Circular
: No. 622, dated
244.
Allowance of depreciation on motor vehicles owned and used by tour operators
and travel agents in the business of running these vehicles on hire for
tourists
1. The second proviso to section 32(1)(ii) of the Income-tax Act, 1961, which disallows depreciation on foreign motor cars, is reproduced below :
Provided
further that no deduction shall be allowed under this clause in respect of any
motor car manufactured outside
2.1 The intention behind this provision is to discourage use of foreign cars for the purposes of business or profession. However, in order to promote tourism industry, an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists, on which full depreciation is allowable.
2.2 Where tour operators or travel agents use certain foreign motor cars, owned by them, for providing transportation services to tourists, depreciation should be allowed on these cars. The position will not change even where such transportation services are provided as a part of package tour for tourists, which may include a number of other services like boarding and lodging, service of guides, etc. A tourist, who opts for a package tour, agrees to pay for a number of services including use of car provided to him by the tour operator or travel agent. Thus, it can be said that the car has been taken by him on hire from such tour operator or travel agent. Therefore, depreciation on foreign motor cars, owned by him and used for providing transportation services to tourists, whether in a package tour or otherwise, should be allowed.
3. Further, under sub-item (2)(ii) of item III of Appendix I to the Income-tax Rules, 1962, a higher rate of depreciation, namely, 40 per cent is allowed on motor buses, motor lorries and motor taxis used in a business of running them on hire. Therefore, where a tour operator or travel agent uses such vehicles, owned by him, in providing transportation services to the tourists, higher rate of depreciation should be allowed on such vehicles. It is clarified that motor vans are akin to motor lorries or motor buses and, therefore, higher rate of depreciation will be allowed on motor vans also, if they are used for providing transport services to tourists.
Circular : No. 609, dated
Judicial analysis
explained in - The
above circular was explained in Sita
World Travel (I) (P.) Ltd. v. IAC [1993] 45 ITD 623 (
We are unable to agree with the stand of the revenue that the C.B.D.T. circular is not applicable to the instant case. It clearly states that when a tourist, who opts for a package tour agrees to pay for a number of services including use of car provided to him by the tour operator or travel agent, it could be said that the car has been taken by him on hire from such tour operator or travel agent and that therefore, depreciation on foreign motor car owned by him and used for providing transportation services to tourists, whether in a package tour or otherwise, should be allowed. It also further adds that where a tour operator or travel agent uses such vehicles owned by him in providing transportation services to the tourists, higher rate of depreciation should be allowed on such vehicles. No appreciable argument has been advanced by the Revenue as to how the C.B.D.T. circular is not applicable to the facts of the instant case. The intention behind the legislative provision is only to discourage use of foreign cars for the purpose of business or profession, but in order to provide the tourism industry, an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists, as in the instant case, on which full depreciation is allowable. Hence as is evident from the circular, this enables the assessee to have his claim fully allowed in regard to depreciation. (p. 626)
Approved in - The above circular was referred to with approval, in ABC India Ltd. v. Dy. CIT [1996] 217 ITR 255 (Gauhati), with the following observations :
. . . it is made clear that the circular dated
Circular : No. 623,
dated
71.
Commutation of pension received by Judges of the Supreme Court and High Courts
1. Under section 10(10A)(i) of the Income-tax Act, 1961 any payment in commutation of pension received, inter alia, under the Civil Pension (Commutation) Rules of the Central Government, shall not be included while computing the total income of the recipient.
2. The issue regarding the applicability of section 10(10A)(i) to the computation of pension received by Judges of the Supreme Court and the High Courts has been considered by the Board. The Board have been advised that under section 19 of the High Court Judges (Conditions of Services) Act, 1954 and the corresponding provisions in the Supreme Court Judges (Conditions of Service) Act, 1958, the Civil Pension (Commutation) Rules for the time being in force shall, with necessary modifications, apply to Judges. The Board are further advised that the Judges would be governed by Rule 3 of the Civil Pension (Commutation) Rules, which provide for commutation for a lump sum portion not exceeding one-half of the pension. Since the commutation is under the aforesaid Rules, Judges of the Supreme Court and High Courts will be entitled to the exemption of the commuted portion under section 10(10A)(i) of the Act.
Circular : No. 624, dated
555.
Clarification regarding reopening of assessments on account of retrospective
amendment made in section 80HHC in respect of counter sale to foreign tourists
in shops and emporia, etc., located in India
The issue whether sale of goods to
foreigners in shops or other establishments situated in
2. Since the amendment with regard to sales over the counters has retrospective operation with effect from 1st April, 1986, it would normally apply even to completed assessments. However, to ensure that the assessees are not subjected to harassment, it has been decided that past cases where assessments have already been completed would not be reopened with a view to check up whether counter sales have been treated as exports for purposes of relief under section 80HHC. Where, however, the records of the assessee clearly show that such sales over the counter have been given relief under section 80HHC, the Assessing Officer will have to take necessary action to rectify the mistake.
Circular : No. 625, dated
1182. Clarification regarding discontinuance of Form No. 16B
1. Reference is invited to the Boards Circular No. 597[`1]*, dated 27-3-1991[`2]*, containing instructions regarding the use of Form Nos. 16, 16A and 16B for issuing certificates of tax deducted at source, under the various provisions of the Income-tax Act, 1961. These three forms had replaced the earlier unified Form No. 16 with effect from 28-2-1991 vide the Income-tax (Sixth Amendment) Rules, 1991 notified under SO 148(E), dated 28-2-1991.
