age of sixty-five years or more at  any  time

during the relevant previous year.

  1. Under section 80DD, where an assessee, who is a resident in India, has, during the previous year,-

(a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

(b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insur­er or the Administrator or the specified company subject to the conditions specified in this regard and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability,

the assessee shall be allowed a deduction of a sum of fifty thousand rupees from his gross total income of that year, subject to the conditions listed below:

However,  where such dependant is a person with severe disability, an amount of seventy-five thousand rupees shall be allowed as deduction subject to the specified conditions.

The deduction under this section shall be allowed only if the following conditions are fulfilled:-

A. (i) the scheme referred to in clause (b) above provides for payment of annuity or lump sum amount for the bene­fit of a dependant, being a person with disability, in the event of the death of the individual in whose name subscription to the scheme has been made;

(ii) the assessee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability.

However, if the dependant, being a person with disability, predeceases the assessee, an amount equal to the amount paid or deposited under sub-para (3)(b) above shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.

  1. The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner, along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed:

In cases where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority in the prescribed form and manner and a copy thereof is furnished along with the return of income.

For the purposes of section 80DD,—

(a)  “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) ;

(b)  “dependant” means—

(i)   in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them;

(ii)  in the case of a Hindu undivided family, a member of the Hindu undivided family,

dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year;

(c)  “disability” shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) and includes “autism”, “cerebral palsy” and “multiple disability” referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retar­dation and Multiple Disabilities Act, 1999 (44 of 1999);

(d)  “Life Insurance Corporation” shall have the same mean­ing as in clause (iii) of sub-section (8) of section 88;

(e)  “medical authority” means the medical authority as referred to in clause (p) of section 2  of the Persons with Disa­bilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) or such other medical authority as may, by notification, be specified by the Central Government for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person with disability” and “severe disability” referred to in clauses (a), (c), (h), (j) and (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabili­ties Act, 1999 (44 of 1999);

(f)  “person with disability” means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participa­tion) Act, 1995 (1 of 1996) or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabili­ties Act, 1999 (44 of 1999);

(g)  “person with severe disability” means—

(i)  a person with eighty per cent or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); or

(ii) a person with severe disability referred to in clause (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999);

(h)  “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002).]

  1.    Under Section 80Eof the Act a deduction will  be            allowed  in  respect of repayment of interest on loan taken for  higher education, subject to the following conditions:

(i)In computing the total income of an assessee, being an                 individual,  there  shall be deducted,  in  accordance with  and  subject to the provisions of this  section, any  amount  paid by him in the previous year, out  of his income chargeable to tax, by way of interest on                 loan,  taken by him from any financial institution  or any approved charitable institution for the purpose of pursuing  his  higher education.

(ii) The  deduction  specified above shall be  allowed  in computing  the total income in respect of the initial assessment   year   and    seven   assessment years

immediately succeeding the initial assessment year or until  the  interest  referred  to  above  is paid in  full by the assessee , whichever is earlier.

For this purpose –

(a) “approved    charitable    institution”    means   an

institution  established for charitable purposes  and

notified  by the Central Government under clause (2C)

of  section  10,  or, an institution referred  to  in

clause (a) of sub-section (2) of Section 80G.

(b) “financial  institution”  means a banking company  to

which  the Banking Regulation Act, 1949 (10 of  1949)

applies  (including  any bank or banking  institution

referred to in section 51 of that Act);  or any other

financial  institution  which the  Central Government

may, by notification in the Official Gazette, specify

in this behalf;

(c) “higher  education”  means full-time studies for  any

graduate  or  post-graduate   course  in  engineering

medicine, management, or, for post-graduate course in

applied   sciences   or   pure  sciences,   including

mathematics and statistics;

(d) “initial  assessment year” means the assessment  year

relevant  to the previous year, in which the assessee

starts paying the interest on the loan.

  1.  No deduction should be allowed by the D.D.O.  from the salary  income  in  respect of any donations  made  for charitable  purposes.  The tax relief on such donations  as admissible  under  section 80G of the Act, will have to  be claimed by the tax payer in the return of income.  However, D.D.O.  on  due  verification  may  allow  donations  to     following bodies to the extent of 50% of the contribution:
  1. i)  Jawaharlal  Nehru  Memorial   Fund.

ii)The Prime Minister’s Drought Relief Fund

iii)The National Children’s Fund,

Iv)The Indira Gandhi Memorial Trust,

  1. v) The Rajiv Gandhi Foundation.

and  to  the following bodies to the extent of 100%  of

the contribution:

  1. National  Defence  Fund or  The  Prime  Minister’s

National Relief Fund.

  1. The  Prime Minister’s Armenia  Earthquake  Relief

Fund.

iii.  The Africa (Public Contributions – India) Fund.

  1. The National Foundation for Communal Harmony.
  1. Chief Minister’s  Earthquake   Relief Fund   – Maharashtra.
  1.    National Blood Transfusion Council.

vii.    State Blood Transfusion Council.

viii.   Army Central Welfare Fund.

  1.  Indian Naval Benevolent Fund.
  1.  Air Force Central Welfare Fund.
  1.   The Andhra Pradesh Chief Minister’s Cyclone Relief Fund – 1996.

xii.    The National Illness Assistance Fund.

xiii.  The  Chief  Minister’s Relief Fund  or  Lieutenant  Governor’s  Relief Fund in respect of any State or  Union  Territory  as the case may be,  subject  to  certain conditions.

xiv.   The  University  or   Educational  Institution  of national  eminence  approved  by  the   Prescribed Authority.

  1. The  National Sports Fund to be set up by Central

Government.

xvi.    The  National Cultural Fund Set up by the Central Government.

xvii.   The   Fund for Technology Development and Application set by the Central Govt.

 

xviii.   The  National  Trust for Welfare of  persons with  Autism,  Cerebral  Palsy,   Mental Retardation  and Multiple disabilities.

  1. Under Section  80GG  of the Act  an  assessee  is entitled  to  a deduction in respect of house rent paid by him for  his own residence.  Such deduction is  permissible subject to the following conditions :-

(a)  the  assessee has not been in receipt of any  House

Rent  Allowance  specifically granted to him  which

qualifies  for  exemption under section 10(13A)  of

the Act;

(b)  the  assessee  files the declaration in Form  No.10

  1.  (Annexure-VII )

(c)  He  will  be entitled to a deduction in respect  of

house  rent paid by him in excess of 10 per cent of

his  total  income, subject to a ceiling of 25  per

cent  thereof or Rs.  2,000/- per month,  whichever

is  less.   The total income for working out  these

percentages  will  be  computed before  making  any

deduction under section 80GG.

(d)  The assessee does not own:

(i) any residential accommodation himself or by his

spouse  or minor child or where such assessee is  a

member of a Hindu Undivided Family, by such family,

at  the  place  where  he  ordinarily  resides   or

performs  duties  of his office or carries  on  his

business or profession;  or

(ii) at any  other   place, any residential accommodation being accommodation in the occupation of  the  assessee,  the  value of which  is  to  be determined  under clause (a)  of sub section  (2) or, as the case may be, clause (a) of sub-section (4) of section 23:

The  Drawing and Disbursing Authorities should  satisfy

themselves  that  all  the conditions mentioned  above  are

satisfied  before such deduction is allowed by them to  the

assessee.   They  should  also satisfy themselves  in  this

regard  by  insisting on production of evidence  of  actual

payment of rent.

  1. Undersection 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of fifty thousand rupees.

However, where such individual is a person with severe disa­bility, a higher deduction of seventy-five thousand rupees shall be allowable.

Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner along with the return of income, in respect of the assessment year for which the deduction is claimed.

In cases where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority in the prescribed form and manner and a copy thereof is furnished along with the return of income.

For the purposes of this section, the expressions “disability”, “medical authority”, “person with disability” and “person with severe disability” shall have the same meaning as given in section 80DD (sub-para E of para 5.4 of this Circular).

DDOs to satisfy themselves of the genuineness of claim:

(21) The Drawing and Disbursing Officers should satisfy          themselves about the  actual deposits/ subscriptions / payments  made by the employees, by calling for such  particulars/ information  as they  deem  necessary  before  allowing the aforesaid deductions.  In case the DDO  is   not satisfied about the genuineness of the employee’s claim  regarding any deposit/subscription/payment made by the employee,  he  should not allow the same, and the  employee would  be free to claim the deduction/ rebate on such amount by filing his return  of  income and furnishing the  necessary  proof etc.,  therewith,  to  the satisfaction  of  the  Assessing Officer.

  1. CALCULATION OF INCOME-TAX TO BE DEDUCTED:

6.1  Salary income for the purpose of Section 192 shall be computed as follow:-

(a)  First  compute  the gross salary as  mentioned  in

para  5.1  excluding all the incomes mentioned  in

para 5.2;

(b)  Allow  deductions  mentioned in para 5.3 from  the

figure arrived at (a) above.

(c) Allow  deductions  mentioned in para 5.4 from  the figure   arrived  at  (b)   above  ensuring   that  aggregate  of the deductions mentioned in para 5.4 does  not  exceed  the  figure of (b)  and  if  it exceeds,  it should be restricted to that  amount.

This  will be the amount of income from salaries on which income tax would be  required to be deducted.  This income should be rounded off to the nearest multiple of ten rupees.

6.2  Income-tax on such income shall be calculated at the rates given in para 2 of this Circular keeping in view the age and gender of the employee.

6.3  The amount of tax  payable  so arrived at shall be increased by surcharge (if applicable) and additional surcharge (Education Cess) at the   prescribed rate  to arrive at the total tax payable.

6.4 The amount of tax as arrived at para 6.3 should  be deducted  every month in equal installments.  Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year.

  1.   MISCELLANEOUS:

7.1  These  instructions  are not  exhaustive  and  are issued  only  with  a  view to  helping  the  employers  to understand  the various provisions relating to deduction of tax from  salaries.  Wherever there is any doubt, reference            may be  made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962 and the Finance Act 2005.

7.2  In case any assistance is required, the  Assessing Officer/the local Public Relation Officer of the Income-tax Department may be contacted.

7.3 These  instructions may be brought to  the notice   of  all  Disbursing   Officers  and   Undertakings  including  those  under  the control of  the  Central/ State Governments.

8.4  Copies  of  this Circular are available  with  the Director  of Income-tax(Research, Statistics & Publications and Public  Relations),  6th  Floor,  Mayur  Bhavan,  Indira Chowk, New Delhi-110 001 and at the following websites:

www.finmin.nic.in

www.incometaxindia.gov.in

(R.K. SAGAR)

Under Secretary(Budget)

Central Board of Direct Taxe

  1. All  State  Governments(including Administration of

Union Territories)

  1. All Ministries/Departments of Government of India etc.
  1. President’s Secretariat
  1. Vice-President’s Secretariat
  1. Prime Minister’s Office
  1. Lok Sabha Secretariat
  1. Rajya Sabha Secretariat
  1. Cabinet Secretariat
  1. Secretary, U.P.S.C., Dholpur House, New Delhi

10.Secretary, Staff Selection Commission, Lodhi Complex,  New Delhi

11.Supreme Court of India, New Delhi

12.Election Commission, New Delhi

13.Planning Commission, New Delhi

14.Secretariat of Governors/Lt.Governors of all States/Union Territories

15.All   Integrated   Financial   Advisors  to   Ministries/Departments of Government of India

16.All Heads of Departments & Offices subordinate to the

Department of Revenue CBDT, CBEC etc.

17.Army Headquarters, New Delhi

18.Air Headquarters, New Delhi

19.Naval Headquarters, New Delhi

20.Director-General of Posts & Telegraphs, New Delhi(10

copies)

21.Comptroller & Auditor General of India (50 copies)

22.Accountant General – I, Andhra Pradesh, Hyderabad

23.Accountant General-II, Andhra Pradesh, Hyderabad

24.Accountant General, Assam, Shillong

25.Accountant General-I, Bihar, Ranchi

26.Accountant General-II, Bihar, Patna

27.Accountant General-I, Gujarat, Ahmedabad

28.Accountant General-II, Gujarat, Rajkot

29.Accountant General, Kerala, Trivandrum

30.Accountant General, Madhya Pradesh, Gwalior

31.Accountant General, Tamil Nadu, Chennai

32.Accountant General-I, Maharashtra, Mumbai

33.Accountant General-II, Maharashtra, Nagpur

34.Accountant General, Karnataka, Bangalore

35.Accountant General, Orissa, Bhubneshwar

36.Accountant General, Punjab, Chandigarh

37.Accountant General, Himachal Pradesh, Simla

38.Accountant General, Rajasthan, Jaipur

39.Accountant General-I, II & III, Uttar Pradesh, Allahabad

40.Accountant General, West Bengal, Calcutta

41.Accountant General, Haryana, Chandigarh

42.Accountant General, Jammu & Kashmir, Srinagar

43.Accountant General, Manipur, Imphal

44.Accountant General, Tripura, Agartala

45.Accountant General, Nagaland, Kohima

46.Director of Audit(Central)Kolkatta

47.Director of Audit(Central Revenue), New Delhi

48.Director of Audit (Central), Mumbai

49.Director of Audit, Scientific & Commercial Department,

Mumbai

50.All Banks (Public Sector, Nationalised including State

Bank of India)

51.Secretary, Reserve Bank of India Central Office

P.B.No.406, Mumbai-400001(25 copies for distribution to

its Branches).

52.Accounts Officer, Inspector General of Assam Rifles,

(Hqrs), Shillong

53.All Chambers of Commerce & Industry

54.Lok Sabha /Rajya Sabha Secretariat Libraries(15 copies

each)

55.All Officers and Sections in Techinical Wing of CBDT

56.Controller of Accounts, Department of Economic Affairs,

New Delhi

57.Manager,  Reserve  Bank  of  India,  Public  Debt

Office, Ahmedabad/Bangalore/Bhubneshwar/Mumbai(Fort)/

Mumbai(Central)/Mumbai-8, Kolkatta/Hyderabad/Kanpur/

Jaipur/Chennai/Nagpur/NewDelhi/Patna/Guwahati/

Trivandrum

58.Asst.Chief Inspector, R.B.I. Inspection Department

Regional audit Cell/Mumbai/Kolkatta/Chennai/New

Delhi/Kanpur

59.Accountant General, Post & Telegraph, Simla

60.Controller General of Defence Accounts, New Delhi

61.Dir.of Audit, Defence Services, New Delhi

62.World Health Organisation, New Delhi

63.International Labour Office, India Branch,  New Delhi

64.Secretary, Indian Red Cross Society, India, New Delhi

65.Atomic Energy Department, Mumbai

66.Secretary, Development Board, Ministry of Commerce &

Industry, New Delhi

67.National Savings Organisation, Nagpur

68.Deputy Accountant General, Post & Telegraph, Kolkatta

69.The Legal Adviser, Export – Import Bank of India, Post

Box  No.19969, Nariman Point, Mumbai-400021

70.The Deputy Finance Manager(Headquarters), Indian

Airlines(H) – Airlines House, 11, Gurudwara Rakabganj

Road, New Delhi-110001

71.Manager, State Bank of India, Local Head Office:-

  1. i) Jeevan Deep Building, 1,Middleton Street, Kolkatta

ii)Circle Top House, Rajaji Salai, Chennai-600001

iii)Lucknow, Uttar Pradesh

  1. iv) Bank Street, Hyderabad-500001
  1. v) Hamida Road, Bhopal-462001

vi)Shop Nos.101 to 105, Sector 17-B, Chandigarh

vii)New Amn.Building, Madam Cama Road, Mumbai-400021

viii) 9, Parliament Street, New Delhi-110001

  1. ix) Bhedru, Ahmedabad-380001
  1. x) Judges Court Road, Post Box No.103, Patna-800001
  1. xi) 59, Forest Park, Bhubneshwar and Gauhati, Assam

xii) Gauhati, Assam

72.Chief Controller of Accounts, CBDT, Lok Nayak Bhawan,

Khan Market, New Delhi

73.State Bank of Patiala, (Head Office), The Mall, Patiala

74.State Bank of Bikaner  and Jaipur, Head Office, Tilak

Marg, ‘C’ Scheme Jaipur

75.State Bank of Hyderabad, Head Office, Gun Factory,

Hyderabad

76.State Bank of Indore, 5 Yashwant Nivas Road, Indore.

77.State Bank of Mysore (Head Office), K.G.Road, Bangalore

78.State Bank of Saurashtra, Behind Satyanarayan Road,

Bhavnagar, Gujarat

79.State Bank of Travancore, Post Box No.34, Trivandrum

80.N.S.Branch, Department of Economic Affairs, New Delhi

81.The Editory, ‘The Income-tax Reporter’ Company Law

Institute of India (P) Ltd., 88, Thyagaraja Road,

Thyagaraja Nagar, Chennai-600017

82.The Editor, Chartered Secretary, The Institute of Company Secretaries of India, ‘ICSI House, 22, Institutional Area, Lodhi Road, New Delhi-110003

83.The Editor, “Taxation” 174, Jorbagh, New Delhi

84.The Editor, “The Tax Law Review” Post Box No.152,

Jallandhar-144001

85.The Editor, “Taxmann” Allied Services (P)Ltd., 1871,

Kucha Chelan, Khari Baoli, Delhi-110006

86.The Min. of Law (Deptt. of Legal Affairs), Shastri

Bhawan New Delhi.

87.Food Corporation of India, 16-17, Barakhamba Lane, New

Delhi-110001

88.IFCI, Bank of Baroda Building, 16, Parliament Street, New Delhi

89.IDBI, IDBI Tower, Cuff Parad, Mumbai-400 005

90.ICICI, 163, Backbay Reclamation, Mumbai-20

91.NABARD, Poonam Chambers,Dr.Annie Besant Road, P.B.No.552,Worli, Mumbai

92.National Housing Bank, 3rd Floor, Bombay Life Building,

45, Veer Nariman Road, Mumbai

93.IRBI, 19, Netaji Subhash Road, Kolkatta

94.All Foreign Banks operating in India

95.Air India, New Delhi

96.University Grants Commission, Bahadur Shah Jafar Marg,

New Delhi

97.The Deputy Director(Admn.), NSSO (FOD), Mahalonobis

Bhavan, 6th Floor, 164, G.L.Tagore Road, Kolkata-700108

ANNEXURE-I

Example  1

Assessment Year 2006-2007

Calculation of Income tax in the case of a male employee having

        gross salary income of:

  1. i)          Rs.2,00,000/- ,
  2. ii)         Rs.5,00,000/-  and

iii)        Rs.10,00,000/-

Particulars            (Rupees)      (Rupees)      (Rupees)

(i)           (ii)          (iii)

Gross Salary Income      2,00,000       5,00,000      10,00,000

(Including allowances)

Contribution to G.P.F.     20,000        50,000        1,00,000

Computation of Total Income and tax payable thereon

Gross Salary             2,00,000      5,00,000       10,00,000

Less: Deduction

U/s 80C               20,000         50,000        1,00,000

Taxable Income             1,80,000      4,50,000      9,00,000

Tax thereon                  11,000        85,000      2,20,000

Add: surcharge                Nil            Nil           Nil

Add: Education Cess @2%       220           1,700         4,400

        Total tax payable             11,220       86,700      2,24,400

Note: Surcharge at the rate of 10% of the tax payable is to be charged only if taxable income exceeds Rs.10,00,000/-.

Example 2

A.Y.2006-2007

Calculation of Income Tax in the case of a male employee having a handicapped dependent.

        Particulars:

  1. Gross Salary                          Rs.3,20,000
  2. Amount spent on treatment

of a dependant, being person

with disability( but not severe

disability)                           Rs.   7,000

  1. Amount paid to LIC with regard

to annuity for the maintenance

of a dependant, being person

with disability( but not severe       Rs.  50,000

disability)

  1. GPF Contribution                      Rs.  25,000
  2. LIP Paid                              Rs.  10,000

Computation of Tax

Gross Salary                                Rs.3,20,000/-

Less: Deduction U/s 80DD

(Restricted to Rs.50,000/-               Rs.  50,000/-

only)                                _________________

Taxable Income                           Rs.2,70,000/-

Less: Deduction u/s 80C:

GPF     25,000/-

LIP     10,000/-

__________

Total   35,000/-                       35,000             

                 Total Income                            Rs. 2,35,000

Income Tax thereon                      Rs.   22,000/- 

Add: Surcharge                                  Nil

Add: Education Cess @2%:               Rs.      440

Total tax Payable                      Rs.    22,400/-

Example 3

A.Y. 2006-2007.

Calculation of Income Tax in the case of a male employee where

         medical treatment expenditure was borne by the employer.

Particulars:

  1. Gross Salary                                Rs.3,00,000/-
  2. Medical Reimbursement by employer on the

treatment of self and dependent family

member                                       Rs. 30,000/-

  1. Contribution of GPF                          Rs. 20,000/-
  2. LIC premium                                  Rs. 20,000/-
  3. Repayment of House Building Advance          Rs. 25,000/-
  4. Tuition fees for two children                Rs. 30,000/-
  5. Investment infrastructure Bond               Rs. 20,000/-

Computation of Tax

Gross Salary                              Rs.3,00,000/-

Add: Perquisite in respect of reimburse-

ment of Medical Expenses in excess

of Rs.15,000/- in view of Sec. 17(2)(v)   Rs.  15,000/-                                                                _____________

Taxable Income                          Rs.3,15,000/-

Less: Deduction u/s 80C:

GPF                        20,000/-

LIC                        20,000/-

Repayment of

HBA                        25,000/-

Tuition Fees               30,000/-

Investment in

infra-structural Bonds     20,000/-

__________

Total                      1,15,000/-

 

Restricted to Rs. 1,00,000/-                Rs. 1,00,000

Total Income:                             Rs. 2,15,000                              

Tax Payable                                Rs. 18,000/-

Add: Surcharge                                   Nil

Add: Education Cess @ 2%:                  Rs.   360

____________

Total Tax Payable                          Rs. 18,360/-

Example 4

A.Y. 2006-2007.

