CBDT’s Circular No. 1 of 2019 dated 01.01.2019Major/important Points to Remember

The CBDT has issued circular No. 1 on 01.01.2019 in respect of the Deduction of tax at Source from Salaries u/s 192 of the Income Tax Act, 1961. Some of the major / important points to remember are;

1. Standard Deduction u/s 16(ia).

Standard deduction of Rs.40,000/- has been introduced u/s 16(ia) in lieu of the the following

  • Conveyance Allowance – u/s 10(14) r.w.r 2BB and
  • Reimbursement of Medical Expenses – Rs.15,000/- – clause (v) to the 1st provisio of sub-section 2 to section 17.

Note: Up to AY 2018-19, reimbursement of medical expenses up to Rs.15,000/- was not included in ‘Salary’ at all, since the same is not a perk as per section 17(2).  Now the same needs to be included in ‘Salary’.

2. Surcharge on Income Tax:

Total Income >50 Lakhs but less than Rs. 1 Crore – @ 10%

Total Income > Rs. 1 Core – @ 15%

3. “Health and Education Cess” shall be levied at the rate of 4% of income tax including surcharge wherever applicable, No marginal relief shall be available in respect of such cess.

4. DDOs Shall obtain documents – section 192(2D) r.w.r.26C: DDOs shall obtain from the assessee evidence or proof or particular of claims such as House rent Allowance (where aggregate annual rent exceeds one lakh rupees); Leave Travel Concession or Assistance etc , Deduction of interest under the head ‘Income from house property’ and deduction under Chapter VI-A as per the prescribed form 12BB laid down by Rule 26C of the Rules.

5. In respect of interest under income from house property DDOs to obtain following details/evidences in respect of Interest deductible.

  • Interest payable or paid
  • Name of the lender
  • Address of the lender
  • PAN of the lender
  • Note:PAN of the lender being financial institution or employer is mandatory if it is available with the employee however in case of other lender obtaining of PAN is mandatory by the DDO.5. Salary Paid in Foreign Currency:

6. 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 “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source ( see Rule 26).

7. Compulsory Requirement to furnish PAN by employee (Section 206AA):

  • If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor has to deduct the tax at higher of the following rates:
  • at the rate specified in the relevant provision of this Act; or
  • at the rate or rates in force; or
  • at the rate of twenty per cent.
Particulars TDS %
a. Total Income is below the taxable limit NIL
b. Total Income is above the taxable limit and the average  rate of Tax is less than 20% 20%
c. Total Income is above the taxable limit and the average rate of Tax is more than 20% At the average rate of Tax

Note: Health and Education cess @ 4% is not to be deducted, in case the tax is deducted at 20% u/s 206AA of the Act

8. Matters pertaining to the TDS made in case of Non Resident:

  • 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 11.07.1995].
  • 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.

9. DDOs cannot consider any deduction u/s 80G, even if it is paid through the employer. Employees have to claim the same by themselves while filing the return of income

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