2. In the light of the experience gained from the use of Form No.
16B, and, with a view to further streamlining the work of issue of certificates
for tax deducted at source, the Central Government have
decided to discontinue the use of Form No. 16B and to substitute it with Form
No. 16A, with effect from
(i) Under the provisions of section 203 of the Income-tax Act, every person deducting tax in accordance with the provisions of sections 192 to 194, 194A, 194AA, 194B, 194D, 194E, 194EE, 194F, 194G, 194H, 195, 196A, 196B, 196C and 196D, is required to furnish a certificate to the effect that tax has been deducted and to specify therein, inter alia, the amount deducted and any other particulars that may be prescribed. This certificate has to be furnished within the period prescribed under rule 31 of the Income-tax Rules, 1962 to the persons to whose account credit is given or to whom the payment is made or the cheque or warrant is issued, as the case may be.
(ii) The existing Form No. 16 shall continue to be used for issuing certificates of tax deducted at source under section 192, relating to salaries.
(iii) The existing Form No. 16A shall, with effect
from
(a) Section 193, relating to interest on securities;
(b) Section 194, relating to dividends;
(c) Section 194A, relating to interest other than interest on securities;
(d) Section 194B, relating to winnings from lotteries or crossword puzzles;
(e) Section 194BB, relating to winnings from horse races;
(f) Section 194C, relating to payment to contractors and sub-contractors;
(g) Section 194D, relating to insurance commission;
(h) Section 194E, relating to payment to non-resident sportsmen/Sports Associations;
(i) Section 194EE, relating to payment in respect of deposits under the National Savings Scheme;
(j) Section 194F, relating to payment on account of repurchase of units by a Mutual Fund or the Unit Trust of India;
(k) Section 194G, relating to payment of commission, remuneration or prize on sale of lottery tickets;
(l) Section 196, relating to payment of other sums to a non-resident or a foreign company;
(m) Section 196A(2), relating to income of foreign company;
(n) Section 196B, relating to income from units payable to an offshore fund;
(o) Section 196C, relating to income from foreign currency bonds or shares of an Indian company; and
(p) Section 196D, relating to income of Foreign Institutional Investors from securities.
(iv) Both Form Nos. 16 and 16A will be issued by tax-deductors on their own stationery, including computer stationery or, on printed forms which may be available from the market. Tax-deductors should take care while procuring these forms that the same are in the prescribed proforma.
(v) Form Nos. 16 and 16A shall not bear any serial number as before. Copies of these forms are enclosed as Annexures II and III.
(vi) As Form No. 16B is exactly similar to Form No. 16A excepting that it bears a serial number, it has been decided that tax-deductors can utilise these forms by scoring out the serial number and writing 16A in place of 16B, till stocks last with them. Similarly, the Income-tax Department would continue to sell these forms by converting them to Form No. 16A, till stocks last.
3. As per the provisions of sub-rule (3) of rule 31, the aforesaid TDS certificates are to be furnished to the payee within a period of one month and fourteen days from the date of credit or payment of the sum, or as the case may be, from the date of issue of a cheque or warrant for payment of any dividend to shareholders, subject to the exceptions covered by the proviso to sub-rule (3). For deduction under section 192 or 194D, the certificates can be issued within one month from the close of the financial year in which deductions were made. Failure to issue these certificates within the prescribed time invites penalty under section 272A of the Income-tax Act at the rate of a minimum of Rs. 100 and a maximum of Rs. 200 for every day during which the failure continues.
4. According to the provisions of section 206 of the Income-tax
Act, 1961, read with rule 37 of the Income-tax Rules, 1962, the person
responsible for deducting tax under any of the provisions of Chapter XVIIB of
the Income-tax Act is required to file an annual return of tax, deducted at
source, within the prescribed time, after the end of financial year during
which deduction is made. For ready reference, the table given below rule 37
which has specified the various annual returns, the forms in which these
returns are to be furnished, and, the months by the end of which these returns
have to be filed with the concerned Assessing Officer (as per rule 36A), is
reproduced below :
|
Sl. No. |
Nature of
returns
|
Form No. |
Month
|
|
(1) |
(2) |
(3) |
(4) |
|
1. |
Annual return of deduction of tax under section 192 from Salaries |
24 |
May |
|
2. |
Annual return of deduction of tax under section 193 from Interest on securities |
25 |
June |
|
3. |
Annual return of deduction of tax under section 194 from Dividends |
26 |
April |
|
4. |
Annual return of deduction of tax under section 194A from Interest other than interest on securities |
26A |
June |
|
5. |
Annual return of deduction of tax under section 194B from Winnings from lotteries or crossword puzzles |
26B |
May |
|
6. |
Annual return of deduction of tax under section 194BB from Winnings from horse races |
26BB |
May |
|
7. |
Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor |
26C |
June |
|
8. |
Annual return of deduction of tax under section 194D from Insurance commission |
26D |
June |
|
9. |
Annual return of insurance commissions paid/credited during the year without deduction of tax |
26E |
June |
|
10. |
Annual return of deduction of tax under section 194EE from Payments in respect of deposits under National Savings Scheme |
26F |
June |
|
11. |
Annual return of deduction of tax under section 194F from Payments on account of repurchase of units by Mutual Fund or Unit Trust of India |
26G |
June |
|
12. |
Annual return of deduction of tax under section 194G from Commission, etc., on sale of lottery tickets |
26H |
June |
|
13. |
Annual return of deduction of tax under section 194H from Commission, brokerage, etc. |
26-I |
June |
|
[N.B. - Deduction of tax at source under section 194H was applicable during the period 1-10-1991 to 31-5-1992 only]. |
|
|
|
It may be mentioned that if a person fails to furnish in due time, any of the aforesaid annual returns, he shall be liable to pay a penalty under section 272A of the Income-tax Act, at the rate of a minimum of rupees one hundred and a maximum of rupees two hundred for every day during which the failure continues, subject, however, to the condition that the amount of such penalty shall not exceed the amount of tax which was deductible or collectible, at source.
This may please brought to the notice of all Disbursing Officers of the Departments of Government of India, State Governments, Public Sector Undertakings, etc. In case any assistance is needed, the Income-tax Officer concerned and/or the Public Relations Officer of the Income-tax Department may please be contacted.