        Illustrative calculation of House Rent Allowance U/s 10 (13A)in respect of residential accommodation situated in Delhi in case of a female employee:

PARTICULARS

  1. Salary                          Rs.2,00,000/-
  2. Dearness Allowance              Rs.1,00,000/-
  3. House Rent Allowance            Rs.1,20,000/-
  4. C.C.A                           Rs.   6,000/-
  5. House rent paid                 Rs.1,44,000/-
  6. General Provident Fund          Rs.  36,000/-
  7. Life Insurance Premium          Rs.  4,000/-
  1. Subscription to Infrastructure

Bonds                           Rs.  20,000/-

 Computation of total income and tax payable thereon

  1. Salary + D.A. + C.C.A.                      Rs.3,06,000/-

House Rent Allowance                        Rs.1,20,000/-

_____________

  1. Total Salary income                         Rs.4,26,000/-
  2. Less: House Rent allowance

exempt U/s 10(13A):Least of:

  1. Actual amount of HRA received=1,20,000
  2. Expenditure of rent in excess of 10%

of salary (including D.A.

presuming that D.A. is taken for

retirement benefit)

(1,44,000-30,000)  =1,14,000                                   c.50% of Salary(Basic+ DA)=

Rs.1,50,000                                Rs.1,14,000/-

Gross Total Income:                          Rs.3,12,000/-

Less: Deduction u/s 80C:

GPF             :36,000/-

LIC             : 4,500/-

Subscription to

Infr. Structure

Bonds          _: 20,000/-

Total:     : 60,000              Rs.  60,000/-

Total Income:                          Rs.2,52,000/-

Tax on total income                   Rs.  21,900/-

Surcharge:                                  Nil

Education Cess @ 2%                   Rs.    438/-             

 Total Tax Payable                     Rs. 22,338/-

        Example 5

A.Y.2006-2007.

        Illustrating  valuation of perquisite and calculation of tax in the  case of a male employee of a private company in Mumbai who was provided  accommodation in a flat at concessional rate for  ten months  and  in  a hotel for two months. 

  1. Salary                            :       Rs.5,00,000/-
  2. Bonus                             :       Rs.  76,000/-
  3. Free gas, electricity, water etc.

(Actual bills paid by company)    :       Rs.   24,000/-

4(a)  Furnished flat provided to the

employee for which actual rent

paid by the company per annum     :       Rs.1,20,000/-

4(b)  Hotel rent paid by employer

(for two months)                  :       Rs.  50,000/-

4(c)  Rent recovered from employee      :       Rs.  10,000/

4(d)  Cost of furniture                 :       Rs.1,00,000/-

  1. Subscription to infrastructure

bonds                             :       Rs.  30,000/-

  1. Life Insurance Premium            :       Rs.   5,000/-
  2. Subscription to NSC (VIII) Issue  :       Rs.  20,000/-
  3. Contribution to recognized P.F.   :       Rs.  36,000/-

COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:

  1. Salary                            :        Rs. 5,00,000/-
  2. Bonus                             :        Rs.   76,000/-

Total Salary for Valuation of      :        Rs. 5,76,000/-

Perquisite ie; Rs.48,000 per month

Valuation of perquisites

(a) Perq. for flat:

Lower of (20% of salary for ten

months=Rs.96,000/-) and (actual rent

paid=1,00,000)                :  Rs. 96,000/-

(b) Perq. for hotel

Lower of (24% of salary of

2 mths=23,040) and (actual

payment=50,000)               :  Rs. 23,040/-

(c) Perq for furniture @ 10%

of cost                       :  Rs.  10,000/-

Rs. 1,29,040

Less: Rent recovered from employee   :  Rs.   10,000/-                                                           Rs. 1,19,400

(d) Add perq. for free gas, elec.

water                         :  Rs.  24,000/-

Total perquisites:              :  Rs. 1,43,040

Gross Total Income                                Rs.  7,19,040/-

(5,76,000+1,43,040)

Less: Deduction u/s 80C:

Provident Fund              :36,000

Subscription to NSC VIII

Issue                       :20,000

LIC                         : 5,000

Infrastructure Bond         :30,00

Total:                           91,000

                                                         Rs.   91,000/-

Total Income                                      Rs.  6,28,040/-

   Tax Payable                                       Rs. 1,38,412 

Surcharge:                                                 Nil

Education Cess @ 2%                                Rs.    2,768/-

 Total Tax Payable                     Rs. 1,41,180/-

Example 6

A.Y.2006-2007.

        Illustrating Valuation of perquisite and calculation of tax in the case of a female employee of a Private Company posted at Delhi and repaying House Building Loan.

Particulars:

  1. Salary                             : Rs.3,00,000/-
  2. Dearness Allowance                 : Rs.1,00,000/-
  3. House Rent Allowance               : Rs.1,80,000/-
  4. Special Duties Allowance           : Rs.  12,000/-
  5. Provident Fund                     : Rs.  60,000/-
  6. LIP                                : Rs.  10,000/-
  7. Deposit in NSC VIII issue          : Rs.  30,000/-
  8. Rent Paid by the employee for house

hired by her                       : Rs.  1,20,000/-

  1. Repayment of House Building Loan

(Principal)                         : Rs.  60,000/-

  1. Tution Fees for three children     : Rs.  30,000/-

(Rs.10,000/- per child)

Computation of total income and tax payable thereon

  1. Gross salary                        :            5,92,000/-

(Basic+DA+HRA+SDA)

Less: House rent allowance exempt

U/s 10 (13A)

Least of:

  1. Actual amount of HRA received        : 1,80,000
  2. Expenditure on rent in excess

of 10% of salary (Including

D.A.)assuming D.A. is

including for retirement

benefits (1,20,000- 40,000)           :   80,000

c.50% of salary (including D.A)          :   2,00,000 (-) 80,000/-

Gross Total Taxable Income   :                5,12,000/-

Less: Deduction u/s 80C:

  1. Provident Fund       : 60,000
  2. LIP                 : 10,000

iii. NSC VIII Issue      : 30,000

  1. Repayment of

HBA                 : 60,000

  1. Tution Fees

(Restricted to two

children)          :  20,000

Total         :   1,80,000

Restricted to                             1,00,000/-

Total Income     :                              4,12,000/-

Tax Payable                                        70,100/- 

Surcharge:                                                 Nil

Education Cess @ 2%                                      1,402/-                  

      Total Tax Payable                                  Rs.   71,502/-

Note:  Part of the dearness allowance merged with the basic pay and shown as ‘Dearness Pay’ is also included in the definition of ‘salary’ for working out the amount of exemption under section 10(13A).

Example 7

A.Y.2006-2007.

Income Tax calculation in the case of a male employee who claims    loss under the head income from self-occupied house property.

Particulars:

  1. Gross salary                                   : 4,00,000
  2. Housing Loan repaid (Principal)                :   50,000
  3. Interest payable on housing loan

(Loan taken after 01.04.1999)                  : 1,60,000

  1. Donation paid to National

Children Fund                                  :    5,000

  1. NSC Purchased                                  :   10,000
  2. GPF                                            :   30,000

Computation of taxable income and tax thereon:

  1. Salary Income                             : Rs.4,00,000
  1. Income from house property

Annual value                       Nil

Interest payable on

loan U/s 24                   1,50,0000

(Maximum allowable)                    : (-)Rs.1,50,000/-

Gross total income                        : Rs.2,50,000/-

Less: Deduction U/s 80G

50% of Rs.5,000/-                Rs.   2,500/-

Less Deduction U/s 80C:

GPF                :30,000

NSC                :10,000

Housing Loan

repaid             :50,000

Total                            Rs.  90,000/-

              Total Deductions under Chapter VI-A          Rs. 92,500/-

              Total Income                :              Rs. 1,57,500/-

              Tax Payable                                : Rs.  6,500/-

Add: surcharge                                      Nil

Add: Education Cess                        : Rs.    130

              Total tax payable                          : Rs.  6,630/-

       EXAMPLE – 8

A.Y.2006-2007.

        Income  Tax  calculation in the case of a male employee who claims loss under the head Income from self-occupied house property, and has taken house building loan before 1.4.99.

Particulars:

  1. Gross Salary                                    4,00,000
  2. Housing Loan repaid (Principal)                   30,000
  1. Interest payable on housing loan

(Loan taken before 01.04.1999)                   1,00,000

  1. Donation paid to National Children’s Fund          6,000
  2. N.S.C. purchased                                  10,000/-
  3. G.P.F.                                            20,000/-

Computation of Taxable Income and tax thereon

  1. Salary Income                                Rs.4,00,000
  1. Income from House Property

Annual value   :                    Nil

Interested payable on loan

u/s 24         :                  30,000

(Maximum allowable                          (-)Rs.30,000/-

for loans taken before 1.4.99)              ————-

Gross total income                            Rs.3,70,000/-

Less Deduction U/s 80G

50% of Rs. 6,000/-                      Rs. 3,000/-

 

Less Deduction U/s  80C:

G.P.F.                         20,000

N.S.C.                         10,000

Housing Loan repaid            30,000

———–

Total:              60,000

————

Total Deductions under Chapter VI-A                 Rs. 63,000/-

Total Income                                       Rs.3,07,000/-

Tax payable                                  Rs. 42,100/-

Add: Surcharge                                       Nil

Add: Education Cess @ 2%                     Rs.     842

————

              Total Tax payable                            Rs. 42,942/-

————

EXAMPLE  – 9

A.Y.2006-2007

     Income  Tax calculation in the case of a male pensioner who is more than 65 years of age.

(Rupees)

Particulars

Service Pension                                  1,80,000

Infrastructure Bond                                30,000

N.S.C. purchased                                   20,000

Computation of Taxable Income and Tax thereon

Income from Salary (Pension)                     1,80,000

Less: Deduction u/s 80C

G.P.F.          30,000

N.S.C.          20,000

———

Total      50,000

———-

 Total Income                                   1,30,000

   

Tax payable                                       Nil   

Note: Taxpayers of sixty five years of age or above do not have to pay tax up to a total income of Rs.1,85,000/-.

ANNEXURE-II

Form for sending particulars of income u/s 192(2B) for the year ending 31st March 2002

  1. Name and address of the employee
  2. Permanent Account Number
  3. Residential status
  4. Particulars of income under any head of income other than “salaries” (not being a loss under any such head other than the loss under the head “Income from house property”) received in the financial year.

(i)  Income from house property                                       ——————-

(in case of loss, enclose computation thereof)

(ii)  Profits and gains of business or profession             ——————-

(iii)  Capital gains                                                                                ——————-

(iv)  Income from other sources

(a)  Dividends

(b) Interest

(c) Other incomes (Specify)

Total                       ——————-

  1. Aggregate of sub-items (i) to (iv) of item 4
  2. Tax deducted at source (enclose certificates) issued under Section 203)

Place——————

Date —————–                                                                                              ——————-

Signature of the employee

Verification

I, —————————————–, do hereby declare that what is stated above is true to the best of my knowledge and belief.

Verified today, the —————— day of ——————2002.

Place——————

Date——————                                                                                  ——————-

Signature of the employee

F.No.142/47/98-TPL                                                                                           Sd/-

NOTIFICATION NO. 10722                             ( SUNITI SRIVASTAVA)

Under Secretary to the Govt. of India

———————————————————————————-

The principal rules were published vide notification No. S.O. 969(E) dated 26.3.1962 and were last amended vide notification NO. SO. 897(E) dated 12.10.98.

ANNEXURE-III

    FORM NO.12BA

{See rule 26A(2)(b)}

Statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary with value thereof

  1. Name and address of employer :

2)   TAN

3)  TDS Assessment Range of the employer :

4)   Name, designation and PAN of employee :

  1. Is the employee a director or a person with :

substantial interest in the company

(where the employer is a company)

6)   Income under the head “Salaries” of the employee :

(other than from perquisites)

7)   Financial Year :

8)   Valuation of Perquisites

S.No Nature of perquisite(see rule 3) Value of perquisite as per rules(Rs.) Amount, if any recovered from the employee(Rs.) Amount of perquisite chargeable to taxCol(3) – Col(4)

(Rs.)

(1) (2) (3) (4) (5)
1 Accommodation
2 Cars/Other automotive
3 Sweeper, gardener, watchman or personal attendant
4 Gas, electricity, water
5 Interest free or concessional loans
6 Holiday expenses
7 Free or concessional travel
8 Free meals
9 Free Education
10 Gifts, vouchers etc.
11 Credit card expenses
12 Club expenses
13 Use of movable assets by employees
14 Transfer of assets to employees
15 Value of any other benefit/amenity/service/privilege
16 Stock options (non-qualified options)
17 Other benefits or amenities
18 Total value of perquisites
19 Total value of Profits in lieu of salary as per 17(3)
  1. Details of tax, –
  1. Tax deducted from salary of the employee u/s 192(1)                          ………
  2. Tax paid by employer on behalf of the employee u/s 192(1A)           ………
  3. Total tax paid                                                                                               ………
  • Date of payment into Government treasury                                            ………

DECLARATION BY EMPLOYER

I ………………. s/o ………………….  working as ……………………………(designation) do hereby declare on behalf of ……………..….. (name of the employer) that the information given above is based on the books of account, documents and other relevant records or information available with us and the details of value of each such perquisite are in accordance with section 17 and rules framed thereunder and that such information is true and correct.

Signature of the person responsible

for deduction of tax

Place…

Date…                                                                                                         Full Name ……………………

Designation …………………. “;

ANNEXURE-IV

FORM NO. 16AA

[See third proviso to rule 12(1)(b) and rule 31(1)(a)]

Certificate for tax deducted at source from income chargeable under the head “Salaries”-cum- Return of income

For an individual, resident in India, where-

  1. his total income includes income chargeable to income-tax under the head ‘Salaries’;
  2. the income from salaries before allowing deductions under section 16 of the Income-tax Act, 1961 does not exceed rupees one lakh fifty thousand;
  3. his total income does not include income chargeable to income-tax under the head ‘Profits and gains of business or profession’ or ‘Capital gains’ or agricultural income; and
  1. d)         he is not in receipt of any other income from which tax has been deducted at source by any person other than the employer
Name and address of the Employer Name and designation of the Employee
PAN/GIR NO. TAN PAN/GIR NO.
TDS Circle where annual Return /statement under section 206 is to be filed Period Assessment year ……………..
FROM TO

DETAILS OF SALARY PAID AND ANY OTHER INCOME AND TAX DEDUCTED

  1. Gross salary
  1. Salary as per provisions contained in section 17(1)
  2. Value of perquisites under section 17(2) (as per Form no. 12BA, wherever applicable)
  3. Profits in lieu of salary under section 17(3) (as per Form No. 12BA, wherever applicable)
  4. Total
Rs.Rs.

Rs.

………………………………

………………

Rs. ________
  1. Less: Allowance to the extent exempt under section 10
Rs.Rs.

Rs.

 

………………………………

………………

Rs. ________
  1. Balance (1-2)
Rs. ________
  1. Deductions under section 16:
  1. Standard deduction
Rs. ……………….
  1. Entertainment allowance
Rs. ……………….
  1. Tax on Employment

 

Rs. ……………….
  1. Aggregate of 4 (a) to (c)

 

Rs. ________
6.  Income chargeable under the head ‘Salaries’ 701
7.  Add: Any other income reported by the employee

  1. Income under the Head ‘Income from House Property’
  2. Income under the Head ‘Income from Other Sources’

(c)  Total of (a) + (b) above

Rs. __________
702
706
8.    GROSS TOTAL INCOME (6+7) 746
  1. DEDUCTIONS UNDER CHAPTER VI-A
GROSS AMOUNT QUALIFYING AMOUNT DEDUCTIBLE AMOUNT
  1. 80 CCC
Rs. ……………… Rs. ……………. 235
  1. 80 D
Rs. ……………… Rs. ……………. 236
  1. 80 E
Rs. ……………… Rs. ……………. 239
  1. 80 G
Rs. ……………… Rs. ……………. 242
  1. 80 L
Rs. ……………… Rs. ……………. 260
  1. 80 QQB
Rs. ……………… Rs. ……………. 275
  1. 80 RRB
Rs. ……………… Rs. ……………. 282
  1. SEC
Rs. ……………… Rs. …………….
  1. Aggregate of deductible amounts under Chapter VI-A
747
  1. TOTAL INCOME (8-10)
760
12. TAX ON TOTAL INCOME 810
13. REBATE UNDER CHAPTER VIII
  1. Under section 88 (please specify)
GROSS AMOUNT QUALIFYING AMOUNT TAX REBATE
(a) Rs. ……………… Rs. ……………… …………..
(b) Rs. ……………… Rs. ……………… …………..
(c) Rs. ……………… Rs. ……………… …………..
(d) Rs. ……………… Rs. ……………… …………..
(e) Rs. ……………… Rs. ……………… …………..
(f) Rs. …………….. Rs. ……………… …………..
(g) Total[(a) to (f)] Rs. ……………… Rs. ……………… 812
  1. (a) under section 88B

(b) under section 88C

813
814
14. Aggregate of tax rebates at 13 above [I(g)+II(a)+II(b)] 820
  1. Tax payable on total income (12-14) and surcharge thereon
832
  1. Less: Relief under section 89(attach details)
837
  1. Balance Tax payable(15-16)
841
  1. Less:

(a) tax deducted at source under section 192(1)

(b) Tax paid by the employer on behalf of the

employee under section 192(1A) on    perquisites under section 17(2)

873
868
872
  1. Tax payable/refundable (17-18)
891

DETAILS OF TAX DEDUCTED AND DEPOSITED INTO CENTRAL GOVERNMENT ACCOUNT

AMOUNT DATE OF PAYMENT NAME OF BANK AND BRANCH WHERE TAX DEPOSITED

 

 
I  ________________________    son of Shri _______________________  working in the capacity of  _____________________                                                 (designation) do hereby certify that a sum of Rupees___________________________________ (in words) has been deducted at source and paid to the credit of the Central Government. I further certify that the information given above is true and correct based on the books of account, documents and other available records.

 

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

TO BE FILLED IN BY THE ASSESSEE

 

1.  NAME OF THE ASSESSEE

 

2. ADDRESS

 

PIN TELEPHONE

 

3. DATE OF BIRTH 4. SEX  M/F: 5. ASSESSMENT YEAR

 

6. WARD/CIRCLE/SPECIAL RANGE: 7. RETURN : ORIGINAL OR REVISED:
  1. PARTICULARS OF BANK ACCOUNT(for payment of refund)

 

Name of the Bank MICR Code Address of Bank Branch Type of Account Account Number

VERIFICATION BY THE ASSESSEE

I ,  _________________________________________________________   (Name in full and in block letters), son/daughter of Shri _________________________________________________________  solemnly declare that to the best of my knowledge and belief, the information given in this return is correct, complete and truly stated and in accordance with the provisions of the Income-tax Act, 1961, in respect of income chargeable to income-tax for the previous year relevant to the assessment year ___________.

 

Receipt No……………… Date……………SEAL

Signature of the receiving official

Signature of the assesseeDate:  _____________

Place: _____________

 

ANNNEXURE-V

[TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY

PART-II SECTION 3, SUB-SECTION (ii)]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

(CENTRAL BOARD OF DIRECT TAXES)

******

New Delhi, the 26th August, 2003

NOTIFICATION

INCOME-TAX

S.O. 974 (E)- In exercise of the powers conferred by sub-section (2) of section 206 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby specifies the following Scheme for electronic filing of return of tax deducted at source, namely:-

  1. Short title, commencement and application. –
  1. This Scheme may be called the “Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003”.
  2. It shall come into force on the date of its publication in the Official Gazette.
  3. It shall be applicable to all persons filing returns of tax deducted at source on computer media under sub-section (2) of section 206 of the Income-tax Act, 1961.
  1. Definitions. – In this Scheme, unless the context otherwise requires,-
  1. “Act” means the Income-tax Act, 1961 (43 of 1961);
  2. “Board” means the Central Board of Direct Taxes constituted under the Central Board of Revenues Act, 1963 (54 of 1963);
  3. “computer media” means a floppy (3 ½ inch and 1.44 MB capacity) or CD-ROM, and includes on-line data transmission of electronic data to a server designated by e-filing Administrator for this purpose;
  4. “e-deductor” means the person responsible for deduction of tax at source who is required to furnish e-TDS Return under this scheme;
  5. “e-filing Administrator” means an officer not below the rank of Commissioner of Income-tax designated by the Board for the purpose of administration of this scheme;
  6. “e-TDS Intermediary” means a person, being a company, authorised by the Board to act as e-TDS Intermediary under this scheme;
  7.  “e-TDS Return” means a return to be filed under section 206 of the Act duly supported by a declaration in Form No. 27A as prescribed under the Rules;
  8. “Rules” means the Income-tax Rules, 1962;
  9. All other words and expressions used herein but not defined and defined in the Act shall have the meanings respectively assigned to them in the Act.
  1. Preparation of e-TDS Return. –

(1) The e-deductor shall use the relevant Forms prescribed under the Rules for preparing e-TDS Returns.