Circular : No. 664, dated
Clarification
I
1. Under the provisions of section 203 of the Income-tax Act, 1961, every person deducting tax in accordance with the provisions of sections 192 to 194, 194A, 194B, 194BB, 194C, 194D and 195 of the Income-tax Act is required to furnish a certificate to the effect that tax has been deducted, and to specify therein, inter alia, the amount deducted and any other particulars that may be prescribed. The certificate has to be furnished within the period prescribed under rule 31 of the Income-tax Rules, 1962, to the person to whose account credit is given or to whom payment is made or the cheque or warrant is issued as the case may be.
2. So far different forms were prescribed under rule 31 for certificates of tax deducted under different sections of the Act. By Notification No. SO 937(E), dated 10-10-1988, however, old rule 13 has been substituted by a new rule which provides for a unified form to be issued in Form No. 16 in respect of tax deducted under all the aforementioned sections. Another important departure from the existing provisions is that the said certificate shall now be issued on a paper serially numbered and printed by the Central Government in book form and supplied for a nominal consideration to the person deducting tax at source on an application to be made by him in Form No.17 to the Commissioner having jurisdiction over him in this regard. This amendment shall come into force on 1-4-1989.
3. In this connection, attention is invited to the provisions of section 272A(2)(g) of the Income-tax Act according to which if a person fails to furnish a certificate as required by section 203 he shall pay, by way of penalty, a sum which shall not be less than Rs. 100, but which may extend to Rs. 200, for every day during which the failure continues.
Circular : No. 529, dated
Clarification
2
1. Under the provisions of section 203 of the Income-tax Act, every person deducting tax in accordance with the provisions of sections 192 to 194, 194A, 194B, 194BB, 194C, 194D, 194E, 195 and 196A is required to furnish a certificate to the effect that tax has been deducted and to specify therein, inter alia the amount deducted, and any other particulars that may be prescribed. The certificate has to be furnished within the period prescribed under rule 31 of the Income-tax Rules, 1962, to the person to whose account credit is given or to whom payment is made or the cheque or warrant is issued, as the case may be.
2. With a view to streamlining the work of issue of certificates for tax deducted at source, and avoiding the problems experienced in the use of the unified Form No. 16 [which was brought into force with effect from 1-4-1989 vide Notification No. SO 937(E), dated the 10th October, 1988 (Ref. Boards Circular No. 529, dated 13-2-1989, the Central Government have now introduced a new scheme for the issue of these certificates. The main features of the scheme are as under :
(i) Instead of the existing common Form No. 16 for
various deductions, three different forms, viz,
Form Nos. 16, 16A and 16B have been introduced by amending, inter alia,
rule 31 of the Income-tax Rules through Notification No. SO
148(E), dated
(ii) The new Form No. 16 shall be used for issuing the certificates for tax deducted at source under section 192 relating to salaries.
(iii) Form No. 16A shall be used for issuing the certificates of tax deducted at source under section 193 relating to interest on securities, section 194 relating to dividends and section 194D relating to insurance commission.
(iv) Form No. 16B shall be used for issuing the certificates of tax deducted at source under section 194A relating to interest other than interest on securities, section 194B relating to winnings from lotteries or crossword puzzles, section 194BB relating to winnings from horse races, section 194C relating to payments to contractors or sub-contractors, section 194E relating to payments to non-resident sportsmen or sports associations, section 195 relating to other sums, and section 196A relating to income payable to unit-holders of Mutual Fund.
(v) Form Nos. 16 and 16A can be issued on private stationery of the tax deductor or the printed forms available in the market, without approaching the Income-tax Department. However, these forms must be in the prescribed proforma.
(vi) Form No. 16B shall be issued on a paper serially numbered and printed by the Central Government in book form and supplied for a consideration to the person deducting tax at source on an application made by him in Form No. 17 to the Chief Commissioner or Commissioner of Income-tax having jurisdiction over him in this regard. However, in the case of companies which have adopted computerisation for furnishing such certificates, the Commissioner of Income-tax can waive the stipulation of the issue of certificates on forms printed by the Government. Such companies can issue the certificates through computers, but in the prescribed proforma.
(vii) The new forms are to be used by the tax deductors for issuing any certificates for tax deducted at source after 28-2-1991.
3. It may be mentioned that as per sub-rule (3) of rule 31, the aforesaid TDS certificates are to be furnished to the payee within a period of one month from the date of credit or payment of the sum, or as the case may be, from the date of issue of a cheque or warrant for payment of any dividend to a shareholder, subject to the exceptions covered by the provisos to sub-rule (3). For deductions under sections 192 and 194D, the certificates can be issued within one month from the close of the financial year in which the deductions were made. Non-furnishing of these certificates within the prescribed time invites penalty under section 272A of the Income-tax Act at the rate of a minimum of rupees one hundred and a maximum of rupees two hundred per day for the period of default.
4. According to rule 37 of the Income-tax Rules, a person responsible for deducting tax under any of the provisions of Chapter XVIIB of the Income-tax Act is required to file an annual return of tax deduction by the end of the specified month. The annual return for deduction from salaries (Form No. 24) was hitherto required to be filed by the 30th of April every year. This date has now been changed to 31st May by the aforesaid Notification of 28th February, 1991. Form No. 24 has also been modified vide Notification No. SO 220 (E), dated 26th March, 1991. The returns this year may be filed in the new form.
5. For ready reference, the Table below rule 37, which specifies
the Form numbers and the months by the end of which the annual return of
tax-deduction have to be filed, is reproduced below :
|
Sl. No. |
Nature of
returns
|
Form No. |
Month
|
|
(1) |
(2) |
(3) |
(4) |
|
1. |
Annual return of deduction of tax under section 192 from Salaries |
24 |
May |
|
2. |
Annual return of deduction of tax under section 193 from Interest on securities |
25 |
June |
|
3. |
Annual return of deduction of tax under section 194 from Dividends |
26 |
April |
|
4. |
Annual return of deduction of tax under section 194A from Interest other than interest on securities |
26A |
June |
|
5. |
Annual return of deduction of tax under section 194 from Winnings from lotteries or crossword puzzles |
26B |
May |
|
6. |
Annual return of deduction of tax under section 194BB from Winnings from horse races |
26BB |
May |
|
7. |
Annual return of deduction of tax under section 194C from Payments to any contractor or sub-contractor |
26C |
June |
|
8. |
Annual return of deduction of tax under section 194D from Insurance commission |
26D |
June |
|
9. |
Annual return of insurance commission paid/credited during the year without deduction of tax |
26E |
June |
It may be mentioned that if a person fails to furnish in due time, any of the aforesaid annual returns he shall be liable to pay penalty under section 272A of the Income-tax Act, at the rate of a minimum of rupees one hundred and a maximum of rupees two hundred per day for the period of default.
Circular : No. 597, dated
Clarification
3
1. Reference is invited to Boards Circular No. 597, dated 27-3-1991 containing detailed instructions on the use of new Form Nos. 16, 16A and 16B in lieu of the unified Form No. 16 which was in force from 1-4-1989 to 28-2-1991.
2. As stated in paragraph 2(vii) of the said Circular, the new forms are to be used by the tax-deductors for issuing any certificate for tax deducted at source after 28-2-1991. However, representations have been received by the Board from various quarters that since the new Form No. 16B was not available in adequate numbers at many places after 28-2-1991, TDS certificates issued after that date in the unified Form No. 16 may be accepted by the Income-tax Department.
3. The matter has been considered by the Board and it has been decided that the TDS certificates issued in the unified Form No. 16 after 28-2-1991, will also be accepted by the Assessing Officers in lieu of Form No. 16B for the assessment year 1991-92. In other words, the unified Form No. 16 will also be accepted in lieu of Form No. 16B in cases where tax has been deducted at source under sections 194A, 194B, 194BB, 194C, 194E, 195 and 196A of the Income-tax Act during the financial year 1990-91.
Circular : No. 605, dated
Clarification
4
1. Reference is invited to Boards Circular No. 605, dated 12-6-1991, conveying the Boards decision that in view of the shortage of the new Form No. 16B, the Assessing Officers may accept the TDS certificates in the old Form No. 16 also in respect of deductions of tax at source under sections 194A, 194B, 194BB, 194C, 194E, 195 and 196A of the Income-tax Act, 1961, for the assessment year 1991-92.
2. Despite measures taken to make
Form No. 16B available in adequate numbers at all places, the shortage of these
forms is still continuing. The Board have, therefore,
decided that TDS certificates issued in the old Form No. 16 may also be
accepted by the Assessing Officers in lieu of Form No. 16B in respect of tax
deducted at source up to
3. It may be clarified here that the old Form No. 16 shall be accepted only for the categories of TDS for which the new Form No. 16B has been prescribed. Form No. 16B shall also remain in force along with old Form No. 16 and the tax-deductors can use either of the two forms.
Circular : No. 607, dated
Clarification
5
1. Reference is invited to Boards Circular No. 607, dated 4-7-1991 conveying Boards decision that the TDS certificates issued by tax deductors in the old (unified) Form No. 16 would continue to be accepted by the Income-tax Department in lieu of the new Form No. 16B, till 31-12-1991.
2. The position in this regard was recently reviewed by the Board and it has been decided that the TDS certificates issued up to 31st March, 1992 in the old (unified) Form No. 16 will continue to be accepted by the Assessing Officers, in lieu of Form No. 16B.
3. It may be clarified that the unified Form No. 16 shall be accepted only for those categories of TDS for which the new Form No. 16B is prescribed at present. Form No. 16B shall also remain in force along with the old (uniform) Form No. 16 and the tax deductors can use either of the two forms till 31-3-1992. TDS certificates issued after 31-3-1992 will not be accepted in the aforesaid Form No. 16.
Circular
: No.
626, dated
1066.
Clarification regarding deduction from interest on time deposits with banks
1. Please refer to Boards Circular No. 617, dated 22-11-1991 regarding deduction of tax at source from interest other than interest on securities under section 194A of the Income-tax Act with particular reference to the new provisions in relation to deduction of tax from interest on time deposits with banks.
2. A question has arisen as to whether the interest paid/credited by banks on time deposits from 1-4-1991 to 30-9-1991 has to be included for the purpose of deduction of tax at source after 1-10-1991. It is clarified that since the provisions relating to tax deduction at source from interest on time deposits with banks came into force w.e.f. 1-10-1991, only the interest paid or credited after this date will be liable for deduction of tax at source at the specified rate. The interest paid/credited during the period 1-4-1991 to 30-9-1991 will be reckoned only for the purposes of seeing whether the aggregate interest paid/credited during the financial year exceeds the limit of Rs. 2,500 which will determine the liability to deduct tax at source from payments made/credited after 1-10-1991.
Circular : No. 627, dated 27-2-1992.
1366.
Exemption to equity shares under section 5(1)(xxa) - Clarification in view of omission of Ninth Schedule
to the Income-tax Act
1. Section 5(1)(xxa) of the Wealth-tax Act, 1957 provides for exemption from wealth-tax in respect of value of equity shares in any company of the type referred to in clause (d) of section 45 which is established with the main object of carrying on the business of manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule to the Income-tax Act, where such shares form part of the initial issue of equity share capital made by the company after the 28th day of February, 1975 for a period of five successive assessment years commencing with the assessment year next following the date on which such shares were first issued.
2. A number of representations have been received in the Board seeking clarification about admissibility of exemption under section 5(1)(xxa) of the Wealth-tax Act in view of the omission of the Ninth Schedule to the Income-tax Act w.e.f. 1-4-1988.