  1. The e-deductor shall prepare his e-TDS Return according to the data structure to be provided by the e-filing Administrator.
  2. While preparing e-TDS Return, the e-deductor shall quote his permanent account number and tax deduction account number as also the permanent account number of all persons in respect of whom tax has been deducted by him except in respect of cases to which the first proviso to sub-section (5A) or the second proviso to sub-section (5B) of section 139A of the Act applies.
  3. The e-deductor shall ensure that all columns of the Forms of the return for tax deduction at source, prescribed under the Rules, are duly and correctly filled in.
  1. Each computer media used for preparation of the e-TDS Return shall be affixed with a label indicating name, permanent account number, tax deduction account number and address of the e-deductor, the period to which the return pertains, the Form Number of the return and the volume number of the said media in case more than one volume of such media is used.
  2. Separate computer media shall be used for each Form of e-TDS Return by the e-deductor.
  1. Furnishing of e-TDS Return.- 

(1) The e-deductor shall furnish e-TDS Return on computer media to the e-TDS Intermediary duly supported by a declaration in Form No.27A, as prescribed in the Rules, in paper format:

Provided that in case any compression software has been used by the e-deductor for preparing the e-TDS Return, he shall also furnish such compression software alongwith the e-TDS Return on the same computer media.

  1. In case the e-deductor has on-line connectivity with the server of the e-TDS Intermediary, as may be designated by e-filing Administrator for this purpose, he may transmit the electronic data of the e-TDS Return directly to such server and send Form No. 27A on paper format separately to the e-TDS Intermediary.
  • Procedure to be followed by e-TDS intermediary. –

(1) The e-TDS Intermediary shall receive the e-TDS Return from e-deductors alongwith the declaration in Form No. 27A in paper format.

  1. The e-TDS Intermediary shall perform format level validation and control checks on the e-TDS Returns received by him and on successful completion of the same, the e-filing Administrator shall issue provisional receipt to the e-deductor.
  2. The e-TDS Intermediary shall upload the data on e-TDS Return on the server designated by the e-filing Administrator for the purpose of e-TDS Return and check whether the prescribed particulars relating to deposit of the tax deducted at source in bank and the permanent account number of the deductee have been given in the e-TDS Return.
  3. On successful completion of the check, the data of e-TDS Return shall be transmitted by the e-TDS Intermediary to the e-filing Administrator together with the declaration in Form No.27A and the provisional receipt issued shall be deemed to be the acknowledgement of the e-TDS Return.
  4. Where the details of deposit of tax deducted at source in bank, the permanent account number, tax deduction account number or any other relevant details are not given in the e-TDS Return, the e-filing Administrator shall forward a deficiency memo to the e-deductor with a request to remove the deficiencies within seven days of receipt of the same.
  5. In case the deficiency indicated in the deficiency memo is removed within seven days, the data on e-TDS Return shall be transmitted by the e-TDS Intermediary to the e-filing Administrator and the provisional receipt shall be deemed to be acknowledgement of the e-TDS Return.  The date of issue of provisional receipt shall be deemed to be the date of filing of the e-TDS Return.
  6. In case no deficiency memo is issued by the e-filing Administrator within thirty days of issue of the provisional receipt, the provisional receipt issued shall be deemed to be the acknowledgement of the e-TDS Return and the date of issue of provisional receipt shall be deemed to be the date of filing of e-TDS Return.
  7. Where the deficiencies indicated in the deficiency memo are not removed by the e-deductor within seven days, the e-TDS Intermediary shall communicate the same to the e-filing Administrator and transmit the data to the e-filing Administrator whereupon  Assessing Officer may take action for declaring the return as an invalid return after giving due opportunity to the deductor as required under sub-section (4) of section 206 of the Act.
  8. In case the defects intimated by the Assessing Officer are rectified within the period of fifteen days or such further period as may be allowed by the Assessing Officer, the date of issue of provisional receipt shall be deemed to be the date of filing of e-TDS Return.
  • General responsibilities of e-TDS Intermediary. –

(1)            The e-TDS Intermediary shall ensure accurate transmission of the e-TDS Return to the e-filing Administrator:

Provided that the e-TDS Intermediary shall not be responsible for any errors or omissions in the return of tax deducted at source prepared by the e-deductor.

  1. The e-TDS Intermediary shall retain for a period of one year from the end of the relevant financial year in which the return is required to be filed, the electronic data of the TDS Return in the format as specified by the e-filing Administrator.
  2. The e-TDS Intermediary shall retain for a period of one year from the end of the relevant financial year in which the return is required to be filed, the information relating to deficiency memo and provisional receipts issued in respect of the returns filed through it.
  3. The e-TDS Intermediary shall ensure confidentiality of information that comes to his possession during the course of implementation of this scheme, save with the permission of the e-deductor, Assessing Officer or e-filing Administrator.
  4. The e-TDS Intermediary shall ensure that all his employees, agents, franchisees, etc., adhere to all provisions of this scheme as well as all directions issued by the e-filing Administrator.
  1. Powers of e-filing Administrator. – Without affecting the generality of the foregoing provisions, the e-filing Administrator shall –
  1. specify the procedures, data structures, formats and standards for ensuring secure capture and transmission of data, for the day to day administration of this scheme;
  2. ensure compliance by e-TDS Intermediary with the technical requirements of this scheme, including review of the functioning of e-return Intermediary, verification of any complaints, scrutinising advertising material issued by them and such other matters as he deems fit.
  1. Powers of the Board: The Board may revoke the authorisation of an e-filing Intermediary on grounds of improper conduct, misrepresentation, unethical practices, fraud or established lack of service to the e-deductors or such other ground as it may deem fit.

Notification No.205/2003.

  1. No. 142/31/2003-TPL

(Deepika Mittal)

Under Secretary to the Government of India

ANNEXURE-V A

MINISTRY OF FINANCE

(Department of Economic Affairs)

(ECB & PR Division)

NOTIFICATION

New Delhi, the 22 nd December, 2003

F.No. 5/7/2003-ECB &PR- The government approved on 23rd August, 2003 the proposal to implement the budget announcement of 2003-04 relating to introducing a new restructured defined contribution pension system for new entrants to Central Government service, except to Armed Forces, in the first stage, replacing the existing system of defined benefit pension system.

    1. The system would be mandatory for all new recruits to the Central Government service from 1st of  January 2004 (except the armed forces in the first stage).  The monthly contribution would be 10 percent of the salary and DA to be paid by the employee and matched by the Central government.  However, there will be no contribution form the Government in respect of individuals who are not Government employees.  The contribution and investment returns would be deposited in a non-withdrawable pension tier-I account.  The existing provisions of defined benefit pension and GPF would not be available to the new recruits in the Central Government service.
    1. In addition to the above pension account, each individual may also have a voluntary tier-II withdrawable account at his option.  This option is given as GPF will be withdrawn for new recruits in Central government service. Government will make no contribution into this account.  These assets would be managed through exactly the above procedures.  However, the employee would be free to withdraw part or all of the ‘second tier’ of his money anytime.  This withdrawable account does not constitute pension investment, and would attract no special tax treatment.
    1. Individuals can normally exit at or after age 60 years for tier-I of the pension system.  At the exit the individual would be mandatorily required to invest 40 percent of pension wealth to purchase an annuity (from an IRDA- regulated life insurance company).  In case of Government employees the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirment.  The individual would received a lump-sum of the remaining pension wealth, which he would be free to utilize in any manner.  Individuals would have the flexibility to leave the pension system prior to age 60.  However, in this case, the mandatory annuitisation would be 80% of the pension wealth.

Architecture of the new Pension System

    1. It will have a central record keeping and accounting (CRA) infrastructure, several pension fund managers (PFMs) to offer three categories of schemes viz. option A, B and C.
    2. The participating entities (PFMs and CRA)  would give out easily understood information about past performance, so that the individual would be able to make informed choices about which scheme to choose.
      1. The effective date for operationalization of the new pension system shall be form 1st of January, 2004.

U.K. SINNHA, Jt. Secy.

                                                                                                           ANNEXURE-VI A

MINISTRY OF FINANCE

(Department of Revenue)

(Central Board of Direct Taxes)

Notification

New Delhi, the 24th November, 2000

INCOME- TAX

S.O.1048 (E) – In exercise of the powers conferred by sub-clause (i) of clause (18) of Section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, hereby specifies the gallantry awards for the purposes of the said Section, mentioned in column 2 of the table below awarded in the circumstances as mentioned in corresponding column 3 thereof:-

Table

—————————————————————————————-

Sl. No.    Name of gallantry award             Circumstances for eligibility

——————————————————————————————

(1)                           (2)                                                                           (3)

—————————————————————————————–

  1. Ashok Chakra                                       When awarded to Civilians for gallantry
  2. Kirti Chakra                                                                                – do –
  3. Shaurya Chakra                                                                      – do –
  4. Sarvottan Jeevan Raksha                         When awarded to Civilians for bravery

Padak                                                     displayed by them in life saving acts.

  1. Uttam Jeevan Raksha                                               – do –

Medal

  1. Jeevan Raksha Padak                                                                – do –
  2. President’s Police Medal                          When awarded for acts of exceptional

for gallantry                                              courage displayed by members of police

forces, Central police or security forces and

certified to this effect by the head of the

department concerned.

  1. Police Medal for                                                                          – do –

Gallantry

  1. Sena Medal                                                   When awarded for acts of courage or

conspicious gallantry and supported

by certificate issued to this effect by

relevant service headquarters.

  1. Nao Sena Medal                                                                          – do –
  2. Vayu Sena Medal                                                                        – do –
  1. Fire Secrvices

Medal for Gallantry                                     When awarded for acts of courage                                                                          or conspicuous gallantry and supported                                                                           by certificate issued to this effect by the                                                                            last Head of  Department.

  1. President’s Police & Fire                                                         -do-

Services   Medal for Gallantry

14.President’s Fire Services Medal for

Gallantry                                                                                    -do-

  1. President’s Home Guards and

Civil Defence Medal   for

Gallantry                                                                                    -do-

  1. Home Guard and Civil Defence

Medal for Gallantry                                                                   -do-

( Notification no. 1156/F.No. 142/29/99-TPL)

T.K. SHAH

Director

ANNEXURE VI B

MINISTRY OF FINANCE

Department of Revenue

Central Board of Direct Taxes

New Delhi,the 29th January,2001

S.O.81(E)- In exercise of the powers conferred by sub-clause (i ) of clause (18) of Section 10 of the Income –tax Act, 1961 (43 of 1961)), the Central Government, hereby specifies the gallanty  awards for the purposes of the said Section and for that purpose makes the following amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number S.O.1048(E), dated the 24th November 2000, namely:-

In the said notification, in the Table, against serial numbers 1,2 and 3 under cloumn (3) relating to “Circumstances for eligibility” the words   “to civilians” shall be omitted.

(Notification No.22/F.No.142/29/99-TPL)

    T.K. SHAH

Director

ANNEXURE-VII

FORM NO. 10BA

(See rule 11B)

DECLARATION TO BE FILED BY THE ASSESSEE

CLAIMING DEDUCTION U/S 80 GG

I/We………………………………………………………………

( Name of the assessee with permanent account number)

do hereby certify that during the previous Year………….I/We had occupied the premise………………………….(full address of the premise) for the purpose of my/our  own residence for a period of…………………..months and have paid Rs. ………………. In cash/through crossed cheque, bank draft towards payment of rent to Shri/Ms/M/s……………………….(name and complete address of the landlord).

It is further certified that no other residential accommodation is owned by

(a) me/my spouse/my minor child/our family (in case the assessee is HUF), at ………………….where I/we ordinarily reside/perform duties of officer or employment or carry on business or profession, or

  1. me/us at any other place, being accommodation in my occupation, the value of which is to be determined u/s 23(2)(a)(i) of u/s 23(2)(b).INCOME-TAX DEDUCTION  FROM  SALARIES  DURING  THE FINANCIAL YEAR 2005-2006 UNDER SECTION 192 OF THE INCOME-TAXACT, 1961CIRCULAR NO.: 9/ 2005, dated 30-11-2005

    Reference is  invited  to Circular No. 6/2004 dated  6.12.2004  wherein  the rates of deduction  of  income-tax  from  the payment of income under the head “Salaries” under  Section  192  of  the  Income-tax  Act,  1961,  during  the  financial  year  2004-2005,  were intimated. The  present  Circular contains the rates of deduction of income-tax from  the  payment of income chargeable under the head “Salaries”  during  the  financial year 2005-2006 and explains  certain  related provisions of the Income-tax Act. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department-

    www.incometaxindia.gov.in.

    1. FINANCE  ACT,2005

    According  to  the Finance Act, 2005, income-tax is required to be deducted under Section 192 of the Income-tax Act 1961  from income chargeable under the head  “Salaries” for the  financial  year 2005-2006 (i.e.   Assessment  Year2006-2007) at the following rates:

    RATES OF INCOME-TAX

    1. Normal Rates of tax:
    1. Where the total income does not           Nil

    exceed Rs.1,00,000/-.

    1. Where the total income exceeds        10 per cent, of the

    Rs.1,00,000 but does not exceed          amount by which the

    Rs.1,50,000/-.                           total income exceeds

    Rs.1,00,000/-

    1. Where the total income exceeds        Rs.5,000/- plus 20

    Rs.1,50,000/- but does not exceed        per cent of the

    Rs.2,50,000/-.                           amount by which the

    total income exceeds

    Rs.1,50,000/-.

    1. Where the total income exceeds        Rs.25,000/- plus 30

    Rs.2,50,000/-.                           per cent of the amount by which the

    total income exceeds Rs.2,50,000/-.

    1. Rates of tax for a woman, resident in India and below sixty-five years of age:
    1. Where the total income does not           Nil

    exceed Rs.1,35,000/-.

    1. Where the total income exceeds         10 per cent, of the

    Rs.1,35,000 but does not exceed           amount by which the

    Rs.1,50,000/-.                            total income exceeds

    Rs.1,35,000/-

    1. Where the total income exceeds         Rs.1,500/- plus 20

    Rs.1,50,000/- but does not exceed         per cent of the

    Rs.2,50,000/-.                            amount by which the

    total income exceeds

    Rs.1,50,000/-.

    1. Where the total income exceeds         Rs.21,500/- plus 30

    Rs.2,50,000/-.                            per cent of the

    amount by which the

    total income exceeds

    Rs.2,50,000/-.

    1. Rates of tax for an individual, resident in India and of the age of sixty-five years or more at any time during the financial year:
    1. Where the total income does not           Nil

    exceed Rs.1,85,000/-.

    1. Where the total income exceeds         20 per cent, of the

    Rs.1,85,000 but does not exceed           amount by which the

    Rs.2,50,000/-.                            total income exceeds

    Rs.1,85,000/-

    1. Where the total income exceeds         Rs.13,000/- plus 30

    Rs.2,50,000/-.                            per cent of the

    amount by which the

    total income exceeds

    Rs.2,50,000/-.

    Surcharge on income tax:

    The  amount  of income-tax computed in accordance with  the  preceding  provisions of this paragraph shall be increased by a surcharge  at the rate of ten percent of such  income  tax where the total income exceeds ten lakh rupees.

    However,  the total amount payable as income-tax and            surcharge  shall  not  exceed the total amount  payable  as income tax  on  a total income of Rs.10,00,000/- by more  than the amount of income that exceeds Rs.10,00,000/-.

    The amount of income-tax as increased by surcharge, if any,  mentioned above shall be further increased by an additional surcharge ( Education Cess on Income Tax) at the rate of two percent of the income-tax and surcharge.

    Surcharge and Education Cess are   payable by both resident and non-resident assessees.

    1. SECTION  192  OF THE INCOME-TAX ACT,1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”.

    Method of Tax Calculation:

    3.1  Every  person who is responsible for  paying  any income  chargeable  under the head “Salaries” shall  deduct income-tax  on  the estimated income of the assessee  under the head  “Salaries” for the financial year 2005-2006.  The income-tax is required to be calculated on the basis of the rates  given above and shall be deducted on average at  the time of each payment.  No tax will, however, be required to be deducted at source  in  any  case unless the  estimated  salary income including  the value of perquisites, for the financial year exceeds Rs.1,00,000/- or Rs.1,35,000/- or Rs.1,85,000/-, as the case may be, depending upon the age and gender of the employee.(Some typical examples of computation of tax are given at Annexure-I).

    Payment of Tax on Non-monetary Perquisites by Employer:

    3.2   An option has been given to  the   employer to pay the tax   on non-monetary perquisites given to an employee.  The employer  may, at his  option, make  payment of the tax on  such perquisites  himself without making   any  TDS  from  the  salary  of the  employee.  The employer will have to   pay  such tax at the time when such tax  was  otherwise  deductible  i.e.  at the  time of payment of income chargeable under the head  salaries to the employee.

    Computation of Average Income Tax:

    3.3  For the purpose  of  making  the  payment  of  tax mentioned in para 3.2 above, tax  is to be determined at the  average  of   income  tax  computed on the  basis of rate in force  for  the financial  year, on  the  income  chargeable under   the  head  “salaries”,  including the  value   of  perquisites   for  which   tax  has been paid by the employer himself.

    ILLUSTRATION:

    Suppose that the income chargeable under the head ‘salary’ of a male employee below sixty-five years of age for the year inclusive of all perquisites is Rs.2,40,000/-, out of which, Rs.40,000/- is on account of non-monetary perquisites and  the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.
    STEPS:

    Income Chargeable under the head “Salaries”

    inclusive of all perquisites:                 Rs.  2,40,000

    Tax on Total Salaries   :                     Rs.    23,000

    Average Rate of Tax [(23,000/2,40,000) X 100]:        9.58%

    Tax payable on Rs.40,000/-

    ( 9.58% of 40,000)                        :     Rs.   3,833

    Amount required to be deposited each month:     Rs.  319

    (3,833/ 12)

    The   tax  so   paid  by  the  employer shall be deemed to be  TDS made from the salary of the employee.

    Salary From More Than One Employer:

    3.4  Sub- section   (2)   of  section   192  deals with  situations where  an  individual  is working under more than   one employer  or has changed from   one employer to  another.   It provides for deduction  of  tax at source by such employer  (as the  tax payer may choose)   from the aggregate salary of  the employee  who is or has been in receipt of salary  from  more than  one  employer.  The employee is now required  to furnish  to  the  present/chosen employer  details  of  the  income  under  the head “Salaries” due or received  from  the former/ other  employer  and  also tax  deducted  at  source  therefrom,  in writing and duly verified by him and by  the   former/other  employer.   The  present/ chosen   employer  will  be  required to deduct tax at source on the aggregate amount of  salary  (including salary received from the former or other  employer).

    Relief When Salary Paid in Arrear or Advance:

    3.5 Under  sub-section (2A) of section 192 where  the assessee,  being  a Government servant or an employee in  a  company, co-operative society, local authority, university, institution,  association or body is entitled to the relief under  Sub-section (1) of Section 89, he may furnish to the person  responsible  for making the payment referred to  in     Para (3.1), such particulars in Form No.  10E duly verified by him,  and thereupon the person responsible as  aforesaid shall  compute the relief on the basis of such  particulars and take the same into  account  in   making  the deduction  under Para(3.1) above.

         Explanation  :-  For this purpose “University means  a  University  established  or  incorporated  by  or  under  a Central,   State  or  Provincial   Act,  and  includes   an institution  declared  under  section 3 of  the  University Grants  Commission  Act, 1956(3 of 1956), to be  University for the purposes of the Act.

    Furnishing of Declaration by Taxpayer in Form 12C

    3.6   (i) Sub-section (2B) of section 192 enables a taxpayer to furnish  particulars  of income under any head  other  than “Salaries” and of any tax deducted at source thereon in the prescribed  form  No.12C (Annexure II). (Form no. 12C has since been omitted from the Income Tax Rules. However, the particulars may now be furnished in a simple statement, which is properly verified by the taxpayer in the same manner as in Form 12C.)

    (ii) Such income should  not  be a loss under any such head other  than  the  loss under  the  head “Income from House Property” for  the same financial  year.   The person responsible for  making payment (DDO) shall take such other income and tax, if any, deducted  at source from such income, and the loss, if any,  under  the  head “Income from House Property” into  account  for the  purpose of computing tax deductible under  section 192 of  the Income-tax Act. However, this sub-section  shall not in any case have the effect  of reducing the tax deductible (except where the loss under the  head “Income  from  House  Property” has  been  taken  into   account)  from  income under the head “Salaries” below  the   amount  that would be so deductible if the other income and the tax deducted thereon had not been taken into account’. In other words, the DDO can take into account any loss (negative income)only under the head “income from House  Property” and no other head for working out the  amount  of total  tax  to be deducted.  While taking into the  account the loss from House Property, the DDO shall ensure that the assessee  files  the declaration referred to above and  encloses therewith  a computation of such loss from House  Property.

    (iii) Sub-section (2C) lays down that a person responsible for paying any income chargeable under the head “salaries” shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in form no. 12BA. (Annexure-III ). Form no. 12BA along with form no. 16, as issued by the employer, are  required to be filed by the employee along with the return of income for the relevant year.

    Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property

    3.7(i)  For  the  purpose of  computing income / loss  under  the   head `Income   from House  Property’ in  respect   of a  self-occupied residential house, a normal deduction of Rs.30,000/- is allowable in respect of interest on borrowed capital. However, a   deduction   on account of interest   up to  a maximum limit of Rs.1,50,000/- is available if  such  loan   has  been  taken on or after 1.4.1999 for constructing or  acquiring  the residential  house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest upto Rs.1,50,000/-, the employee should furnish a certificate from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the  residential house or for conversion of a part or whole of the capital borrowed, which remains to be repaid as a new loan.

    3.7(ii)The essential conditions necessary for availing higher  deduction  of interest of Rs.1,50,000/- are that the  amount of capital  must have been borrowed on or after 01.4.1999 and the acquisition or construction  of residential house must have been completed  within three  years  from the end of the financial year  in  which  capital  was  borrowed.  There is no stipulation  regarding the date  of  commencement of construction. Consequently, the construction of  the  residential  house  could   have  commenced   before   01.4.1999   but,  as   long   as   its   construction/acquisition is completed within  three  years, from the  end  of the financial year in which  capital  was borrowed  the  higher deduction would be available in respect of the capital borrowed after 1.4.1999.   It may also be noted that there  is  no  stipulation   regarding  the   construction/ acquisition of the residential unit being entirely financed by capital borrowed on or after 01.4.1999.The loan taken prior  to 01.4.1999  will carry deduction of interest up to Rs.30,000/ only. However, in any case the total amount of deduction of interest on borrowed capital will not exceed Rs.1,50,000/- in a year.

    Adjustement for Excess or Shortfall of Deduction:

    3.8  The provisions of sub-section (3) of Section  192 allow  the  deductor to make adjustments for any excess  or  shortfall  in the deduction of tax already made during  the financial  year,  in  subsequent deductions for that employee within  that financial year itself.

    TDS on Payment of Balance Under Provident Fund and Superannuation Fund:

    3.9  The  trustees of a Recognized Provident Fund,  or  any person  authorized  by the regulations of the  Fund  to  make payment  of  accumulated  balances due  to  employees, shall,  in  cases where sub-rule(1) of rule 9 of Part A  of the Fourth  Schedule  to the Act applies, at the time  when the accumulated  balance  due to an employee is paid,  make therefrom  the deduction specified in rule 10 of Part A  of the Fourth Schedule.

    3.10 Where  any  contribution  made  by  an  employer,   including  interest  on such contributions, if any,  in  an approved  Superannuation Fund is paid to the employee,  tax on the  amount so paid shall be deducted by the trustees of the Fund  to the extent provided in rule 6 of Part B of the Fourth Schedule to the Act.

    Salary Paid in Foreign Currency:

    3.11   For  the purposes of deduction of tax on salary    payable  in  foreign currency, the value in rupees of such  salary  shall  be  calculated  at the  prescribed  rate  of exchange.

    4.PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES:

     

    4.1.   Under clause (i) of Section 204 of the Act the “persons responsible for paying” for the purpose of Section 192 means  the  employer  himself or if the employer  is  a  Company, the Company itself including the Principal Officer thereof.

    4.2.   The  tax  determined as per para  6  should  be deducted from the salary u/s 192 of the Act.

    Deduction of Tax at Lower Rate:

    4.3.   Section  197 enables the tax-payer to  make  an  application in form No.13 to his Assessing Officer, and, if the Assessing Officer is satisfied that the total income of the tax-payer  justifies the deduction of income-tax at any lower  rate or no deduction of income tax, he may issue  an appropriate  certificate  to  that effect which  should  be taken  into  account by the Drawing and Disbursing  Officer while  deducting  tax at source.  In the absence of such  a certificate  furnished by the employee, the employer should  deduct  income  tax  on  the salary payable at  the  normal  rates: (Circular No.  147 dated 28.10.1974.)

     

    Deposit of Tax Deducted:

    4.4.   According to the provisions of section 200, any person  deducting any sum in accordance with the provisions  of Section  192 or paying tax on non-monetary perquisites  on behalf of the employee under Section 192(1A), shall pay the sum so deducted or tax so calculated on the said non-monetary perquisites, as the case may be, to the credit of the Central Government in prescribed  manner  (vide Rule 30 of the Income-tax  Rules,1962).  In the case of deductions made by, or, on behalf of the  Government,  the payment has to be made on the day  of the  tax-deduction itself.  In other cases, the payment has to be made within one week from the last day of month in which deduction is made.

    Penalty for Failure to Deposit Tax Deducted:

    4.5  If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole  or any part of the tax to the credit of the  Central Government  within the prescribed time, he shall be  liable to action in accordance with the provisions of section 201. Sub-section  (1A) of section 201 lays down that such person shall  be liable to pay simple interest at twelve per cent per annum  w.e.f.  08.9.2003 on the amount of such tax from the date  on  which such tax was deductible to the date  on which the tax is actually paid.  Section 271C lays down that if  any person  fails  to  deduct tax at source,  he  shall  be  liable to pay, by way of penalty, a sum equal to the amount  of tax  not  deducted by him.  Further, section  276B  lays   down that  if  a person fails to pay to the credit  of  the   Central  Government  within  the prescribed  time  the  tax  deducted  at  source  by him, he shall be  punishable  with  rigorous  imprisonment for a term which shall be between  3  months and 7 years, and with fine.

                 Furnishing of Certificate for Tax Deducted:

    4.6  According to the provisions of section 203, every  person  responsible for deducting tax at source is required  to furnish  a  certificate to the payee to the effect  that tax has  been  deducted and to specify therein  the  amount deducted  and certain other particulars.  This certificate, usually  called  the “TDS certificate”, has to  be  furnished within  a period of one month from the end of the  relevant   financial  year.  Even the banks deducting tax at the  time   of payment   of   pension  are   required  to  issue   such  certificates.   In the case of

    employees receiving  salary income (including pension), the certificate has to be issued in Form  No.16. However, in the case of an employee who is resident in India and whose income from salaries, before allowing standard deduction, does not exceed Rs.1,50,000/-, the certificate of deduction of tax shall be issued in Form No. 16AA ( Specimen form 16AA enclosed as ANNEXURE-IV). It  is, however, clarified that there is no obligation to issue the TDS certificate  (Form  16 or Form 16AA)  in case tax at source  is  not  deductible/deducted  by virtue of claims of exemptions  and  deductions. As per  section  192,   the  responsibility of providing correct and complete particulars  of  perquisites or profits in lieu  of  salary   given to  an employee is placed on the person  responsible for paying  such  income i.e., the person  responsible  for   deducting  tax  at  source.  The form and  manner  of  such particulars are prescribed in Rule 26A, Form 12BA, Form 16 and Form 16AA of  the  Income-tax  Rules .

    Information relating to  the nature  and  value of perquisites is to be provided  by  the employer in Form no. 12BA  in  case of salary above  Rs.1,50,000/-. In  other  cases, the information would have to be provided  by the employer  in Form 16 itself.  In either case, Form 16 with Form 12BA or Form 16 by itself will have to be furnished within  a  period  of one month from the end   of  relevant financial year.

    An employer, who has paid the tax on perquisites on behalf of the employee as per the provisions discussed   in  paras 3.2 and 3.3, shall furnish to the employee concerned a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate  at which  tax has been paid and certain other particulars in the amended Form 16.

    The obligation cast on the employer under Section 192(2C) for furnishing  a  statement  showing the value  of  perquisites  provided to the employee is a serious responsibility of the  employer,  which is expected to be discharged in  accordance  with law  and  rules of valuation framed  thereunder.   Any false  information, fabricated documentation or suppression of requisite information will entail consequences therefore provided under the law. The certificates in form no.12BA and form no. 16 are to be issued on tax-deductor’s  own  stationery within one month  from  the close  of  the  financial year i.e. by April 30  of  every year.   If  he  fails to issue these  certificates  to  the person  concerned,  as required by section 203, he  will  be liable to pay, by way of penalty, under section 272A, a sum which  shall  be  Rs.100/- for every day during  which  the failure continues.

    Mandatory Quoting of PAN and TAN:

    4.7 According to the provisions of section 203A of the Income-tax   Act,   it  is   obligatory  for  all   persons  responsible for deducting tax at source to obtain and quote the Tax-deduction  Account  No. (TAN)  in  the  Challans, TDS-certificates,  returns  etc.  Detailed instructions  in  this regard  are  available in this  Department’s  Circular No.497 (F.No.275/118/87-IT(B) dated 9.10.1987). If a person  fails  to  comply with the provisions of section  203A,  he will be  liable  to pay, by way of penalty,  under  section 272BB,  a  sum of ten thousand rupees.  Similarly,  as  per Section  139A(5B),  it is obligatory for persons  deducting tax at source to quote PAN of the persons from whose income tax has  been  deducted  in  the  statement  furnished  u/s 192(2C),  certificates  furnished u/s 203 and  all  returns prepared and delivered as per the provisions of Section 206 of the Income Tax Act, 1961.

    Annual Return of TDS:

    4.8.   According  to the provisions of section 206  of the Income-tax  Act,  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, the prescribed person in the case of every  local authority or other public body or association, every  private employer and every other person  responsible for deducting tax under section 192, from “Salaries” shall, after  the end of each financial year, prepare and deliver, by 30th June following the financial year, an annual return of deduction  of tax to the designated/concerned  Assessing   Officer.   It is now mandatory for all offices of the Government and all companies to file the annual return of TDS on computer media only in accordance with the “Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003” as notified vide Notification No. S.O. 974 (E) dated 26.8.2003. (ANNEXURE-V) . Accordingly, the annual TDS return for financial year 2005-06, which would be required to be filed by 30.6.2006, would be filed by the Government deductors in electronic format only with the e-TDS Intermediary at any of the TIN Facilitation Centres, particulars of which are available at www.incometaxindia.gov.in and at http://tin.nsdl.com . If a person fails to furnish  the annual return in  due  time, he shall be liable to pay by way of penalty  under section 272A, a sum which shall be  Rs.100/-  for every  day  during  which the failure continues. However,  this sum shall not exceed the amount of  tax which was deductible at source.

    4.9.   A return filed on the prescribed computer readable media shall be deemed to be  a return  for the purposes of section 206 and the Rules  made thereunder,  and  shall  be admissible  in  any  proceeding thereunder,  without  further  proof of production  of  the original, as evidence of any contents of the original.

    Challans for Deposit of TDS:

    4.10. While  making the payment of tax  deducted  at source  to the credit of the Central Government, it may  be ensured  that the correct amount of income-tax is  recorded  in the  relevant challan.  It may also be ensured that  the right  type  of challan is used.  The relevantchallan  for making  payment of tax deducted at source from salaries is challan no. ITNS-281.  Where the amount  of  tax deducted  at  source is credited to the Central  Government through  book  adjustment, care should be taken  to  ensure that the correct amount of income-tax is reflected therein.

    TDS on Income from Pension:

    4.11.   In  the case of pensioners who  receive their   pension from  a  nationalized bank,  the instructions contained  in this circular shall apply in the same  manner as they  apply  to salary-income.  The deductions from  the amount  of  pension under section 80C  on  account  of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioners furnish the relevant details to the banks, may be allowed.  Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other  nationalized  Banks  vide  RBI’s  Pension   Circular(Central  Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64(11CVL)-/92) dated  the  27th  April, 1992, and, these  instructions should be followed by all the  branches of the  Banks,  which have been entrusted with the task  of payment of pensions.  Further all branches of the banks are  bound  u/s 203 to issue certificate of tax deducted in Form  16 to the pensioners also vide CBDT circular no.  761 dated 13.1.98.

    Important Circulars:

    4.12.   Where  Non-Residents  are deputed to  work  in India  and  taxes are borne by the employer, if any  refund  becomes due to the employee after he has already left India  and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the  tax has been borne by it :Circular No.  707 dated 11.7.1995.

    4.13.   TDS certificates issued by Central  Government departments  which are making payments by book  adjustment, should  be  accepted  by  the Assessing  Officers  if  they indicate  that  credit has been effected to the Income  Tax Department  by  book  adjustment  and   the  date  of  such adjustment  is given therein.  In such cases, the Assessing Officers  may  not insist on details like challan  numbers, dates  of  payment into Government Account etc.,  but  they should  in  any  case satisfy  themselves  regarding  the genuineness  of  the  certificates produced before  them  : Circular No.  747 dated 27.12.1996.

    4.14  There  is  a specific procedure  laid  down  for  refund  of payments made by the deductor in excess of taxes deducted   at   source,  vide Circular  No. 285 dated 21.10.1980.

    4.15  In respect of non-residents, the salary paid for services  rendered  in  India shall be regarded  as  income earned  in  India. It has been specifically provided in the Act that  any  salary  payable  for rest period or leave period  which  is both preceded  or  succeeded by service in India and  forms part of  the  service contract of employment will  also  be regarded as income earned in India.

  2. New Procedure for TDS Returns and Quarterly Statements with effect from 1st of April, 2005:4.16.       a) The person deducting the tax (employer in case of salary income), is required to file Quarterly Statements for the periods ending on 30th June, 30th September, 31st December and 31st March of each financial year, duly verified, to the Director General of Income Tax (Systems) or M/s National Securities Depository Ltd (NSDL). These statements are required to be filed on or before the 15th  July, the 15th  October, the 15th  January in respect of the first three quarters of the financial year and on or before the 15th June  following the last quarter of the financial year.
    1. b) The Quarterly Statements are be filed on computer media only in accordance with rule 31A of the Income-tax Rules, 1962. In case of failure in filing of the Quarterly Statement, the person deducting the tax shall be liable for a penalty under section 272A(2)(k) of Rs.100 for each day of default.These Quarterly Statements compulsorily require quoting of the Tax Deduction Account Number (TAN) of the tax deductor and the Permanent Account Number(PAN) of the employees whose tax has been deducted. Therefore, all Drawing and Disbursing Officers of the Central and State Governments/ Departments, who have not yet obtained TAN, must immediately apply for and obtain TAN. Similarly, all employees (including non-resident employees) from whose income, tax is to be deducted may be advised to obtain PAN, if not already obtained, and to quote the same correctly, as otherwise the credit for the tax deducted cannot be given. A penalty under section 272B of Rs.10,000/- has been prescribed for willfully intimating a false PAN.
    1.   ESTIMATION OF INCOME UNDER THE HEAD “SALARIES”

            5.1 Income chargeable under the head “Salaries”.

    (1)  The  following  income  shall  be  chargeable  to  income-tax under the head “Salaries” :

    (a) any  salary  due from an employer or  a  former

    employer  to an assessee in the previous  year,

    whether paid or not;

    (b) any  salary  paid  or  allowed to  him  in  the

    previous year by or on behalf of an employer or

    a  former employer though not due or before  it

    became due to him.

    (c) any arrears of salary paid or allowed to him in

    the  previous  year  by  or  on  behalf  of  an

    employer  or a former employer, if not  charged

    to income-tax for any earlier previous year.

    (2) For  the removal of doubts, it is clarified that where any salary paid in advance is included in the  total income  of any person for any previous year it shall not be included  again in the total income of the person when  the salary  becomes  due.   Any salary,  bonus,  commission  or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “Salary”.

    Definition of Salary:

    (3)   “Salary”  includes   wages,  fees,  commissions, perquisites, profits in lieu of, or, in addition to salary, advance  of salary, annuity or pension, gratuity,  payments   in respect  of  encashment of leave etc.  It also  includes   the annual  accretion  to  the   employee’s  account  in  a  recognized provident fund to the extent it is chargeable to tax under  rule  6 of Part A of the Fourth Schedule of  the Income-tax  Act .Contributions  made by the  employer to the   account of the employee in a recognized provident fund   in    excess  of  12%  of the salary of the  employee,  along with  interest applicable, shall be included in the income of the  assessee  for  the previous year. Any contribution made by the Central Government to the account of the employee under the New Pension Scheme as notified vide Notification No. F.N. 5/7/2003- ECB&PR dated 22.12.2003 (copy enclosed as Annexure-VA) and referred to in section 80CCD (para 5.4(E) of this Circular) shall also be included in the salary income.  Other items included  in  salary,  profits  in  lieu of salary  and  perquisites  are  described  in Section 17 of the Income-tax Act.  The  scope of the term profit in lieu of salary has been amended so as   not to  include  interest  on   contributions  or  any  sum  received  under a Keyman insurance policy including the sum allocated  by way of bonus on such policy.  For the purposes  of  this sub-clause, the expression Keyman insurance  policy   shall  have  the meaning assigned to it in clause  (10D)  of    section  10.   It may be noted that, since  salary  includes   pensions,  tax  at  source would have to  be  deducted  from  pension  also, if otherwise called for.  However, no tax  is   required to be deducted from the commuted portion of pension  as explained in clause (3) of para 5.2 of this Circular.

    (4) Section 17  defines the   terms “salary”,  “perquisite”   and   “profits in  lieu   of salary”.

    Perquisite includes:

    1. The value of rent free accommodation provided to the employee by his employer;
    2. The value of any concession in the matter of rent in respect of any accommodation provided to the employee by his employer;
    3. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases:
    1. By a company to an employee who is a director of such company;
    1. By a company to an employee who has a substantial interest in the company;
    2. By an employer (including a company)to an employee, who is not covered by (i) or (ii) above and whose income under the head Salaries ( whether due from or paid or allowed by one or more employers), exclusive of the value of all benefits and amenities not provided by way of monetary payment, exceeds Rs.50,000/_.

    The rules relating to valuation of such benefits and amenities have been prescribed in Rule 3. It is further provided that ‘profits    in lieu  of salary’ shall include amounts received in  lump  sum or otherwise, prior to employment or after cessation of  employment for the purposes of taxation.  The rules for valuation of perquisite are as under :  –

    1. Accommodation :- For purpose  of valuation  of  the perquisite of unfurnished  accommodation, all employees are divided into two categories: I) Govt. & State  Govt.   employees;  and ii)Others.

    For  employees of the Central and State government the value  of  perquisite  shall be equal to  the  licence  fee charged for such accommodation as reduced by the rent actually paid by the employee.

    For  all others, i.e., those salaried taxpayers not in employment of  the  Central   government  and  the  State government, the  valuation  of perquisite  in  respect  of accommodation  would  be at prescribed rates, as discussed below:

          1. Where the accommodation provided to the employee is owned by the employer, the rate  is 20% of  ‘salary’ in cities having population exceeding four lakh  as  per  the  2001 census.  For  other  places,  the perquisite value would be 15% of salary.
          2. Where the accommodation so provided is taken on lease/ rent by the employer, the prescribed rate is 20% of the

    salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee.

    For furnished accommodation, the value of perquisite as determined by the above method shall be increased by-

    1. 10% of the cost of furniture, appliances and equipments, or
    2. where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable.

    – as reduced by any charges paid by the employee himself.

    The scope of the word “accommodation” has been widened to include a house, flat, farm  house, hotel  accommodation, motel, service apartment guest house, a caravan,  mobile  home, ship etc.  However, the value  of any accommodation  provided to  an employee  working  at  a  mining site or  an on-shore  oil exploration  site  or  a  project   execution  site or a dam site or a power generation site  or  an off-shore site will  not  be treated  as a perquisite. However, such accommodation should either be located in a “remote area” or where it is not located in a “remote area”, the accommodation should be of a temporary nature having plinth area of not more than 800 square feet and should not be located within 8 kilometers of the local limits of any municipality or cantonment board.  A project execution site for the  purposes of this  sub-rule means a site of project up to the stage of its commissioning.   A “remote area” means an area  located at least 40 kilometers away from a town having a population not exceeding  20,000 as per the latest published all-India census. Off-shore sites of similar nature do not have  to  meet any requirement of distance.

    If  an  accommodation is provided by an employer in  a hotel  the value of the benefit in such a case shall be 24% of the  annual salary or the actual charges paid or payable to such  hotel,  whichever is lower, for the period  during which such accommodation is provided as reduced by any rent actually  paid or payable by the employee.  However,  where in cases  the employee is provided such accommodation for a period  not exceeding in aggregate fifteen days on transfer  from one  place  to another, no perquisite value  for  such accommodation provided in a hotel shall be charged. It may  be clarified  that  while services provided as an  integral part of the accommodation, need not be valued separately as  perquisite,  any  other  services over and above  that  for which the employer makes payment or reimburses the employee shall be valued as a perquisite as per the residual clause. In other  words, composite tariff for accommodation will be valued  as per these Rules and any other charges for  other facilities  provided by the hotel will be separately valued under  the  residual clause. Also, if on account of  an employee’s transfer from one place to another, the employee is provided  with accommodation at the new place of posting while  retaining the accommodation at the other place,  the value of perquisite shall be determined with reference to only one  such accommodation which has the lower value as per the  table prescribed in Rule 3 of the Income Tax Rules,  for  a period  up to  90  days. However,  after  that  the  value of perquisite  shall be charged for both accommodations as prescribed.

    II  Personal  attendants etc.:  The  value of free service of all personal  attendants including  a  sweeper, gardener and a watchman is to be  taken at   actual  cost  to  the  employer. Where  the  attendant  is   provided  at the residence of the employee, full cost will be  taxed   as  perquisite  in  the   hands  of   the   employee irrespective  of the degree of personal service rendered  to him.  Any amount paid by the employee for such facilities or services shall be reduced from the above amount.

    III Gas, electricity & water: For free  supply of  gas, electricity  and  water  for household consumption, the rules provide that the amount paid by the  employer  to  the  agency supplying the amenity shall be the value of perquisite. Where  the supply is made from the employer’s own resources, the  manufacturing  cost per unit incurred by  the  employer would  be taken for the valuation of perquisite.  Any amount paid by the employee  for  such facilities or services shall be  reduced from the above amount.