3. The matter has been considered in consultation with the Law Ministry who have advised that the omission of the Ninth Schedule from the Income-tax Act does not affect the admissibility of exemption under section 5(1)(xxa) of the Wealth-tax Act and, for this limited purpose, the Ninth Schedule can be taken to be in the statute. The Assessing Officers shall decide the claims made under section 5(1)(xxa) of the Wealth-tax Act accordingly.
Circular : No.
628, dated
408.
Clarification regarding penalty under section 271B for failure to comply with
provisions of section 44AB for assessment year 1985-86
1. The Board had vide Circular No. 422, dated 19-6-1985 (see Clarification 2) decided that the penalty proceedings under section 271B of the Income-tax Act, 1961, for failure to comply with the provisions of section 44AB should not be initiated for assessment year 1985-86, in cases where :
(i) the Audit Report prescribed under section 44AB read with rule 6G has been obtained by 30th September, 1985; and
(ii) the self-assessment tax under section 140A of the Act has been paid within the normal period prescribed under section 139(1) of the Act for filing return of income.
Subsequently, on receipt of representations, the matter was reconsidered and Circular No. 582 was issued on 23-10-1990 clarifying that no penalty would be imposed for the assessment year 1985-86 under section 271B in cases where the audit report prescribed under section 44AB read with rule 6G had been obtained by 30th September, 1985.
2. The matter has been reconsidered by the Board in consultation with the Ministry of Law and it has been decided to withdraw the Circular No. 582, dated 23-10-1990. [Clarification 1].
CLARIFICATION 1
1. Vide Circular No. 422, dated 19th June, 1985 (Clarification 2), the Board had directed that the penalty proceedings under section 271B of the Income-tax Act, leviable for non-compliance of the provisions of section 44AB of the Act, should not be initiated for the assessment year 1985-86 in cases where :
(i) the audit report prescribed under section 44AB, read with rule 6G has been obtained by 30th September, 1985; and
(ii) the self-assessment tax under section 140A of the Act has been paid within the normal period prescribed under section 139(1) of the Act for filing return of income.
2. Representations were subsequently received requesting the Board to clarify whether the conditions mentioned at (i) & (ii) above were cumulative or independent. The Revenue Audit has also raised objections that penalty under section 271B should have been levied in cases where self-assessment tax was not paid within the normal period prescribed under section 139(1) of the Act, but was paid within the extended period, i.e., 30th September, 1985.
3. Penalty under section 271 B of the Act is leviable only for non-compliance with the provisions of section 44AB of the Act and not for delay in payment of self-assessment tax. Therefore, there seems to be an obvious anomaly in the said Circular No. 422 insofar as it linked imposition of penalty under section 271B with the payment of self-assessment tax.
4. It is, therefore, clarified that no penalty will be imposed for the assessment year 1985-86 under section 271B in cases where the audit report prescribed under section 44AB, read with rule 6G, has been obtained by 30th September, 1985. This clarification applies only to assessment year 1985-86, being the first year of operation of section 44AB of the Act.
Circular : No. 582, dated
JUDICIAL ANALYSIS
Explained in - In
The circular obviously shows that the revenue itself has delinked the payment of self-assessment tax, a natural consequence of filing return under section 139(1), from purview of audit report under section 44AB (sic). I have emphasised the word only in the Circular of the CBDT, which manifests the view of the CBDT in these matters. In my view as the assessee had obtained the audit report before the prescribed date of section 44AB and had filed it with the return, which was accepted, no penalty under section 271B should be levied.
clarification
2
1. Section 44AB lays down that every person carrying on business, whose sales, turnover or gross receipts exceed rupees forty lakhs or carrying on a profession, whose gross receipts exceed rupees ten lakhs, shall get his accounts of such previous year audited before the specified date and obtain before that date the report of such audit in the prescribed form.
2. Under Explanation of this section, specified date means the date of the expiry of four months from the end of the previous year, or where there are more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year or 30th day of June of the assessment year, whichever is later.
3. Rule 6G of the Income-tax Rules, 1962 inserted by the Income-tax (Amendment) Rules, 1985 with effect from 1-4-1985, prescribes the manner and Forms in which the audit report required under section 44AB is to be submitted. These rules were notified on 31-1-1985.
4. A number of representations have been received from assessees and various trade associations expressing their difficulties in getting the accounts audited by the specified date this year. The matter has accordingly been considered by the Board. This being the first year of the operation of the section and considering that the relevant rule was notified only on 31-1-1985, the Board has decided that the penalty proceedings under section 271B for failure to comply with the provisions of section 44AB should not be initiated for the assessment year 1985-86, in cases where :
(i) the audit report prescribed under section 44AB read with rule 6G has been obtained by 30-9-1985; and
(ii) the self-assessment tax under section 140A has been paid within the normal period prescribed under section 139(1) for filing return of income.
Circular : No. 422 [F. No.
201/156/85-IT(A-II)], dated
Note : The above circular was referred to
in ITO v. Arun Kumar Bhuwalka [1992] 40 ITD 373 (
Circular: No.
629, dated 31-7-1992.
FINANCIAL YEAR 1992-93
1675.
Instructions for deduction of tax at source from salary - Rate of tax for the
financial year 1992-93
1. Reference is invited to Boards Circular No. 612, dated 13-11-1991 wherein the rates of deduction of income-tax during the financial year 1991-92, from the payment of income under the head Salaries, under section 192 of the Income-tax Act, 1961, 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 1992-93 and explains certain related provisions of the Income-tax Act.
2. The Finance Act, 1992 has raised the income-tax exemption limit for individuals from Rs. 22,000 to Rs. 28,000. Further, the number of taxable income slabs has been reduced from four to three, viz, (i) Rs. 28,001 to Rs. 50,000, (ii) Rs. 50,001 to Rs. 1,00,000, and (iii) over Rs. 1,00,000, attracting the tax rate of 20%, 30% and 40% respectively, on the portion of the income falling within these slabs. The limit of total income for the purpose of levying surcharge on income-tax has also been raised from Rs. 75,000 to Rs. 1,00,000. The rate of surcharge, however, remains unchanged at 12% of the income-tax computed on the total income. An extract of sub-paragraph 1 of paragraph A of Part III of the First Schedule to the Finance Act, 1992 giving the tax rates applicable, is given at Annexure I.