            IV  Free  or concessional education:  Perquisite on account of free  or concessional education shall be valued in a  manner assuming  that such expenses are borne by the employee,  and would  cover  cases  where  an   employer  is  running, maintaining or  directly  or indirectly  financing   the  educational  institution.   Any amount paid by the  employee for  such facilities or services shall be reduced from  the above  amount.  However, where such educational  institution itself is maintained and owned by the employer or where such  free  educational facilities are provided in any institution by  reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality if the cost of such education  or such benefit per child    exceeds Rs.1000/- p.m.

    V  Interest  free  or concessional loans – It  is  common practice, particularly in financial institutions, to  provide interest free or concessional loans to employees or any member of his household.  The value of  perquisite arising from such loans would be the excess of interest  payable at  prescribed  interest rate over interest, if any, actually  paid  by  the employee or any member of his household.  The prescribed interest rate  would  now  be  the rate charged per annum by the State Bank of India as on the 1st day of the relevant financial year in respect of loans of same type and for the same purpose advanced by it to the general public. Perquisite  value  would  be   calculated  on the basis of the maximum outstanding  monthly balance method. For valuing perquisites under this rule, any other method of calculation and  adjustment otherwise adopted by the employer shall  not be relevant.

    However, small loans up to  Rs.  20,000/- in the aggregate are exempt.  Loans  for  medical  treatment  specified  in Rule 3A are  also  exempt,  provided the amount of loan for medical reimbursement is not reimbursed  under  any medical insurance scheme.  Where  any medical  insurance reimbursement is received, the perquisite value  at the prescribed  rate shall be charged from the  date  of reimbursement  on  the  amount reimbursed,  but  not  repaid against  the  outstanding loan taken specifically  for  this purpose.

    VI    Use  of  assets:  It is common practice for an  asset    owned by  the  employer  to be used by the  employee. This perquisite  is  to  be  charged at the rate of  10%  of  the   original  cost  of the asset as reduced by any charges  recovered from the employee   for such  use.   However, the use of Computers and Laptops would not give rise to any perquisite.

    VII   Transfer  of assets:  Often an employee or member  of  his household  benefits  from the transfer of movable  asset (not being  shares  or securities) at no cost or at  a  cost  less than   its  market  value   from  the  employer.    The  difference   between  the  original   cost  of  the  movable   asset(not  being shares or securities) and the sum, if  any,  paid by  the  employee,  shall  be taken  as  the  value  of  perquisite.   In case of a movable asset, which has  already  been put to use, the original cost shall be reduced by a sum  of 10% of such original cost for every completed year of use of the asset.   Owing to a higher degree of obsolescence, in  case of computers and electronic gadgets, however, the value   of perquisite  shall  be worked out by reducing 50%  of  the   actual cost   by  the  reducing   balance  method  for  each  completed  year  of  use.  Electronic gadgets in  this  case means data  storage  and  handling  devices  like  computer, digital  diaries and printers.  They do not include household appliance  (i.e.   white  goods)   like  washing   machines, microwave  ovens, mixers, hot plates, ovens etc.  Similarly, in case of  cars,   the value of perquisite shall be worked out by reducing 20%  of its actual cost by the reducing  balance  method for each completed year of use.

    VIII. Employee Stock Option Plan:   Prior  to Finance Act, 2000, stock options were taxed    at two stages   i.e.,  as  perquisite    (on   the   amount  representing  the difference between the exercise price  and the fair  market  value  on the date of  exercise),  and  as  capital  gains at the time of transfer of the same.   With  effect from  1.4.2001 (relevant to  assessment  year 2001-2002) onward, stock options issued  as  per guidelines  of  the Central Government are to  be  taxed  only once, at the time of sale, as capital gains.  In cases, where  perquisite  has  been assessed with  reference  to exercise  of the option by the employee under Section 17(2),  the  fair market value at the time of exercise of the option  shall  be  the cost of acquisition of share for working  out the  capital gains.  The relevant guidelines of the  Central Government  have  been issued vide  Notification  No.1021(E) dt.11.10.2001. Stock  options not in conformity  with  the above   guidelines   (non-qualified   stock  options) shall  continue  to be taxed at both the stages.

    It is pertinent to mention that  benefits  specifically exempt   u/s  10(13A),  10(5),    10(14), 17 etc.  would continue to be exempt.  These include benefits  like  travel on tour and transfer,  leave  travel, daily allowance to meet tour expenses as prescribed, medical      facilities  subject to conditions.

    5.2 Incomes not included in the Head “Salaries”(Exemptions)

    Any income falling within any of the following clauses shall not be included in computing the income from salaries for the purpose of Section 192 of the Act :-

    (1) The  value  of   any  travel  concession or  assistance  received  by  or due to an  employee  from  his employer  or former employer for himself and his family, in connection with his proceeding (a) on leave to any place in India or   (b)  on  retirement   from  service,  or,  after termination  of  service  to any place in India  is  exempt under clause  (5)  of Section 10 subject, however,  to  the  conditions  prescribed in rule 2B of the Income-tax  Rules,            1962.

    For the purpose of this clause, “family” in relation to an individual means :

    (i) The spouse and children of the individual;  and

    (ii) the   parents,  brothers  and   sisters   of   the

    individual  or  any  of  them,  wholly  or  mainly

    dependent on the individual.

    It may also be noted that the amount exempt under this clause  shall  in  no case exceed the  amount  of  expenses actually incurred for the purpose of such travel.

    (2) Death-cum-retirement  gratuity  or   any  other gratuity  which  is  exempt to the  extent  specified  from inclusion  in computing the total income under clause  (10) of Section 10.

    (3)  Any  payment in commutation of  pension  received under  the Civil Pension(Commutation) Rules of the  Central Government  or under any similar scheme applicable to  the members  of the civil services of the Union, or holders  of  civil  posts/posts connected with defence, under the Union, or civil  posts under a State, or to the members of the all India services/Defence Services, or, to the employees of a local  authority or a corporation established by a Central,            State  or Provincial Act, is exempt under sub-clause (i) of clause  (10A)  of  Section  10.   As  regards  payments  in commutation  of  pension received under any scheme  of  any other employer, exemption  will  be  governed by the      provisions of sub-clause (ii) of clause (10A) of section   10.

    (4) Any payment received by an employee of the Central Government or a State Government, as cash-equivalent of the leave  salary  in respect of the period of earned leave  at his credit  at the time of his retirement on superannuation            or otherwise,  is  exempt  under  sub-clause(i)  of  clause (10AA) of Section 10.  In the case of other employees, this exemption will be determined with reference to the leave to their  credit at the time of retirement on  superannuation, or otherwise,  subject  to a maximum of ten months’  leave. This exemption  will  be  further limited  to  the  maximum amount  specified  by the Government of India  Notification No.S.O.588(E) dated 31.05.2002 at Rs. 3,00,000/- in relation to such employees who retire, whether on superannuation or otherwise, after 1.4.1998.

    (5)  Under   Section 10(10B), the   retrenchment compensation  received by a workman is exempt from income-tax subject   to certain  limits.    The  maximum   amount   of retrenchment compensation exempt is the sum calculated on the  basis provided  in section 25F(b) of the Industrial  Disputes Act, 1947  or  any  amount not less than Rs.50,000/-  as  the Central  Government  may  by   notification  specify  in  the official  gazette, whichever is less.  These limits shall not          apply in  the  case where the compensation is paid under  any scheme  which  is  approved  in this behalf  by  the  Central Government,  having regard to the need for extending  special protection  to  the workmen in the undertaking to  which  the scheme applies and other relevant circumstances. The maximum limit of such payment is Rs. 5,00,000 where retrenchment is on or after 1.1.1977.

    (6)  Under Section 10(10C), any payment received or receivable (even if received in instalments) by an  employee  of  the  following  bodies at  the  time  of  his voluntary  retirement  or  termination of his  service,  in accordance  with  any  scheme  or  schemes  of   voluntary retirement  or  in  the case of public sector company  ,  a scheme of voluntary separation, is exempted from income-tax to the  extent  that such amount does not exceed five  lakh            rupees:

    1. a) A public sector company;
    2. b) Any other company;
    3. c) An Authority established under a Central,

    State or Provincial Act;

    1. d) A Local Authority;
    2. e) A Cooperative Society;
    3. f) A university established or incorporated or

    under a Central, State or Provincial Act,

    or, an Institution declared to be a

    University under section 3 of the University

    Grants Commission Act, 1956;

    1. g) Any Indian Institute of Technology within

    the meaning of Clause (g) of Section 3 of

    the Institute of Technology Act, 1961;

    1. h) Such   Institute  of   Management  as  the

    Central  Government may by notification in

    the  Official  Gazette,  specify  in  this

    behalf.

    It may also be noted that where this exemption has been allowed to any employee for any assessment year, it shall not be allowed  to  him  for  any  other  assessment  year. The exemption  of  amount  received  under VRS  has been extended  to  employees  of  the  Central Government and  State  Government employees and employees of notified institutions having importance throughout India or any State or States.

    (7)  Any  sum received under a Life Insurance Policy, including  the  sum allocated by way of bonus on such policy other  than:

    1. any  sum  received under  sub-section  (3)  of section 80DD or sub-section (3) of section 80DDA

    or,

    1. any sum received under Keyman insurance policy

    or,

    iii) any sum received under an insurance policy issued on or after 1.4.2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20 percent of the actual capital sum assured. However, any sum received under such policy on the death of a person would still be exempt.

    (8)  any  payment from a Provident Fund to  which  the  Provident  Funds Act, 1925 ( 19 of 1925), applies ( or from any other  provident fund set up by the Central  Government and notified by it in this behalf in the Official Gazette).

    (9) Under Section 10(13A) of the Income-tax Act, 1961,any special  allowance specifically granted to an  assessee by his  employer to meetexpenditure incurred on payment of rent (by  whatever  name called) in respect of  residential  accommodation  occupied  by  the assessee  is  exempt  from Income-tax  to  the  extent as may  be  prescribed,  having regard  to the area or place in which such accommodation is situated  and other relevant considerations.  According  to rule 2A of  the  Income-tax Rules, 1962,  the  quantum  of exemption   allowable  on  account  of  grant  of   special allowance to meet expenditure on payment of rent shall be:

    (a)  The actual amount of such allowance received by an

    employer in respect of the relevant period;  or

    (b)  The actual expenditure incurred in payment of rent

    in  excess  of  1/10  of the salary  due  for  the

    relevant period;  or

    (c)  Where  such  accommodation is situated in  Bombay,

    Calcutta,  Delhi or Madras, 50% of the salary  due

    to the employee for the relevant period;  or

    (d)  Where  such accommodation is situated in any other

    place,  40% of the salary due to the employee  for

    the relevant period,

    whichever is the least.

    For this purpose, “Salary” includes dearness allowance,

    if the terms of employment so provide, but excludes all other

    allowances and perquisites.

    It  has to be noted that only the expenditure  actually

    incurred  on  payment  of rent in  respect  of  residential

    accommodation  occupied  by  the assessee  subject  to  the

    limits  laid down in Rule 2A, qualifies for exemption  from

    income-tax.   Thus,  house  rent allowance  granted  to  an

    employee  who  is residing in a house/flat owned by him  is

    not exempt  from  income-tax.  The  disbursing  authorities

    should  satisfy  themselves in this regard by insisting  on

    production  of  evidence of actual payment of  rent  before

    excluding  the House Rent Allowance or any portion  thereof

    from the total income of the employee.

    Though  incurring actual expenditure on payment of rent

    is a  pre-requisite  for claiming deduction  under  section

    10(13A),  it has been decided as an administrative  measure

    that  salaried employees drawing house rent allowance  upto

    Rs.3000/-  per  month will be exempted from  production  of

    rent  receipt.   It  may,  however,   be  noted  that  this

    concession  is  only  for the purpose of  tax-deduction  at

    source, and, in the regular assessment of the employee, the

    Assessing  Officer will be free to make such enquiry as  he

    deems  fit  for the purpose of satisfying himself that  the

    employee  has  incurred  actual expenditure on  payment  of

    rent.

     

    (10)  Clause (14) of section 10 provides for  exemption            of the following allowances :-

    (i) Any special  allowance  or benefit granted  to  an

    employee  to  meet  the expenses incurred  in  the

                         performance of his duties as prescribed under Rule

    2BB  subject to the extent to which such  expenses

    are actually incurred for that purpose.

    (ii) Any  allowance  granted to an employee  either  to

    meet  his  personal expenses at the place  of  his

    posting  or at the place he ordinarily resides  or

    to  compensate  him  for  the  increased  cost  of

                         living,  which may be prescribed and to the extent

    as may be prescribed.

    However, the allowance referred to in (ii) above should

    not be in the nature of a personal allowance granted to the

    assessee  to remunerate or compensate him  for  performing

    duties  of  a  special  nature relating to  his  office  or

    employment unless such allowance is related to his place of

    posting or residence.

    The  CBDT has prescribed guidelines for the purpose  of

    clauses  (i)  and (ii) of Section 10(14) vide  notification

    No.SO617(E)  dated 7th July, 1995  (F.No.142/9/95-TPL)which

    has been   amended  vide  notification   SO  No.403(E)   dt

    24.4.2000  (F.No.142/34/99-TPL).  The transport allowance

    granted  to  an  employee to meet his expenditure  for  the

    purpose of commuting between the place of his residence and

    the place  of  duty is exempt to the extent of  Rs.800  per

    month  vide  notification  S.O.No. 395(E) dated  13.5.98.

    (11) Under Section 10(15)(iv)(i) of the Income-tax Act, interest  payable by the Government on deposits made by  an employee of the Central Government or a State Government or a public   sector  company  from   out  of  his  retirement  benefits,  in  accordance with such scheme framed  in  this  behalf  by  the  Central  Government and  notified  in  the   Official   Gazette   is  exempt    from   income-tax. By  notification No.F.2/14/89-NS-II dated 7.6.89, as amended by

    notification No.F.2/14/89-NS-II dated 12.10.89, the Central Government  has notified a scheme called Deposit Scheme for Retiring  Government Employees, 1989 for the purpose of the            said clause.

    (12)Clause (18) of Section 10 provides for exemption of any income  by way of pension received by an individual  or family  pension received by any member of the family of  an individual  who has  been  in the service  of  the  Central  Government  or State Government and has been awarded “Param  Vir Chakra”  or  “Maha Vir Chakra” or “Vir Chakra” or  such other  gallantry  ward as may be specifically notified  by  the Central  Government.   Such notification has been  made vide  Notifications No.S.O.1948(E)  dated  24.11.2000  and 81(E) dated  29.1.2001 which are enclosed as per Annexure- VIA & VIB

    (13)  Under  Section 17 of the Act, exemption from  tax will also be available in respect of:-

    (a)  the  value  of  any medical treatment provided  to  an  employee  or any member of his family, in any hospital maintained by the employer;

    (b)  any  sum  paid  by  the employer  in  respect  of    any expenditure  actually incurred by the employee on  his medical treatment or of any member of his family:

    (i) in any hospital maintained by the Government or any local  authority or any other hospital approved  by the   Government  for  the   purposes  of   medical treatment of its employees;

    (ii)in respect of the prescribed diseases or ailments as  provided in Rule  3A(2) of I.T.  Rules  1962 , in any hospital  approved  by  the  Chief Commissioner having  regard  to  the prescribed  guidelines as provided in Rule 3(A)(1)of I.T.  Rule, 1962 :

    In a case falling in sub-clause (ii)above, the employee  shall  attach  with his return  of  income  a   certificate  from  the hospital specifying the  disease  or ailment  for which medical treatment was required and  the receipt for the amount paid to the hospital.

    (c)  premium  paid  by the employer in respect  of  medical

    insurance  taken  for his employees (under any  scheme                 approved  by the Central Government) or  reimbursement of insurance premium to the employees who take medical insurance  for themselves or for their family  members (under any scheme approved by the Central Government);

    (d)  reimbursement, by the employer, of the amount spent by an employee in obtaining medical treatment for himself or  any  member  of his family from  any  doctor,  not exceeding in the aggregate Rs.15,000/- in an year.

    (e)  As  regards  medical  treatment   abroad,  the  actual   expenditure  on  stay  and  treatment  abroad  of  the  employee  or  any  member of his family, or,  on  stay  abroad  of one attendant who accompanies the  patient, in  connection  with such treatment, will be  excluded from  perquisites  to  the  extent  permitted  by  the Reserve Bank of India. It may be noted that  the  expenditure  incurred on travel abroad by the patient/attendant, shall  be  excluded  from   perquisites  only  if  the  employee’s  gross  total  income, as  computed  before including  the said expenditure, does not exceed  Rs.2 lakhs.

    For the purpose of availing exemption on expenditure incurred on medical treatment, “hospital” includes a dispensary or clinic or nursing home, and  “family” in relation to an individual  means  the  spouse   and  children  of  the individual. Family  also  includes  parents,  brothers  and sisters  of  the  individual  if they are  wholly  or  mainly dependent on the individual.
    5.3 Deductions u/s 16 of the Act

    Entertainment Allowance:

    A deduction is  also  allowed under  clause  (ii)  of section  16 in respect of any allowance in the nature of an entertainment   allowance  specifically   granted by an employer to   the assessee, who is in receipt of a salary from the Government, a   sum  equal  to   one-fifth   of   his  salary(exclusive  of  any  allowance,   benefit  or   other perquisite) or five thousand rupees whichever is less. The deduction  hitherto available to non-government  employees has been withdrawn.

    Tax On Employment:

    The tax on employment (Professional Tax) within the meaning of clause (2) of Article 276 of the Constitution of India, leviable by or  under  any  law,  shall also be allowed as a  deduction  in            computing the income under the head “Salaries”.

    It may be clarified that “Standard Deduction” from gross salary income of Rs. 30,000/- or Rs. 20,000/-, depending upon the amount of salaries, which was being allowed up to financial year 2004-05 shall not be allowed from financial year 2005-06 onwards.

    5.4  Deductions under chapter VI-A of the Act

    In computing the taxable income of the employee, the  following deductions under Chapter VI-A of the Act are to be allowed from his gross total income:

    1. As per section 80C, an  employee will be entitled  to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,00,000/-:

    (1)  Payment of insurance premium to effect or to  keep in force  an  insurance on the life of the individual, the spouse or any child of the individual.

    (2)  Any  payment made to effect or to keep in force  a  contract for a deferred annuity, not being an annuity plan  as is  referred to in item (7) herein below on the life  of the individual,  the  spouse or any child  of  the individual, provided that such contract does not contain a provision  for the exercise by the insured of an option  to receive  a  cash  payment  in lieu of the  payment  of  the annuity;

    (3) Any sum deducted from the salary payable by, or, on  behalf  of  the Government to any individual, being  a  sum deducted  in accordance with the conditions of his  service for the  purpose  of securing to him a deferred annuity  or making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary;

    (4) Any contribution made :

    (a) by an individual to any Provident Fund to which the

    Provident Fund Act, 1925 applies;

    (b) to  any  provident  fund  set  up  by  the  Central Government,  and  notified by it in this behalf  in the Official Gazette, where such contribution is to an  account standing in the name of an individual, or spouse or children ;

                  [The Central Government has since notified Public Provident Fund vide Notification S.O. No. 1559(E) dated 3.11.05.]

    (c) by an employee to a Recognized Provident Fund;

    (d) by an employee to an approved superannuation fund;

    It  may be noted that “contribution” to any Fund  shall

    not include any sums in repayment of loan;

    (5) Any subscription :-

    (a) to  any such security of the Central Government  or

    any  such deposit scheme as the Central  Government

    may,  by  notification  in  the  Official  Gazette,

    specify in this behalf;

    (b) to  any  such saving certificates as defined  under

    section  2(c) of the Government Saving  Certificate

    Act, 1959 as the Government may, by notification in

    the  Official  Gazette,  specify  in  this  behalf.

                         [The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05.]

    (6)  Any  sum  paid as contribution in the case  of  an  individual, for himself, spouse or any child,

    (a)  for  participation  in the Unit  Linked  Insurance  Plan, 1971 of the Unit Trust of India;

    (b)  for  participation  in any  unit-linked  insurance  plan  of  the  LIC  Mutual Fund  notified  by  the Central  Government under clause (23D) of  section 10.

                          [The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.]

    (7)  Any subscription made to effect or keep in force a contract  for  such  annuity  plan of  the  Life  Insurance  Corporation  as the Central Government may by  notification in the Official Gazette, specify;

    [The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No. 1562(E) dated 3.11.05.]

    (8) Any subscription made to any units of any Mutual Fund, notified under clause(23D) of section 10, or from  the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under  any  plan formulated  in  accordance with any scheme as  the  Central Government,  may, by notification in the Official  Gazette, specify in this behalf;

          [The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose. The Notification issued in this regard is available at the website of the Income Tax Department at www.incometaxindia.gov.in]

    The investments made after 1.4.2005 in plans formulated in accordance with Equity Linked Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for deduction under section 80C

    (9).   Any  contribution made by an individual to  any  pension  fund  set  up by any Mutual  Fund  notified  under clause  (23D) of section 10, or, by the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the Central  Government  may,  by notification in  the  Official Gazette, specify in this behalf;

    [The Central Government has since notified UTI-Retirement Benefit Pension Fund vide Notification S.O. No. 1564(E) dated 3.11.05.]