3. Some of the other important changes brought about by the Finance Act, 1922 are as follows :
(i) Insertion of a proviso to clause (i) of section 16 to enhance the standard deduction to fifteen thousand rupees in respect of working women whose total income before making the standard deduction does not exceed seventy-five thousand rupees.
(ii) Amendment of clause (2) of section 17 to provide that all payments made by an employer directly to a hospital, approved by the Chief Commissioner of Income-tax, having regard to the prescribed guidelines, in connection with the medical treatment of the employee or any member of his family, shall not be included in the value of the perquisites. Also, the existing restriction upon the admissibility of expenditure on travel abroad for medical treatment, only in the case of employees whose total income does not exceed Rs. one lakh, has been relaxed so as to cover employees whose gross total income does not exceed Rs. two lakhs.
(iii) Amendment of section 80CCA to provide that no deduction under that section shall be allowed on or after the 1st April, 1992 in relation to any amount paid or deposited in respect of any schemes covered by this section (e.g., National Savings Scheme, Jeevan Dhara, Jeevan Akshay, etc.). However, investments in notified Schemes will now qualify for tax rebate as per the provisions of section 88.
(iv) Amendment of section 80CCB to provide that no deduction under that section shall be allowed in relation to any amount invested in the Equity Linked Savings Schemes, on or after the 1st April, 1992. However, subscriptions to units of notified Mutual Funds and UTI will now qualify for tax rebate as per the provisions of section 88.
(v) Amendment of section 80D so as to enhance the deduction allowed thereunder in respect of sums paid by an assessee to effect or keep in force an insurance on his health or on the health of his family members from Rs. three thousand to Rs. six thousand.
(vi) Amendment of section 80DD so as to enhance the deduction in respect of medical treatment of handicapped dependents from Rs. six thousand to Rs. twelve thousand. Further, the ceiling of the assessees total income being one lakh rupees or less for claiming the deduction under this section has been withdrawn.
(vii) Omission of the first and second provisos to sub-section (1) of section 80L which has the effect of limiting the deduction allowed under that section, in respect of income by way of interest, dividend, etc., as specified, up to a maximum of Rs. seven thousand.
(viii) Amendment of section 88 so as to provide that a higher limit of tax rebate of Rs. 12,000 can be availed of in the case of individuals, and Rs. 17,500 in the case of authors, playwrights, artists, musicians, actors, athletes, and sportsmen, whose income derived from the exercise of these professions, constitutes 25% or more of their total income.
(ix) Insertion of a new section 88B so as to provide an additional rebate of ten per cent of the amount of income-tax (as computed before allowing the rebate under Chapter VIII of the Income-tax Act, 1961) payable by individuals, resident in India, who are of the age of sixty-five years or more at any time during the relevant previous year and have a gross total income not exceeding fifty thousand rupees.
4. The substance of the main provisions of law insofar as they relate to income chargeable under the head Salaries on which tax is to be deducted at source during the financial year 1992-93 is given hereunder and in the succeeding paragraphs:
(i) Sub-section (1) of section 192 provides that the person responsible for paying any income chargeable under the head Salaries shall, at the time of making payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year, in which the payment is made, on the estimated income, under this heads, of the assessee for that financial year. The provisions of sub-section (3) of the said section are intended for making adjustment for any excess or shortfall in the deduction of tax made during the financial year. The aggregate tax thus calculated on the estimated income, divided by 12 and rounded off to the nearest rupee, is required to be deducted from the monthly salary. No tax will, however, be deducted at source in any case unless the estimated salary income for the financial year exceeds Rs. 28,000. (Some typical examples of calculations are given at Annexure II).
(ii) 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 employees account in a recognised provident fund to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule to the Income-tax Act. Other items included in salary, profits in lieu of salary and perquisites as described in section 17 of the Income-tax Act. It may be noted that, since salary includes pension, 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 para 5(iii) of this Circular.
(iii) The value of perquisites by way of free or concessional residential accommodation, or motor car provided by employers to their employees shall be determined under rule 3 of the Income-tax Rules, 1962. It is, however, clarified that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or, from such office or place to his residence shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purpose.
(iv) Other benefits or amenities provided free of cost or at concessional rates to the employees like supply of gas, electric energy, water for household consumption, educational facilities, etc., should also be taken into account for the purpose of computing the estimated salary income of the employees during the current financial year (Example III at Annexure II illustrates computation of some such perquisites). The valuation has to be done in accordance with rule 3 of the Income-tax Rules.
(v) The value of any benefit or amenity granted or provided free of cost or at concessional rate by an employer to an employee (not being a Director of the Company or a person who has substantial interest in the company) is not regarded as perquisites received by the employee unless the employees income under the head Salary, exclusive of the value of any benefit or amenity not provided for by way of monetary payment, exceeds Rs. 24,000.
(vi) In cases where salary is received from more than one employer, the aggregate salary from these employers will have to be taken into account for the purpose of tax deduction at source.
Exemptions/Deductions in computing total income
5. The exemptions/deductions which can be taken into account for computing the total income of an employee are discussed hereunder :
(i) 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
(1) the spouse and children of the individual; and
(2) 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.
(ii) Death-cum-retirement gratuity or any other gratuity is exempt to the extent specified from inclusion in computing the total income under clause (10) of section 10.
(iii) 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.
(iv) 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 eight months leave. This
exemption will be further limited to the maximum amount specified by the
Government of India from time to time. Presently, this limit has been specified
in the Government of India, Notification No. S.O. 553(E), [F.
No. 142/11/88-TPL], dated
(v) 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.