    (10)  Any subscription made to any such deposit  scheme of, or,  any contribution made to any such pension fund set  up by, the National Housing Bank, as the Central Government may,  by  notification in the Official Gazette, specify  in this behalf;

    (11) Any subscription made to any such deposit  scheme, as the Central Government  may,  by notification in the Official  Gazette, specify  for  the  purpose of being floated by  (a)  public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes,  or, (b) any authority constituted in India  by,   or, under  any  law,  enacted  either for  the  purpose  of    dealing   with   and  satisfying   the  need  for   housing   accommodation  or for the purpose of planning,  development or improvement of cities, towns and villages, or for both.

    (12)  Any  sums paid by an assessee for the purpose  of purchase  or construction of a residential house  property, the income  from which is chargeable to tax under the  head “Income from house property” (or which would, if it has not been   used  for  assessee’s   own  residence,  have been chargeable  to tax under that head) where such payments are  made towards or by way of any instalment or part payment of the amount  due under any self-financing or other scheme of any Development Authority,   Housing   Board  etc.

    The deduction  will also be allowable in respect of  re-payment of loans  borrowed  by an assessee from the Government,  or any bank or Life Insurance Corporation, or National Housing Bank,  or certain other categories of institutions  engaged in the   business  of  providing   long  term  finance  for construction or purchase of houses in India.  Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, or a public sector company,  or  a university established by law, or  a  college affiliated  to  such university, or a local authority, or  a   cooperative  society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act.

    The stamp duty, registration fee and   other  expenses incurred for the purpose of transfer  shall   also  be  covered.   Payment  towards  the  cost  of  house property,  however, will not include, admission fee or cost of share  or initial deposit or the cost of any addition or alteration  to,  or,  renovation  or repair  of  the  house property  which  is  carried  out after the  issue  of  the completion certificate by competent authority, or after the  occupation  of  the house by the assessee or after  it  has been  let out.  Payments towards any expenditure in respect of which the deduction is allowable under the provisions of  section  24 of the Income-tax Act will also not be included in payments towards the cost of purchase or construction of a house  property.

    Where the house property in respect  of which  deduction has been allowed under these provisions is transferred  by the tax-payer at any time before the expiry of five  years from the end of the financial year in  which possession  of  such  property  is obtained by  him  or  he receives back,  by  way of refund or  otherwise,  any  sum specified in section 80C(2)(xviii), no deduction under  these provisions shall be allowed in respect of such sums paid in such  previous  year in which the transfer is made and  the aggregate amount of deductions of income so allowed  in  the earlier years shall be added to the total income of the assessee of such previous year and shall be liable to tax accordingly.

    (13) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee.

             It is clarified that any payment towards any development fees or donation or payment of similar nature does not qualify for deduction under these provisions.

    (14)  subscription  to  equity   shares  or  debentures

    forming  part of any eligible issue of capital made by a public company or by any public finance institution , which is approved by the Board.

    (15)  Subscription  to  any units of  any  mutual  fund referred  to in clause (23D) of Section 10 and approved  by the Board for this purpose.

         It may be clarified that the amount of premium or other payment made on an insurance policy [other than a contract for deferred annuity mentioned in sub-para (2)] shall be eligible for deduction only to the extent of 20 percent of the actual capital sum assured. In calculating any such actual capital sum, the following shall not be taken into account:

    1. the value of any premiums agreed to be returned, or
    1. any benefit by way of bonus or otherwise over and above the sum actually assured which may be received under the policy.
    1. As  per section 80CCC, where an assessee being  an            individual  has in the previous year paid or deposited  any            amount  out  of his income chargeable to tax to  effect  or            keep  in  force  a contract for any annuity  plan  of  Life            Insurance  Corporation  of India or any other  insurer  for            receiving  pension  from  the Fund referred  to  in  clause            (23AAB)  of  section 10, he shall, in accordance with,  and            subject  to  the provisions of this section, be  allowed  a            deduction  in  the computation of his total income, of  the            whole  of the amount paid or deposited (excluding  interest            or bonus  accrued or credited to the assessee’s account, if any)  as does not exceed the amount of ten thousand     rupees in the previous year.

    Where  any amount paid or deposited by the assessee has            been taken into account for the purposes of this section, a            rebate/ deduction  with reference to such amount shall not be  allowed under section 88 up to assessment year 2005-06 and under section 80C from assessment year 2006-07 onwards.

    1. As per the provisions ofsection 80CCD, where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004, has in the previous year paid or deposited any amount in his account under a pension scheme as notified vide Notification No. F.N. 5/7/2003- ECB&PR dated 22.12.2003 (copy enclosed as Annexure-VA), he shall be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed ten per cent of his salary in the previous year.

    Where, in the case of such an employee, the Central Government makes any contribution to his account under such pension scheme, the employee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government as does not exceed ten per cent of his salary in the previous year.

    Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is re­ceived by the assessee or his nominee, in whole or in part, in any financial year,—

    (a) on account of closure or his opting out of such pension scheme; or

    1. b) as pension received from the annuity plan purchased or taken on such closure or opting out,

    the whole of the amount referred to in clause (a) or clause (b) above shall be deemed to be the income of the assessee or his nominee, as the case may be, in the financial year in which such amount is received, and shall accordingly be charged to tax as income of that financial year.

    For the purposes of deduction under section 80CCD, “salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

    The aggregate amount of deduction under sections 80C, 80CCC and 80CCD shall not exceed Rs.1,00,000/- (Section 80CCE)

    1. Under  section  80D,  in  the  case  of  the  following            categories  of  persons, a deduction can be allowed for  a            sum not  exceeding  Rs.10,000/-  per annum  to  the  extent            payment is made by cheque out of their income chargeable to            tax to  keep  in  force an insurance on the health  of  the            categories  of  persons mentioned below provided that  such            insurance  shall  be in accordance with a scheme framed  in            this behalf by –

    (a) the General Insurance Corporation of India formed under Section   9   of  the    General   Insurance Business  (Nationalization)Act, 1972 and approved by the Central Government in this behalf;  or

    (b) any  other  insurer  and   approved  by  the  Insurance    Regulatory  and Development Authority established under    sub-section   (1)  of  Section  3  of   the   Insurance    Regulatory  and  Development Authority Act, 1999.

    The categories of persons are :

    (i) where  the  assessee is an individual, any sum paid  to

    effect  or to keep in force an insurance on the  health

    of  the  assessee  or  on the health  of  the  wife  or

    husband, dependent parents or dependent children of the

    assessee.

    (ii) where the assessee is a Hindu Undivided Family, any sum

    paid  to effect or to keep in force an insurance on the

    health of any member of the family.

    However,  the  deduction can be allowed for a  sum  not

    exceeding  Rs.  15,000/- per annum where the assessee or  his

    wife or  husband,  or dependent parents or any member of  the

    family  (in case the assessee is a Hindu Undivided Family) is

    a senior  citizen which means an individual resident in India

    who is  of  the age of sixty-five years or more at  any  time

    during the relevant previous year.

    1. Under section 80DD, where an assessee, who is a resident in India, has, during the previous year,-

    (a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

    (b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insur­er or the Administrator or the specified company subject to the conditions specified in this regard and approved by the Board in this behalf for the maintenance of a dependant, being a person with disability,

    the assessee shall be allowed a deduction of a sum of fifty thousand rupees from his gross total income of that year, subject to the conditions listed below:

    However,  where such dependant is a person with severe disability, an amount of seventy-five thousand rupees shall be allowed as deduction subject to the specified conditions.

    The deduction under this section shall be allowed only if the following conditions are fulfilled:-

    A. (i) the scheme referred to in clause (b) above provides for payment of annuity or lump sum amount for the bene­fit of a dependant, being a person with disability, in the event of the death of the individual in whose name subscription to the scheme has been made;

    (ii) the assessee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability.

    However, if the dependant, being a person with disability, predeceases the assessee, an amount equal to the amount paid or deposited under sub-para (3)(b) above shall be deemed to be the income of the assessee of the previous year in which such amount is received by the assessee and shall accordingly be chargeable to tax as the income of that previous year.

    1. The assessee, claiming a deduction under this section, shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner, along with the return of income under section 139, in respect of the assessment year for which the deduction is claimed:

    In cases where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority in the prescribed form and manner and a copy thereof is furnished along with the return of income.

    For the purposes of section 80DD,—

    (a)  “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) ;

    (b)  “dependant” means—

    (i)   in the case of an individual, the spouse, children, parents, brothers and sisters of the individual or any of them;

    (ii)  in the case of a Hindu undivided family, a member of the Hindu undivided family,

    dependant wholly or mainly on such individual or Hindu undivided family for his support and maintenance, and who has not claimed any deduction under section 80U in computing his total income for the assessment year relating to the previous year;

    (c)  “disability” shall have the meaning assigned to it in clause (i) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) and includes “autism”, “cerebral palsy” and “multiple disability” referred to in clauses (a), (c) and (h) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retar­dation and Multiple Disabilities Act, 1999 (44 of 1999);

    (d)  “Life Insurance Corporation” shall have the same mean­ing as in clause (iii) of sub-section (8) of section 88;

    (e)  “medical authority” means the medical authority as referred to in clause (p) of section 2  of the Persons with Disa­bilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996) or such other medical authority as may, by notification, be specified by the Central Government for certifying “autism”, “cerebral palsy”, “multiple disabilities”, “person with disability” and “severe disability” referred to in clauses (a), (c), (h), (j) and (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabili­ties Act, 1999 (44 of 1999);

    (f)  “person with disability” means a person as referred to in clause (t) of section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participa­tion) Act, 1995 (1 of 1996) or clause (j) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabili­ties Act, 1999 (44 of 1999);

    (g)  “person with severe disability” means—

    (i)  a person with eighty per cent or more of one or more disabilities, as referred to in sub-section (4) of section 56 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996); or

    (ii) a person with severe disability referred to in clause (o) of section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999);

    (h)  “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002).]

    1.    Under Section 80Eof the Act a deduction will  be            allowed  in  respect of repayment of interest on loan taken for  higher education, subject to the following conditions:

    (i)In computing the total income of an assessee, being an                 individual,  there  shall be deducted,  in  accordance with  and  subject to the provisions of this  section, any  amount  paid by him in the previous year, out  of his income chargeable to tax, by way of interest on                 loan,  taken by him from any financial institution  or any approved charitable institution for the purpose of pursuing  his  higher education.

    (ii) The  deduction  specified above shall be  allowed  in computing  the total income in respect of the initial assessment   year   and    seven   assessment years

    immediately succeeding the initial assessment year or until  the  interest  referred  to  above  is paid in  full by the assessee , whichever is earlier.

    For this purpose –

    (a) “approved    charitable    institution”    means   an

    institution  established for charitable purposes  and

    notified  by the Central Government under clause (2C)

    of  section  10,  or, an institution referred  to  in

    clause (a) of sub-section (2) of Section 80G.

    (b) “financial  institution”  means a banking company  to

    which  the Banking Regulation Act, 1949 (10 of  1949)

    applies  (including  any bank or banking  institution

    referred to in section 51 of that Act);  or any other

    financial  institution  which the  Central Government

    may, by notification in the Official Gazette, specify

    in this behalf;

    (c) “higher  education”  means full-time studies for  any

    graduate  or  post-graduate   course  in  engineering

    medicine, management, or, for post-graduate course in

    applied   sciences   or   pure  sciences,   including

    mathematics and statistics;

    (d) “initial  assessment year” means the assessment  year

    relevant  to the previous year, in which the assessee

    starts paying the interest on the loan.

    1.  No deduction should be allowed by the D.D.O.  from the salary  income  in  respect of any donations  made  for charitable  purposes.  The tax relief on such donations  as admissible  under  section 80G of the Act, will have to  be claimed by the tax payer in the return of income.  However, D.D.O.  on  due  verification  may  allow  donations  to     following bodies to the extent of 50% of the contribution:
    1. i)  Jawaharlal  Nehru  Memorial   Fund.

    ii)The Prime Minister’s Drought Relief Fund

    iii)The National Children’s Fund,

    Iv)The Indira Gandhi Memorial Trust,

    1. v) The Rajiv Gandhi Foundation.

    and  to  the following bodies to the extent of 100%  of

    the contribution:

    1. National  Defence  Fund or  The  Prime  Minister’s

    National Relief Fund.

    1. The  Prime Minister’s Armenia  Earthquake  Relief

    Fund.

    iii.  The Africa (Public Contributions – India) Fund.

    1. The National Foundation for Communal Harmony.
    1. Chief Minister’s  Earthquake   Relief Fund   – Maharashtra.
    1.    National Blood Transfusion Council.

    vii.    State Blood Transfusion Council.

    viii.   Army Central Welfare Fund.

    1.  Indian Naval Benevolent Fund.
    1.  Air Force Central Welfare Fund.
    1.   The Andhra Pradesh Chief Minister’s Cyclone Relief Fund – 1996.

    xii.    The National Illness Assistance Fund.

    xiii.  The  Chief  Minister’s Relief Fund  or  Lieutenant  Governor’s  Relief Fund in respect of any State or  Union  Territory  as the case may be,  subject  to  certain conditions.

    xiv.   The  University  or   Educational  Institution  of national  eminence  approved  by  the   Prescribed Authority.

    1. The  National Sports Fund to be set up by Central

    Government.

    xvi.    The  National Cultural Fund Set up by the Central Government.

    xvii.   The   Fund for Technology Development and Application set by the Central Govt.

    xviii.   The  National  Trust for Welfare of  persons with  Autism,  Cerebral  Palsy,   Mental Retardation  and Multiple disabilities.

    1. Under Section  80GG  of the Act  an  assessee  is entitled  to  a deduction in respect of house rent paid by him for  his own residence.  Such deduction is  permissible subject to the following conditions :-

    (a)  the  assessee has not been in receipt of any  House

    Rent  Allowance  specifically granted to him  which

    qualifies  for  exemption under section 10(13A)  of

    the Act;

    (b)  the  assessee  files the declaration in Form  No.10

    1.  (Annexure-VII )

    (c)  He  will  be entitled to a deduction in respect  of

    house  rent paid by him in excess of 10 per cent of

    his  total  income, subject to a ceiling of 25  per

    cent  thereof or Rs.  2,000/- per month,  whichever

    is  less.   The total income for working out  these

    percentages  will  be  computed before  making  any

    deduction under section 80GG.

    (d)  The assessee does not own:

    (i) any residential accommodation himself or by his

    spouse  or minor child or where such assessee is  a

    member of a Hindu Undivided Family, by such family,

    at  the  place  where  he  ordinarily  resides   or

    performs  duties  of his office or carries  on  his

    business or profession;  or

    (ii) at any  other   place, any residential accommodation being accommodation in the occupation of  the  assessee,  the  value of which  is  to  be determined  under clause (a)  of sub section  (2) or, as the case may be, clause (a) of sub-section (4) of section 23:

    The  Drawing and Disbursing Authorities should  satisfy

    themselves  that  all  the conditions mentioned  above  are

    satisfied  before such deduction is allowed by them to  the

    assessee.   They  should  also satisfy themselves  in  this

    regard  by  insisting on production of evidence  of  actual

    payment of rent.

    1. Undersection 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of fifty thousand rupees.

    However, where such individual is a person with severe disa­bility, a higher deduction of seventy-five thousand rupees shall be allowable.

    Every individual claiming a deduction under this section shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner along with the return of income, in respect of the assessment year for which the deduction is claimed.

    In cases where the condition of disability requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority in the prescribed form and manner and a copy thereof is furnished along with the return of income.

    For the purposes of this section, the expressions “disability”, “medical authority”, “person with disability” and “person with severe disability” shall have the same meaning as given in section 80DD (sub-para E of para 5.4 of this Circular).

    DDOs to satisfy themselves of the genuineness of claim:

    (21) The Drawing and Disbursing Officers should satisfy          themselves about the  actual deposits/ subscriptions / payments  made by the employees, by calling for such  particulars/ information  as they  deem  necessary  before  allowing the aforesaid deductions.  In case the DDO  is   not satisfied about the genuineness of the employee’s claim  regarding any deposit/subscription/payment made by the employee,  he  should not allow the same, and the  employee would  be free to claim the deduction/ rebate on such amount by filing his return  of  income and furnishing the  necessary  proof etc.,  therewith,  to  the satisfaction  of  the  Assessing Officer.

    1. CALCULATION OF INCOME-TAX TO BE DEDUCTED:

    6.1  Salary income for the purpose of Section 192 shall be computed as follow:-

    (a)  First  compute  the gross salary as  mentioned  in

    para  5.1  excluding all the incomes mentioned  in

    para 5.2;

    (b)  Allow  deductions  mentioned in para 5.3 from  the

    figure arrived at (a) above

    (c) Allow  deductions  mentioned in para 5.4 from  the                     figure   arrived  at  (b)   above  ensuring   that  aggregate  of the deductions mentioned in para 5.4 does  not  exceed  the  figure of (b)  and  if  it exceeds,  it should be restricted to that  amount.

    This  will be the amount of income from salaries on which income tax would be  required to be deducted.  This income should be rounded off to the nearest multiple of ten rupees.

    6.2  Income-tax on such income shall be calculated at the rates given in para 2 of this Circular keeping in view the age and gender of the employee.

    6.3  The amount of tax  payable  so arrived at shall be increased by surcharge (if applicable) and additional surcharge (Education Cess) at the   prescribed rate  to arrive at the total tax payable.

    6.4 The amount of tax as arrived at para 6.3 should  be deducted  every month in equal installments.  Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year.

    1.   MISCELLANEOUS:

    7.1  These  instructions  are not  exhaustive  and  are issued  only  with  a  view to  helping  the  employers  to understand  the various provisions relating to deduction of tax from  salaries.  Wherever there is any doubt, reference            may be  made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962 and the Finance Act 2005.

    7.2  In case any assistance is required, the  Assessing Officer/the local Public Relation Officer of the Income-tax Department may be contacted.

    7.3 These  instructions may be brought to  the notice   of  all  Disbursing   Officers  and   Undertakings  including  those  under  the control of  the  Central/ State Governments.

    8.4  Copies  of  this Circular are available  with  the Director  of Income-tax(Research, Statistics & Publications and Public  Relations),  6th  Floor,  Mayur  Bhavan,  Indira Chowk, New Delhi-110 001 and at the following websites:

    www.finmin.nic.in

    www.incometaxindia.gov.in

    (R.K. SAGAR)

    Under Secretary(Budget)

    Central Board of Direct Taxes

     

    1. All  State  Governments(including Administration of

    Union Territories)

    1. All Ministries/Departments of Government of India etc.
    1. President’s Secretariat
    1. Vice-President’s Secretariat
    1. Prime Minister’s Office
    1. Lok Sabha Secretariat
    1. Rajya Sabha Secretariat
    1. Cabinet Secretariat
    1. Secretary, U.P.S.C., Dholpur House, New Delhi

    10.Secretary, Staff Selection Commission, Lodhi Complex,  New Delhi

    11.Supreme Court of India, New Delhi

    12.Election Commission, New Delhi

    13.Planning Commission, New Delhi

    14.Secretariat of Governors/Lt.Governors of all States/Union Territories

    15.All   Integrated   Financial   Advisors  to   Ministries/Departments of Government of India

    16.All Heads of Departments & Offices subordinate to the

    Department of Revenue CBDT, CBEC etc.

    17.Army Headquarters, New Delhi

    18.Air Headquarters, New Delhi

    19.Naval Headquarters, New Delhi

    20.Director-General of Posts & Telegraphs, New Delhi(10

    copies)

    21.Comptroller & Auditor General of India (50 copies)

    22.Accountant General – I, Andhra Pradesh, Hyderabad

    23.Accountant General-II, Andhra Pradesh, Hyderabad

    24.Accountant General, Assam, Shillong

    25.Accountant General-I, Bihar, Ranchi

    26.Accountant General-II, Bihar, Patna

    27.Accountant General-I, Gujarat, Ahmedabad

    28.Accountant General-II, Gujarat, Rajkot

    29.Accountant General, Kerala, Trivandrum

    30.Accountant General, Madhya Pradesh, Gwalior

    31.Accountant General, Tamil Nadu, Chennai

    32.Accountant General-I, Maharashtra, Mumbai

    33.Accountant General-II, Maharashtra, Nagpur

    34.Accountant General, Karnataka, Bangalore

    35.Accountant General, Orissa, Bhubneshwar

    36.Accountant General, Punjab, Chandigarh

    37.Accountant General, Himachal Pradesh, Simla

    38.Accountant General, Rajasthan, Jaipur

    39.Accountant General-I, II & III, Uttar Pradesh, Allahabad

    40.Accountant General, West Bengal, Calcutta

    41.Accountant General, Haryana, Chandigarh

    42.Accountant General, Jammu & Kashmir, Srinagar

    43.Accountant General, Manipur, Imphal

    44.Accountant General, Tripura, Agartala

    45.Accountant General, Nagaland, Kohima

    46.Director of Audit(Central)Kolkatta

    47.Director of Audit(Central Revenue), New Delhi

    48.Director of Audit (Central), Mumbai

    49.Director of Audit, Scientific & Commercial Department,

    Mumbai

    50.All Banks (Public Sector, Nationalised including State

    Bank of India)

    51.Secretary, Reserve Bank of India Central Office

    P.B.No.406, Mumbai-400001(25 copies for distribution to

    its Branches).