(vi) Hitherto, under section 10(10C) of the Income-tax Act, any payment received by an employee of a public sector company at the time of his voluntary retirement was exempt from tax provided the payment was in accordance with any scheme approved by the Central Government. The Finance Act, 1992 has enlarged the ambit of section 10(10C) to provide that exemption will be available not only to the employees of the public sector companies but also of other companies, if the payment made at the time of voluntary retirement is in accordance with any scheme(s) of voluntary retirement. These schemes will have to be in accordance with the guidelines prescribed by the Central Government which may, inter alia, include criteria of economic viability of the concerned companies. The only distinction between the voluntary retirement schemes of public sector companies and other companies will be that the latter will have to be approved by the Chief Commissioner of Income-tax or Director General of Income-tax, as the case may be.
(vii) Under section 10(13A) of the Income-tax Act, 1961, any special allowance specifically granted to an assessee by his employer to meet expenditure 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 employee 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
(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, i.e., 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 up to Rs. 600 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.
(viii) 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, which the Central Government may specify by notification in the Official Gazette.
(ii) Any allowance granted to an assessee 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 the Central Government may specify by notification in the Official Gazette.
The Direct Tax Laws (Second Amendment) Act, 1989 has inserted the following proviso to the aforesaid clause :
Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of 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 the place of his posting or residence.
By Notification Nos. SO 143(E), dated
(a) Any allowance granted to meet cost of travel on tour or on transfer, including any allowance granted to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;
(b) Any Special compensatory allowance in the nature of border area allowance or remote area allowance or difficult area allowance disturbed area allowance;
(c) Tribal area allowance;
(d) Any allowance granted to an employee working in a transport system to meet this personal expenses during his duty performed in the course of running of such transport from one place to another;
(e) Children education allowance;
(f) Any allowance granted to an employee to meet the hostel expenditure of his child;
(g) Any allowance granted to meet the expenditure incurred on conveyance in the performance of duties of an office or employment of profit;
(h) Any special compensatory allowance in the nature of Composite Hill Compensatory Allowance or High Altitude Allowance or Uncongenial Climate Allowance or Snowbound Area Allowance or Avalanche Allowance; and
(i) Any allowance granted to meet the expenditure incurred on a helper where such a helper is engaged for the performance of duties of an office or employment of profit; any allowance granted for encouraging academic research and any other professional pursuit; any allowance granted to meet the expenses incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.
It may be noted that the Dearness Allowance and City Compensatory Allowance granted to an employee are not covered by the aforesaid notifications; these allowances will clearly be part of income and will have to be taken into account in the computation of income for the purpose of deduction of tax at source. The reimbursement of tuition fee is also not exempt from tax.
(ix) Under section 10(15)(iv)(i) of the Income-tax Act as amended by the Finance Act, 1990, interest payable by the Government on deposits made by an employee of the Central Government or 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. 2/14/89-NS-II, dated 7-6-1989 as amended by Notification No. 2/14/89-NS-II, dated 12-10-1989, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause.
(x) (a) Under section 16 of the Income-tax Act, as amended by the Finance Act, 1992, that taxable salary is to be computed after making a standard deduction equal to 331/3% of the salary, subject to the following limits :
(i) Rs. 15,000 in the case of working women whose total income before making the standard deduction does not exceed Rs. 75,000 in the financial year.
(ii) Rs. 12,000 in any other case, not covered by (i).
For this purpose, the term Salary, will include fees, commissions, perquisites, or, profits in lieu of, or, in addition to salary, but will not include any payment received by the employees which is specifically exempt under clauses (10), (10A), (10AA), (10B), (10C), (10D), (11), (12), (13A) and (14) of section 10 of the Act. Thus, for example, house rent allowance to the extent exempt under section 10(13A) of the Act will not be taken into account for the purpose of computing the amount of standard deduction.
This deduction will also be available to all persons drawing pension during the current financial year at the same rate and subject to the ceiling of Rs. 12,000.
It may be noted that the standard deduction in full will be admissible even to those employees who are entitled to conveyance facilities.
(b) The tax on employment 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 of the salaried taxpayers under the head Salaries.
(c) 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 to the assessee by his employer subject to certain limits. In the case of a Government employee, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees or the actual amount of entertainment allowance, whichever is the least, is allowable as deduction. In the case of a non-Government employee, deduction for entertainment allowance to the extent specified in sub-clause (b) of clause (ii) of section 16 will be given only if the allowance is regularly received by him from his present employer from a date prior to 1st April, 1955.
(xi) Under section 17, as amended by the Finance (No. 2) Act, 1991 and, further amended by the Finance Act, 1992, 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) reimbursement by the employer, of expenditure incurred by an employee on his medical treatment or treatment of any member of his family 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;
(c) any sum paid by the employer directly to a hospital, approved by the Chief Commissioner of Income-tax, having regard to the prescribed guidelines for the purposes of medical treatment of the prescribed diseases or ailments, on account of such treatment or any member of his family;
(d) 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);
(e) 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. 10,000 in an year;
(f) as regards medical
treatment abroad, the actual expenditure incurred on medical treatment,
including the expenditure on travel or stay abroad of the patient and one
attendant, in cases where an attendant is permitted by the Reserve Bank of
(xii) The Finance Act, 1922 has amended sections 80CCA and 80CCB so as to provide that the deductions in respect of investments/deposits made in the schemes or plans covered by these sections, which were hitherto being allowed in the computation of total income of the investor, will cease to be so allowed in respect of such investments made on or after the 1st April, 1992. These investments will now qualify for tax rebate under section 88, subject to the limits prescribed under that section. However, the amendment of section 80CCA also provides that no tax will be levied on any amount received by the assessee on account of the surrender of the policy in accordance with the annuity plan of the LIC, where the assessee elects to surrender the said annuity plan before the 1st October, 1992, in respect of which he had paid the amount before 1st April, 1992.