    52.Accounts Officer, Inspector General of Assam Rifles,

    (Hqrs), Shillong

    53.All Chambers of Commerce & Industry

    54.Lok Sabha /Rajya Sabha Secretariat Libraries(15 copies

    each)

    55.All Officers and Sections in Techinical Wing of CBDT

    56.Controller of Accounts, Department of Economic Affairs,

    New Delhi

    57.Manager,  Reserve  Bank  of  India,  Public  Debt

    Office, Ahmedabad/Bangalore/Bhubneshwar/Mumbai(Fort)/

    Mumbai(Central)/Mumbai-8, Kolkatta/Hyderabad/Kanpur/

    Jaipur/Chennai/Nagpur/NewDelhi/Patna/Guwahati/

    Trivandrum

    58.Asst.Chief Inspector, R.B.I. Inspection Department

    Regional audit Cell/Mumbai/Kolkatta/Chennai/New

    Delhi/Kanpur

    59.Accountant General, Post & Telegraph, Simla

    60.Controller General of Defence Accounts, New Delhi

    61.Dir.of Audit, Defence Services, New Delhi

    62.World Health Organisation, New Delhi

    63.International Labour Office, India Branch,  New Delhi

    64.Secretary, Indian Red Cross Society, India, New Delhi

    65.Atomic Energy Department, Mumbai

    66.Secretary, Development Board, Ministry of Commerce &

    Industry, New Delhi

    67.National Savings Organisation, Nagpur

    68.Deputy Accountant General, Post & Telegraph, Kolkatta

    69.The Legal Adviser, Export – Import Bank of India, Post

    Box  No.19969, Nariman Point, Mumbai-400021

    70.The Deputy Finance Manager(Headquarters), Indian

    Airlines(H) – Airlines House, 11, Gurudwara Rakabganj

    Road, New Delhi-110001

    71.Manager, State Bank of India, Local Head Office:-

    1. i) Jeevan Deep Building, 1,Middleton Street, Kolkatta

    ii)Circle Top House, Rajaji Salai, Chennai-600001

    iii)Lucknow, Uttar Pradesh

    1. iv) Bank Street, Hyderabad-500001
    1. v) Hamida Road, Bhopal-462001

    vi)Shop Nos.101 to 105, Sector 17-B, Chandigarh

    vii)New Amn.Building, Madam Cama Road, Mumbai-400021

    viii) 9, Parliament Street, New Delhi-110001

    1. ix) Bhedru, Ahmedabad-380001
    1. x) Judges Court Road, Post Box No.103, Patna-800001
    1. xi) 59, Forest Park, Bhubneshwar and Gauhati, Assam

    xii) Gauhati, Assam

    72.Chief Controller of Accounts, CBDT, Lok Nayak Bhawan,

    Khan Market, New Delhi

    73.State Bank of Patiala, (Head Office), The Mall, Patiala

    74.State Bank of Bikaner  and Jaipur, Head Office, Tilak

    Marg, ‘C’ Scheme Jaipur

    75.State Bank of Hyderabad, Head Office, Gun Factory,

    Hyderabad

    76.State Bank of Indore, 5 Yashwant Nivas Road, Indore.

    77.State Bank of Mysore (Head Office), K.G.Road, Bangalore

    78.State Bank of Saurashtra, Behind Satyanarayan Road,

    Bhavnagar, Gujarat

    79.State Bank of Travancore, Post Box No.34, Trivandrum

    80.N.S.Branch, Department of Economic Affairs, New Delhi

    81.The Editory, ‘The Income-tax Reporter’ Company Law

    Institute of India (P) Ltd., 88, Thyagaraja Road,

    Thyagaraja Nagar, Chennai-600017

    82.The Editor, Chartered Secretary, The Institute of Company Secretaries of India, ‘ICSI House, 22, Institutional Area, Lodhi Road, New Delhi-110003

    83.The Editor, “Taxation” 174, Jorbagh, New Delhi

    84.The Editor, “The Tax Law Review” Post Box No.152,

    Jallandhar-144001

    85.The Editor, “Taxmann” Allied Services (P)Ltd., 1871,

    Kucha Chelan, Khari Baoli, Delhi-110006

    86.The Min. of Law (Deptt. of Legal Affairs), Shastri

    Bhawan New Delhi.

    87.Food Corporation of India, 16-17, Barakhamba Lane, New

    Delhi-110001

    88.IFCI, Bank of Baroda Building, 16, Parliament Street, New Delhi

    89.IDBI, IDBI Tower, Cuff Parad, Mumbai-400 005

    90.ICICI, 163, Backbay Reclamation, Mumbai-20

    91.NABARD, Poonam Chambers,Dr.Annie Besant Road, P.B.No.552,Worli, Mumbai

    92.National Housing Bank, 3rd Floor, Bombay Life Building,

    45, Veer Nariman Road, Mumbai

    93.IRBI, 19, Netaji Subhash Road, Kolkatta

    94.All Foreign Banks operating in India

    95.Air India, New Delhi

    96.University Grants Commission, Bahadur Shah Jafar Marg,

    New Delhi

    97.The Deputy Director(Admn.), NSSO (FOD), Mahalonobis

    Bhavan, 6th Floor, 164, G.L.Tagore Road, Kolkata-700108
    ANNEXURE-I

    Example  1

    Assessment Year 2006-2007

    Calculation of Income tax in the case of a male employee having

            gross salary income of:

    1. i)          Rs.2,00,000/- ,
    2. ii)         Rs.5,00,000/-  and

    iii)        Rs.10,00,000/-

    Particulars            (Rupees)      (Rupees)      (Rupees)

    (i)           (ii)          (iii)

    Gross Salary Income      2,00,000       5,00,000      10,00,000

    (Including allowances)

    Contribution to G.P.F.     20,000        50,000        1,00,000

    Computation of Total Income and tax payable thereon

    Gross Salary             2,00,000      5,00,000       10,00,000

    Less: Deduction

    U/s 80C               20,000         50,000        1,00,000

    Taxable Income             1,80,000      4,50,000      9,00,000

    Tax thereon                  11,000        85,000      2,20,000

    Add: surcharge                Nil            Nil           Nil

    Add: Education Cess @2%       220           1,700         4,400

            Total tax payable             11,220       86,700      2,24,400

    Note: Surcharge at the rate of 10% of the tax payable is to be charged only if taxable income exceeds Rs.10,00,000/-.

    Example 2

    A.Y.2006-2007

    Calculation of Income Tax in the case of a male employee having a handicapped dependent.

            Particulars:

    1. Gross Salary                          Rs.3,20,000
    2. Amount spent on treatment

    of a dependant, being person

    with disability( but not severe

    disability)                           Rs.   7,000

    1. Amount paid to LIC with regard

    to annuity for the maintenance

    of a dependant, being person

    with disability( but not severe       Rs.  50,000

    disability)

    1. GPF Contribution                      Rs.  25,000
    2. LIP Paid                              Rs.  10,000

    Computation of Tax

    Gross Salary                                Rs.3,20,000/-

    Less: Deduction U/s 80DD

    (Restricted to Rs.50,000/-               Rs.  50,000/-

    only)                                _________________

    Taxable Income                           Rs.2,70,000/-

    Less: Deduction u/s 80C:

    GPF     25,000/-

    LIP     10,000/-

    __________

    Total   35,000/-                       35,000             

                     Total Income                            Rs. 2,35,000

    Income Tax thereon                      Rs.   22,000/- 

    Add: Surcharge                                  Nil

    Add: Education Cess @2%:               Rs.      440

    Total tax Payable                      Rs.    22,400/-
    Example 3

    A.Y. 2006-2007.

    Calculation of Income Tax in the case of a male employee where

             medical treatment expenditure was borne by the employer.

    Particulars:

    1. Gross Salary                                Rs.3,00,000/-
    2. Medical Reimbursement by employer on the

    treatment of self and dependent family

    member                                       Rs. 30,000/-

    1. Contribution of GPF                          Rs. 20,000/-
    2. LIC premium                                  Rs. 20,000/-
    3. Repayment of House Building Advance          Rs. 25,000/-
    4. Tuition fees for two children                Rs. 30,000/-
    5. Investment infrastructure Bond               Rs. 20,000/-

    Computation of Tax

    Gross Salary                              Rs.3,00,000/-

    Add: Perquisite in respect of reimburse-

    ment of Medical Expenses in excess

    of Rs.15,000/- in view of Sec. 17(2)(v)   Rs.  15,000/-                                                                _____________

    Taxable Income                          Rs.3,15,000/-

    Less: Deduction u/s 80C:

    GPF                        20,000/-

    LIC                        20,000/-

    Repayment of

    HBA                        25,000/-

    Tuition Fees               30,000/-

    Investment in

    infra-structural Bonds     20,000/-

     

    ___________

    Total                      1,15,000/-

    Restricted to Rs. 1,00,000/-                Rs. 1,00,000

    Total Income:                           Rs. 2,15,000                              

    Tax Payable                                Rs. 18,000/-

    Add: Surcharge                                   Nil

    Add: Education Cess @ 2%:                  Rs.   360

    ____________

    Total Tax Payable                          Rs. 18,360/-
    Example 4

    A.Y. 2006-2007.

            Illustrative calculation of House Rent Allowance U/s 10 (13A)in respect of residential accommodation situated in Delhi in case of a female employee:

    PARTICULARS

    1. Salary                          Rs.2,00,000/-
    2. Dearness Allowance              Rs.1,00,000/-
    3. House Rent Allowance            Rs.1,20,000/-
    4. C.C.A                           Rs.   6,000/-
    5. House rent paid                 Rs.1,44,000/-
    6. General Provident Fund          Rs.  36,000/-
    7. Life Insurance Premium          Rs.  4,000/-
    1. Subscription to Infrastructure

    Bonds                           Rs.  20,000/-

     Computation of total income and tax payable thereon

    1. Salary + D.A. + C.C.A.                      Rs.3,06,000/-

    House Rent Allowance                        Rs.1,20,000/-

    _____________

    1. Total Salary income                         Rs.4,26,000/-
    2. Less: House Rent allowance

    exempt U/s 10(13A):Least of:

    1. Actual amount of HRA received=1,20,000
    2. Expenditure of rent in excess of 10%

    of salary (including D.A.

    presuming that D.A. is taken for

    retirement benefit)

    (1,44,000-30,000)  =1,14,000                                   c.50% of Salary(Basic+ DA)=

    Rs.1,50,000                                Rs.1,14,000/-

    Gross Total Income:                          Rs.3,12,000/-

    Less: Deduction u/s 80C:

    GPF             :36,000/-

    LIC             : 4,500/-

    Subscription to

    Infr. Structure

    Bonds          _: 20,000/-

    Total:     : 60,000              Rs.  60,000/-

    Total Income:                          Rs.2,52,000/-

    Tax on total income                   Rs.  21,900/-

    Surcharge:                                  Nil

    Education Cess @ 2%                   Rs.    438/-

     Total Tax Payable                     Rs. 22,338/-
                           

                Example 5

    A.Y.2006-2007.

            Illustrating  valuation of perquisite and calculation of tax in the  case of a male employee of a private company in Mumbai who was provided  accommodation in a flat at concessional rate for  ten months  and  in  a hotel for two months. 

    1. Salary                            :       Rs.5,00,000/-
    2. Bonus                             :       Rs.  76,000/-
    3. Free gas, electricity, water etc.

    (Actual bills paid by company)    :       Rs.   24,000/-

    4(a)  Furnished flat provided to the

    employee for which actual rent

    paid by the company per annum     :       Rs.1,20,000/-

    4(b)  Hotel rent paid by employer

    (for two months)                  :       Rs.  50,000/-

    4(c)  Rent recovered from employee      :       Rs.  10,000/

    4(d)  Cost of furniture                 :       Rs.1,00,000/-

    1. Subscription to infrastructure

    bonds                             :       Rs.  30,000/-

    1. Life Insurance Premium            :       Rs.   5,000/-
    2. Subscription to NSC (VIII) Issue  :       Rs.  20,000/-
    3. Contribution to recognized P.F.   :       Rs.  36,000/-

    COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:

    1. Salary                            :        Rs. 5,00,000/-
    2. Bonus                             :        Rs.   76,000/-

    Total Salary for Valuation of      :        Rs. 5,76,000/-

    Perquisite ie; Rs.48,000 per month

    Valuation of perquisites

    (a) Perq. for flat:

    Lower of (20% of salary for ten

    months=Rs.96,000/-) and (actual rent

    paid=1,00,000)                :  Rs. 96,000/-

    (b) Perq. for hotel

    Lower of (24% of salary of

    2 mths=23,040) and (actual

    payment=50,000)               :  Rs. 23,040/-

    (c) Perq for furniture @ 10%

    of cost                       :  Rs.  10,000/-

    Rs. 1,29,040

    Less: Rent recovered from employee   :  Rs.   10,000/-                                                           Rs. 1,19,400

    (d) Add perq. for free gas, elec.

    water                         :  Rs.  24,000/-

    Total perquisites:              :  Rs. 1,43,040
    Gross Total Income                                Rs.  7,19,040/-

    (5,76,000+1,43,040)

    Less: Deduction u/s 80C:

    Provident Fund              :36,000

    Subscription to NSC VIII

    Issue                       :20,000

    LIC                         : 5,000

    Infrastructure Bond         :30,00

    Total:                           91,000

                                                             Rs.   91,000/-

    Total Income                                      Rs.  6,28,040/-

       Tax Payable                                       Rs. 1,38,412 

    Surcharge:                                                 Nil

    Education Cess @ 2%                                Rs.    2,768/-

     Total Tax Payable                     Rs. 1,41,180/-

    Example 6

    A.Y.2006-2007.

            Illustrating Valuation of perquisite and calculation of tax in the case of a female employee of a Private Company posted at Delhi and repaying House Building Loan.

    Particulars:

    1. Salary                             : Rs.3,00,000/-
    2. Dearness Allowance                 : Rs.1,00,000/-
    3. House Rent Allowance               : Rs.1,80,000/-
    4. Special Duties Allowance           : Rs.  12,000/-
    5. Provident Fund                     : Rs.  60,000/-
    6. LIP                                : Rs.  10,000/-
    7. Deposit in NSC VIII issue          : Rs.  30,000/-
    8. Rent Paid by the employee for house

    hired by her                       : Rs.  1,20,000/-

    1. Repayment of House Building Loan

    (Principal)                         : Rs.  60,000/-

    1. Tution Fees for three children     : Rs.  30,000/-

    (Rs.10,000/- per child)

    Computation of total income and tax payable thereon

    1. Gross salary                        :            5,92,000/-

    (Basic+DA+HRA+SDA)

    Less: House rent allowance exempt

    U/s 10 (13A)

    Least of:

    1. Actual amount of HRA received        : 1,80,000
    2. Expenditure on rent in excess

    of 10% of salary (Including

    D.A.)assuming D.A. is

    including for retirement

    benefits (1,20,000- 40,000)           :   80,000

    c.50% of salary (including D.A)          :   2,00,000 (-) 80,000/-

    Gross Total Taxable Income   :                5,12,000/-

    Less: Deduction u/s 80C:

    1. Provident Fund       : 60,000
    2. LIP                 : 10,000

    iii. NSC VIII Issue      : 30,000

    1. Repayment of

    HBA                 : 60,000

    1. Tution Fees

    (Restricted to two

    children)          :  20,000

    Total         :   1,80,000

    Restricted to                             1,00,000/-

    Total Income      :                              4,12,000/-

    Tax Payable                                        70,100/- 

    Surcharge:                                                 Nil

    Education Cess @ 2%                                      1,402/-                  

          Total Tax Payable                                  Rs.   71,502/-

    Note:  Part of the dearness allowance merged with the basic pay and shown as ‘Dearness Pay’ is also included in the definition of ‘salary’ for working out the amount of exemption under section 10(13A).
    Example 7

    A.Y.2006-2007.

    Income Tax calculation in the case of a male employee who claims    loss under the head income from self-occupied house property.

    Particulars:

    1. Gross salary                                   : 4,00,000
    2. Housing Loan repaid (Principal)                :   50,000
    3. Interest payable on housing loan

    (Loan taken after 01.04.1999)                  : 1,60,000

    1. Donation paid to National

    Children Fund                                  :    5,000

    1. NSC Purchased                                  :   10,000
    2. GPF                                            :   30,000

    Computation of taxable income and tax thereon:

    1. Salary Income                             : Rs.4,00,000
    1. Income from house property

    Annual value                       Nil

    Interest payable on

    loan U/s 24                   1,50,0000

    (Maximum allowable)                    : (-)Rs.1,50,000/-

    Gross total income                        : Rs.2,50,000/-

    Less: Deduction U/s 80G

    50% of Rs.5,000/-                Rs.   2,500/-

    Less Deduction U/s 80C:

    GPF                :30,000

    NSC                :10,000

    Housing Loan

    repaid             :50,000

    Total                            Rs.  90,000/-

                  Total Deductions under Chapter VI-A          Rs. 92,500/-

                  Total Income                :              Rs. 1,57,500/-

                  Tax Payable                                : Rs.  6,500/-

    Add: surcharge                                      Nil

    Add: Education Cess                        : Rs.    130

                  Total tax payable                          : Rs.  6,630/-
                                               

                                     EXAMPLE – 8

    A.Y.2006-2007.

            Income  Tax  calculation in the case of a male employee who claims loss under the head Income from self-occupied house property, and has taken house building loan before 1.4.99.

    Particulars:

    1. Gross Salary                                    4,00,000
    2. Housing Loan repaid (Principal)                   30,000
    1. Interest payable on housing loan

    (Loan taken before 01.04.1999)                   1,00,000

    1. Donation paid to National Children’s Fund          6,000
    2. N.S.C. purchased                                  10,000/-
    3. G.P.F.                                            20,000/-

    Computation of Taxable Income and tax thereon

    1. Salary Income                                Rs.4,00,000
    1. Income from House Property

    Annual value   :                    Nil

    Interested payable on loan

    u/s 24         :                  30,000

    (Maximum allowable                          (-)Rs.30,000/-

    for loans taken before 1.4.99)              ————-

    Gross total income                            Rs.3,70,000/-

    Less Deduction U/s 80G

    50% of Rs. 6,000/-                      Rs. 3,000/-

    Less Deduction U/s  80C:

    G.P.F.                         20,000

    N.S.C.                         10,000

    Housing Loan repaid            30,000

    ———–

    Total:              60,000

    ————

    Total Deductions under Chapter VI-A                 Rs. 63,000/-

    Total Income                                       Rs.3,07,000/-

    Tax payable                                  Rs. 42,100/-

    Add: Surcharge                                       Nil

    Add: Education Cess @ 2%                     Rs.     842

    ————

                  Total Tax payable                            Rs. 42,942/-

    ———–

    EXAMPLE  – 9

    A.Y.2006-2007

         Income  Tax calculation in the case of a male pensioner who is more than 65 years of age.

    (Rupees)

    Particulars

    Service Pension                                  1,80,000

    Infrastructure Bond                                30,000

    N.S.C. purchased                                   20,000

    Computation of Taxable Income and Tax thereon

    Income from Salary (Pension)                     1,80,000

    Less: Deduction u/s 80C

    G.P.F.          30,000

    N.S.C.          20,000

    ———

    Total      50,000

    ———-

     Total Income                                   1,30,000

       

    Tax payable                                       Nil

    Note: Taxpayers of sixty five years of age or above do not have to pay tax up to a total income of Rs.1,85,000/-.
    ANNEXURE-II

    Form for sending particulars of income u/s 192(2B) for the year ending 31st March 2002

    1. Name and address of the employee
    2. Permanent Account Number
    3. Residential status
    4. Particulars of income under any head of income other than “salaries” (not being a loss under any such head other than the loss under the head “Income from house property”) received in the financial year.

    (i)  Income from house property                                       ——————-

    (in case of loss, enclose computation thereof)

    (ii)  Profits and gains of business or profession             ——————-

    (iii)  Capital gains                                                                                ——————-

    (iv)  Income from other sources

    (a)  Dividends

    (b) Interest

    (c) Other incomes (Specify)

    Total                       ——————-

    1. Aggregate of sub-items (i) to (iv) of item 4
    2. Tax deducted at source (enclose certificates) issued under Section 203)

    Place——————

    Date —————–                                                                                              ——————-

    Signature of the employee

    Verification

    I, —————————————–, do hereby declare that what is stated above is true to the best of my knowledge and belief.

    Verified today, the —————— day of ——————2002.

    Place——————

    Date——————                                                                                  ——————-

    Signature of the employee

    F.No.142/47/98-TPL                                                                                           Sd/-

    NOTIFICATION NO. 10722                             ( SUNITI SRIVASTAVA)

    Under Secretary to the Govt. of India

    ———————————————————————————-

    The principal rules were published vide notification No. S.O. 969(E) dated 26.3.1962 and were last amended vide notification NO. SO. 897(E) dated 12.10.98.
    ANNEXURE-III

        FORM NO.12BA

    {See rule 26A(2)(b)}

    Statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary with value thereof

    1. Name and address of employer :

    2)   TAN

    3)  TDS Assessment Range of the employer :

    4)   Name, designation and PAN of employee :

    1. Is the employee a director or a person with :

    substantial interest in the company

    (where the employer is a company)

    6)   Income under the head “Salaries” of the employee :

    (other than from perquisites)

    7)   Financial Year :

    8)   Valuation of Perquisites

    S.No Nature of perquisite(see rule 3) Value of perquisite as per rules(Rs.) Amount, if any recovered from the employee(Rs.) Amount of perquisite chargeable to taxCol(3) – Col(4)

    (Rs.)

    (1) (2) (3) (4) (5)
    1 Accommodation
    2 Cars/Other automotive
    3 Sweeper, gardener, watchman or personal attendant
    4 Gas, electricity, water
    5 Interest free or concessional loans
    6 Holiday expenses
    7 Free or concessional travel
    8 Free meals
    9 Free Education
    10 Gifts, vouchers etc.
    11 Credit card expenses
    12 Club expenses
    13 Use of movable assets by employees
    14 Transfer of assets to employees
    15 Value of any other benefit/amenity/service/privilege
    16 Stock options (non-qualified options)
    17 Other benefits or amenities
    18 Total value of perquisites
    19 Total value of Profits in lieu of salary as per 17(3)
    1. Details of tax, –
    1. Tax deducted from salary of the employee u/s 192(1)                          ………
    2. Tax paid by employer on behalf of the employee u/s 192(1A)           ………
    3. Total tax paid                                                                                               ………
  • Date of payment into Government treasury                                            ………
  • DECLARATION BY EMPLOYERI ………………. s/o ………………….  working as ……………………………(designation) do hereby declare on behalf of ……………..….. (name of the employer) that the information given above is based on the books of account, documents and other relevant records or information available with us and the details of value of each such perquisite are in accordance with section 17 and rules framed thereunder and that such information is true and correct.Signature of the person responsible

    for deduction of tax

    Place…

    Date…                                                                                                         Full Name ……………………

    Designation …………………. “;
    ANNEXURE-IV

    FORM NO. 16AA

    [See third proviso to rule 12(1)(b) and rule 31(1)(a)]

    Certificate for tax deducted at source from income chargeable under the head “Salaries”-cum- Return of income

    For an individual, resident in India, where-

    1. his total income includes income chargeable to income-tax under the head ‘Salaries’;
    2. the income from salaries before allowing deductions under section 16 of the Income-tax Act, 1961 does not exceed rupees one lakh fifty thousand;
    3. his total income does not include income chargeable to income-tax under the head ‘Profits and gains of business or profession’ or ‘Capital gains’ or agricultural income; and
    1. d)         he is not in receipt of any other income from which tax has been deducted at source by any person other than the employer
    Name and address of the Employer Name and designation of the Employee
    PAN/GIR NO. TAN PAN/GIR NO.
    TDS Circle where annual Return /statement under section 206 is to be filed Period Assessment year ……………..
    FROM TO

     

    DETAILS OF SALARY PAID AND ANY OTHER INCOME AND TAX DEDUCTED

    1. Gross salary
    1. Salary as per provisions contained in section 17(1)
    2. Value of perquisites under section 17(2) (as per Form no. 12BA, wherever applicable)
    3. Profits in lieu of salary under section 17(3) (as per Form No. 12BA, wherever applicable)
    4. Total
    Rs.Rs.

    Rs.

    ………………………………

    ………………

    Rs. ________
    1. Less: Allowance to the extent exempt under section 10
    Rs.Rs.

    Rs.

     

    ………………………………

    ………………

    Rs. ________
    1. Balance (1-2)
    Rs. ________
    1. Deductions under section 16:
    1. Standard deduction
    Rs. ……………….
    1. Entertainment allowance
    Rs. ……………….
    1. Tax on Employment

     

    Rs. ……………….
    1. Aggregate of 4 (a) to (c)

     

    Rs. ________
    6.  Income chargeable under the head ‘Salaries’ 701
    7.  Add: Any other income reported by the employee

    1. Income under the Head ‘Income from House Property’
    2. Income under the Head ‘Income from Other Sources’

    (c)  Total of (a) + (b) above

    Rs. __________
    702
    706
    8.    GROSS TOTAL INCOME (6+7) 746
    1. DEDUCTIONS UNDER CHAPTER VI-A
    GROSS AMOUNT QUALIFYING AMOUNT DEDUCTIBLE AMOUNT
    1. 80 CCC
    Rs. ……………… Rs. ……………. 235
    1. 80 D
    Rs. ……………… Rs. ……………. 236
    1. 80 E
    Rs. ……………… Rs. ……………. 239
    1. 80 G
    Rs. ……………… Rs. ……………. 242
    1. 80 L
    Rs. ……………… Rs. ……………. 260
    1. 80 QQB
    Rs. ……………… Rs. ……………. 275
    1. 80 RRB
    Rs. ……………… Rs. ……………. 282
    1. SEC
    Rs. ……………… Rs. …………….
    1. Aggregate of deductible amounts under Chapter VI-A
    747
    1. TOTAL INCOME (8-10)
    760
    12. TAX ON TOTAL INCOME 810
    13. REBATE UNDER CHAPTER VIII
    1. Under section 88 (please specify)
    GROSS AMOUNT QUALIFYING AMOUNT TAX REBATE
    (a) Rs. ……………… Rs. ……………… …………..
    (b) Rs. ……………… Rs. ……………… …………..
    (c) Rs. ……………… Rs. ……………… …………..
    (d) Rs. ……………… Rs. ……………… …………..
    (e) Rs. ……………… Rs. ……………… …………..
    (f) Rs. …………….. Rs. ……………… …………..
    (g) Total[(a) to (f)] Rs. ……………… Rs. ……………… 812
    1. (a) under section 88B

    (b) under section 88C

    813
    814
    14. Aggregate of tax rebates at 13 above [I(g)+II(a)+II(b)] 820
    1. Tax payable on total income (12-14) and surcharge thereon
    832
    1. Less: Relief under section 89(attach details)
    837
    1. Balance Tax payable(15-16)
    841
    1. Less:

    (a) tax deducted at source under section 192(1)

    (b) Tax paid by the employer on behalf of the

    employee under section 192(1A) on    perquisites under section 17(2)

    873
    868
    872
    1. Tax payable/refundable (17-18)
    891

    DETAILS OF TAX DEDUCTED AND DEPOSITED INTO CENTRAL GOVERNMENT ACCOUNT

    AMOUNT DATE OF PAYMENT NAME OF BANK AND BRANCH WHERE TAX DEPOSITED

     

     
    I  ________________________    son of Shri _______________________  working in the capacity of  _____________________                                                 (designation) do hereby certify that a sum of Rupees___________________________________ (in words) has been deducted at source and paid to the credit of the Central Government. I further certify that the information given above is true and correct based on the books of account, documents and other available records.

     

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

    TO BE FILLED IN BY THE ASSESSEE

    1.  NAME OF THE ASSESSEE

     

    2. ADDRESS

     

    PIN TELEPHONE

     

    3. DATE OF BIRTH 4. SEX  M/F: 5. ASSESSMENT YEAR

     

    6. WARD/CIRCLE/SPECIAL RANGE: 7. RETURN : ORIGINAL OR REVISED:
    1. PARTICULARS OF BANK ACCOUNT(for payment of refund)

     

    Name of the Bank MICR Code Address of Bank Branch Type of Account Account Number

    VERIFICATION BY THE ASSESSEE

    I ,  _________________________________________________________   (Name in full and in block letters), son/daughter of Shri _________________________________________________________  solemnly declare that to the best of my knowledge and belief, the information given in this return is correct, complete and truly stated and in accordance with the provisions of the Income-tax Act, 1961, in respect of income chargeable to income-tax for the previous year relevant to the assessment year ___________.

     

    Receipt No……………… Date……………SEAL

    Signature of the receiving official

    Signature of the assesseeDate:  _____________

    Place: _____________

    ANNNEXURE-V

    [TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY

    PART-II SECTION 3, SUB-SECTION (ii)]

    GOVERNMENT OF INDIA

    MINISTRY OF FINANCE

    (DEPARTMENT OF REVENUE)

    (CENTRAL BOARD OF DIRECT TAXES)

    ******

    New Delhi, the 26th August, 2003

    NOTIFICATION

    INCOME-TAX

    S.O. 974 (E)- In exercise of the powers conferred by sub-section (2) of section 206 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby specifies the following Scheme for electronic filing of return of tax deducted at source, namely:-

    1. Short title, commencement and application. –
    1. This Scheme may be called the “Electronic Filing of Returns of Tax Deducted at Source Scheme, 2003”.
    2. It shall come into force on the date of its publication in the Official Gazette.
    3. It shall be applicable to all persons filing returns of tax deducted at source on computer media under sub-section (2) of section 206 of the Income-tax Act, 1961.
    1. Definitions. – In this Scheme, unless the context otherwise requires,-
    1. “Act” means the Income-tax Act, 1961 (43 of 1961);
    2. “Board” means the Central Board of Direct Taxes constituted under the Central Board of Revenues Act, 1963 (54 of 1963);
    3. “computer media” means a floppy (3 ½ inch and 1.44 MB capacity) or CD-ROM, and includes on-line data transmission of electronic data to a server designated by e-filing Administrator for this purpose;
    4. “e-deductor” means the person responsible for deduction of tax at source who is required to furnish e-TDS Return under this scheme;
    5. “e-filing Administrator” means an officer not below the rank of Commissioner of Income-tax designated by the Board for the purpose of administration of this scheme;
    6. “e-TDS Intermediary” means a person, being a company, authorised by the Board to act as e-TDS Intermediary under this scheme;
    7.  “e-TDS Return” means a return to be filed under section 206 of the Act duly supported by a declaration in Form No. 27A as prescribed under the Rules;
    8. “Rules” means the Income-tax Rules, 1962;
    9. All other words and expressions used herein but not defined and defined in the Act shall have the meanings respectively assigned to them in the Act.
    1. Preparation of e-TDS Return. –

    (1) The e-deductor shall use the relevant Forms prescribed under the Rules for preparing e-TDS Returns.

    1. The e-deductor shall prepare his e-TDS Return according to the data structure to be provided by the e-filing Administrator.
    2. While preparing e-TDS Return, the e-deductor shall quote his permanent account number and tax deduction account number as also the permanent account number of all persons in respect of whom tax has been deducted by him except in respect of cases to which the first proviso to sub-section (5A) or the second proviso to sub-section (5B) of section 139A of the Act applies.
    3. The e-deductor shall ensure that all columns of the Forms of the return for tax deduction at source, prescribed under the Rules, are duly and correctly filled in.
    1. Each computer media used for preparation of the e-TDS Return shall be affixed with a label indicating name, permanent account number, tax deduction account number and address of the e-deductor, the period to which the return pertains, the Form Number of the return and the volume number of the said media in case more than one volume of such media is used.
    2. Separate computer media shall be used for each Form of e-TDS Return by the e-deductor.
    1. Furnishing of e-TDS Return.- 

    (1) The e-deductor shall furnish e-TDS Return on computer media to the e-TDS Intermediary duly supported by a declaration in Form No.27A, as prescribed in the Rules, in paper format:

    Provided that in case any compression software has been used by the e-deductor for preparing the e-TDS Return, he shall also furnish such compression software alongwith the e-TDS Return on the same computer media.

    1. In case the e-deductor has on-line connectivity with the server of the e-TDS Intermediary, as may be designated by e-filing Administrator for this purpose, he may transmit the electronic data of the e-TDS Return directly to such server and send Form No. 27A on paper format separately to the e-TDS Intermediary.
  • Procedure to be followed by e-TDS intermediary. –
  • (1) The e-TDS Intermediary shall receive the e-TDS Return from e-deductors alongwith the declaration in Form No. 27A in paper format.
    1. The e-TDS Intermediary shall perform format level validation and control checks on the e-TDS Returns received by him and on successful completion of the same, the e-filing Administrator shall issue provisional receipt to the e-deductor.
    2. The e-TDS Intermediary shall upload the data on e-TDS Return on the server designated by the e-filing Administrator for the purpose of e-TDS Return and check whether the prescribed particulars relating to deposit of the tax deducted at source in bank and the permanent account number of the deductee have been given in the e-TDS Return.
    3. On successful completion of the check, the data of e-TDS Return shall be transmitted by the e-TDS Intermediary to the e-filing Administrator together with the declaration in Form No.27A and the provisional receipt issued shall be deemed to be the acknowledgement of the e-TDS Return.
    4. Where the details of deposit of tax deducted at source in bank, the permanent account number, tax deduction account number or any other relevant details are not given in the e-TDS Return, the e-filing Administrator shall forward a deficiency memo to the e-deductor with a request to remove the deficiencies within seven days of receipt of the same.
    5. In case the deficiency indicated in the deficiency memo is removed within seven days, the data on e-TDS Return shall be transmitted by the e-TDS Intermediary to the e-filing Administrator and the provisional receipt shall be deemed to be acknowledgement of the e-TDS Return.  The date of issue of provisional receipt shall be deemed to be the date of filing of the e-TDS Return.
    6. In case no deficiency memo is issued by the e-filing Administrator within thirty days of issue of the provisional receipt, the provisional receipt issued shall be deemed to be the acknowledgement of the e-TDS Return and the date of issue of provisional receipt shall be deemed to be the date of filing of e-TDS Return.
    7. Where the deficiencies indicated in the deficiency memo are not removed by the e-deductor within seven days, the e-TDS Intermediary shall communicate the same to the e-filing Administrator and transmit the data to the e-filing Administrator whereupon  Assessing Officer may take action for declaring the return as an invalid return after giving due opportunity to the deductor as required under sub-section (4) of section 206 of the Act.
    8. In case the defects intimated by the Assessing Officer are rectified within the period of fifteen days or such further period as may be allowed by the Assessing Officer, the date of issue of provisional receipt shall be deemed to be the date of filing of e-TDS Return.
  • General responsibilities of e-TDS Intermediary. –
  • (1)            The e-TDS Intermediary shall ensure accurate transmission of the e-TDS Return to the e-filing Administrator:Provided that the e-TDS Intermediary shall not be responsible for any errors or omissions in the return of tax deducted at source prepared by the e-deductor.
    1. The e-TDS Intermediary shall retain for a period of one year from the end of the relevant financial year in which the return is required to be filed, the electronic data of the TDS Return in the format as specified by the e-filing Administrator.
    2. The e-TDS Intermediary shall retain for a period of one year from the end of the relevant financial year in which the return is required to be filed, the information relating to deficiency memo and provisional receipts issued in respect of the returns filed through it.
    3. The e-TDS Intermediary shall ensure confidentiality of information that comes to his possession during the course of implementation of this scheme, save with the permission of the e-deductor, Assessing Officer or e-filing Administrator.
    4. The e-TDS Intermediary shall ensure that all his employees, agents, franchisees, etc., adhere to all provisions of this scheme as well as all directions issued by the e-filing Administrator.
    1. Powers of e-filing Administrator. – Without affecting the generality of the foregoing provisions, the e-filing Administrator shall –
    1. specify the procedures, data structures, formats and standards for ensuring secure capture and transmission of data, for the day to day administration of this scheme;
    2. ensure compliance by e-TDS Intermediary with the technical requirements of this scheme, including review of the functioning of e-return Intermediary, verification of any complaints, scrutinising advertising material issued by them and such other matters as he deems fit.
    1. Powers of the Board: The Board may revoke the authorisation of an e-filing Intermediary on grounds of improper conduct, misrepresentation, unethical practices, fraud or established lack of service to the e-deductors or such other ground as it may deem fit.

    Notification No.205/2003.

    1. No. 142/31/2003-TPL

    (Deepika Mittal)

    Under Secretary to the Government of India
    ANNEXURE-V A

    MINISTRY OF FINANCE

    (Department of Economic Affairs)

    (ECB & PR Division)

    NOTIFICATION

    New Delhi, the 22 nd December, 2003

    F.No. 5/7/2003-ECB &PR- The government approved on 23rd August, 2003 the proposal to implement the budget announcement of 2003-04 relating to introducing a new restructured defined contribution pension system for new entrants to Central Government service, except to Armed Forces, in the first stage, replacing the existing system of defined benefit pension system.

      1. The system would be mandatory for all new recruits to the Central Government service from 1st of  January 2004 (except the armed forces in the first stage).  The monthly contribution would be 10 percent of the salary and DA to be paid by the employee and matched by the Central government.  However, there will be no contribution form the Government in respect of individuals who are not Government employees.  The contribution and investment returns would be deposited in a non-withdrawable pension tier-I account.  The existing provisions of defined benefit pension and GPF would not be available to the new recruits in the Central Government service.
      1. In addition to the above pension account, each individual may also have a voluntary tier-II withdrawable account at his option.  This option is given as GPF will be withdrawn for new recruits in Central government service. Government will make no contribution into this account.  These assets would be managed through exactly the above procedures.  However, the employee would be free to withdraw part or all of the ‘second tier’ of his money anytime.  This withdrawable account does not constitute pension investment, and would attract no special tax treatment.
      1. Individuals can normally exit at or after age 60 years for tier-I of the pension system.  At the exit the individual would be mandatorily required to invest 40 percent of pension wealth to purchase an annuity (from an IRDA- regulated life insurance company).  In case of Government employees the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirment.  The individual would received a lump-sum of the remaining pension wealth, which he would be free to utilize in any manner.  Individuals would have the flexibility to leave the pension system prior to age 60.  However, in this case, the mandatory annuitisation would be 80% of the pension wealth.

    Architecture of the new Pension System

      1. It will have a central record keeping and accounting (CRA) infrastructure, several pension fund managers (PFMs) to offer three categories of schemes viz. option A, B and C.
      2. The participating entities (PFMs and CRA)  would give out easily understood information about past performance, so that the individual would be able to make informed choices about which scheme to choose.
        1. The effective date for operationalization of the new pension system shall be form 1st of January, 2004.

    U.K. SINNHA, Jt. Secy.
                                                                                                               ANNEXURE-VI A

    MINISTRY OF FINANCE

    (Department of Revenue)

    (Central Board of Direct Taxes)

    Notification

    New Delhi, the 24th November, 2000

    INCOME- TAX

    S.O.1048 (E) – In exercise of the powers conferred by sub-clause (i) of clause (18) of Section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, hereby specifies the gallantry awards for the purposes of the said Section, mentioned in column 2 of the table below awarded in the circumstances as mentioned in corresponding column 3 thereof:-

    Table

    —————————————————————————————-

    Sl. No.    Name of gallantry award             Circumstances for eligibility

    ——————————————————————————————

    (1)                           (2)                                                                           (3)

    —————————————————————————————–

    1. Ashok Chakra                                       When awarded to Civilians for gallantry
    2. Kirti Chakra                                                                                – do –
    3. Shaurya Chakra                                                                      – do –
    4. Sarvottan Jeevan Raksha                         When awarded to Civilians for bravery

    Padak                                                     displayed by them in life saving acts.

    1. Uttam Jeevan Raksha                                               – do –

    Medal

    1. Jeevan Raksha Padak                                                                – do –
    2. President’s Police Medal                          When awarded for acts of exceptional

    for gallantry                                              courage displayed by members of police

    forces, Central police or security forces and

    certified to this effect by the head of the

    department concerned.

    1. Police Medal for                                                                          – do –

    Gallantry

    1. Sena Medal                                                   When awarded for acts of courage or

    conspicious gallantry and supported

    by certificate issued to this effect by

    relevant service headquarters.

    1. Nao Sena Medal                                                                          – do –
    2. Vayu Sena Medal                                                                        – do –
    1. Fire Secrvices

    Medal for Gallantry                                     When awarded for acts of courage                                                                          or conspicuous gallantry and supported                                                                           by certificate issued to this effect by the                                                                            last Head of  Department.

    1. President’s Police & Fire                                                         -do-

    Services   Medal for Gallantry

    14.President’s Fire Services Medal for

    Gallantry                                                                                    -do-

    1. President’s Home Guards and

    Civil Defence Medal   for

    Gallantry                                                                                    -do-

    1. Home Guard and Civil Defence

    Medal for Gallantry                                                                   -do-

    ( Notification no. 1156/F.No. 142/29/99-TPL)

    T.K. SHAH

    Director
    ANNEXURE VI B

    MINISTRY OF FINANCE

    Department of Revenue

    Central Board of Direct Taxes

    New Delhi,the 29th January,2001

    S.O.81(E)- In exercise of the powers conferred by sub-clause (i ) of clause (18) of Section 10 of the Income –tax Act, 1961 (43 of 1961)), the Central Government, hereby specifies the gallanty  awards for the purposes of the said Section and for that purpose makes the following amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number S.O.1048(E), dated the 24th November 2000, namely:-

    In the said notification, in the Table, against serial numbers 1,2 and 3 under cloumn (3) relating to “Circumstances for eligibility” the words   “to civilians” shall be omitted.

    (Notification No.22/F.No.142/29/99-TPL)

        T.K. SHAH

    Director
    ANNEXURE-VII

    FORM NO. 10BA

    (See rule 11B)

    DECLARATION TO BE FILED BY THE ASSESSEE

    CLAIMING DEDUCTION U/S 80 GG

    I/We………………………………………………………………

    ( Name of the assessee with permanent account number)

    do hereby certify that during the previous Year………….I/We had occupied the premise………………………….(full address of the premise) for the purpose of my/our  own residence for a period of…………………..months and have paid Rs. ………………. In cash/through crossed cheque, bank draft towards payment of rent to Shri/Ms/M/s……………………….(name and complete address of the landlord).

    It is further certified that no other residential accommodation is owned by

    (a) me/my spouse/my minor child/our family (in case the assessee is HUF), at ………………….where I/we ordinarily reside/perform duties of officer or employment or carry on business or profession, or

    1. me/us at any other place, being accommodation in my occupation, the value of which is to be determined u/s 23(2)(a)(i) of u/s 23(2)(b).

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