(xiii) Under section 80D as amended by the Finance Act, 1992, in the case of the following categories of persons, a deduction can be allowed of a sum not exceeding Rs. 6,000 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 is in accordance with the scheme framed by the General Insurance Corporation of India as approved by the Central Government, popularly known as Mediclaim.
The categories of persons are :
(a) 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;
(b) 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;
(c) where the assessee is an association of persons or a body of individuals consisting in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu, any sum paid to effect or to keep in force an insurance on the health of any member of such association or body or on the health of the dependent children of the members of such an association or body.
(xiv) Under section 80DD, as amended by the Finance Act, 1992, a deduction of Rs. 12,000 shall be allowed in the case of resident individuals who incur expenditure on the medical treatment (including nursing), training and rehabilitation of a handicapped dependent relative, suffering from permanent physical disability (including blindness) or mental retardation, specified in rule 11A of the Income-tax Rules, 1962. The deduction will be available to all assessees without any restriction with regard to their total income. The permanent physical disability or mental retardation of the dependent relative has to be certified by a physician, surgeon, oculist or a psychiatrist, as the case may be, working in a Government hospital including a Departmental dispensary or a hospital maintained by a local authority as per Explanation given below section 80DD. The Drawing and Disbursing Officers should, therefore, call for such particulars/certificates/ information from the employees as they deem necessary to verify the genuineness of the claim before they allow this deduction.
(xv) No deduction should be made from the salary
income in respect of any donations for charitable purposes. The tax relief on
such donations, as admissible under section 80G of the Act will have to be
claimed by the taxpayer separately at the time of finalisation
of the assessment. However, in cases where contributions to the National Defence Fund, Jawaharlal Nehru Memorial Fund, Prime
Ministers Drought Relief Fund, National Childrens
Fund, Indira Gandhi Memorial Trust or Rajiv Gandhi
Foundation, are made, 50 per cent of such contributions may be deducted in
computing the total income of the employee. The donations to the Prime
Ministers National Relief Fund, the Prime Ministers Armenia Earthquake Relief
Fund and the Africa (Public Contributions -
(xvi) 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 at the places specified under rule 11B of the Income-tax Rules, 1962. 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) 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. 1,000 per month, whichever is less. The total income for working out these percentages will be computed before making any deductions under section 80GG;
(c) 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 sub-clause (i) of clause (a), or as the case may be, clause (b) of sub-section (2) of section 23.
(d) The accommodation occupied by him for the purpose of his own residence is situated in any of the following places, namely :
(i) Agra, Ahmedabad, Allahabad, Amritsar, Bangalore, Bhopal, Calcutta, Coimbatore, Delhi, Faridabad, Gwalior (Lashkar), Hyderabad, Indore, Jabalpur, Jaipur, Kanpur, Lucknow, Ludhiana City, Madurai, Nagpur, Patna, Pune, Srinagar, Surat, Vadodara (Baroda) or Varanasi (Banaras) or the Urban Agglomeration of each of such places; or
(ii)
Explanation: Urban Agglomeration in relation to a place means the area for the time being included in the Urban Agglomeration of such place for the purpose of grant of house rent allowance by the Central Government to its employees under the orders issued by it from time to time in this regard.
The 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.
(xvii) Section 80RRA (as amended by the Finance Act, 1990) provides that where the gross total income of an individual who is a citizen of India, includes any remuneration received by him in foreign currency from any employer (i.e., a foreign employer or an Indian concern) for any services rendered by him outside India, an amount equal to the following shall be allowed as deduction in computing the total income of the individual:
(i) fifty per cent of the remuneration, or
(ii) seventy-five per cent of such remuneration as is brought into India, by, or on behalf of, the assessee in accordance with the Foreign Exchange Regulation Act, 1973, and any rules made thereunder, whichever is higher.
In the
case of an employee of Central Government or any State Government, or a person
who was immediately before taking up the service outside India, in the
employment of the Central Government or any State Government, the deduction
will be allowed only if the service of the employee is sponsored by the Central
Government, in the case of any other individual, the deduction will be allowed
only if he is a technician and the terms and conditions of his service outside
India are approved for the purpose of the said section by the Central
Government or the prescribed authority. It is pertinent to note that the
deduction is to be allowed with reference to the remuneration received by the
individual in foreign currency for services rendered outside
Thus,
if the remuneration is paid to the Indian technician, etc., partly in Indian
currency and partly in foreign currency, the amount paid in Indian currency,
will not be taken into account for purposes of deduction under section 80RRA.
Likewise, if a part of the remuneration, although paid in foreign currency
relates to service rendered in
(a) in the case of an individual who is in the employment of the Central Government or any State Government, the fact of his service having been sponsored by the Central Government;
(b) in the case of any
other individual being a technician, the fact of the terms and conditions of
his service outside
(It
should also be ensured that the deduction is allowed with reference to the
remuneration received in foreign currency in respect of the period of service
outside
(xviii) Section 80U allows deduction of a sum of twenty thousand rupees in computing the total income of a resident individual, who, at the end of previous year, is suffering from a permanent physical disability (including blindness) or is subject to mental retardation, being a permanent physical disability, or mental retardation, specified in rule 11D of the Income-tax Rules, 1962 which is certified by a physician, surgeon, oculist or psychiatrist, as the case may be, working in a Government hospital and which has the effect of reducing considerably such individuals capacity for normal work or engaging in a gainful employment or occupation. The expression Government hospital will include a departmental dispensary or a hospital maintained by a local authority as specified in the Explanation given below section 80DD.
Tax rebate
6. According to section 88, as amended by the Finance Act, 1992, an assessee will be entitled to a rebate (subject to the specified limits) in respect of the amounts invested or deposited in the following items during the previous year out of his income chargeable to tax from the income-tax payable by him on his total income :
(i) Payment of insurance premium to effect or to keep in force an insurance on the life of the individual. (It may be noted that any premium or other payment made on a policy as is not in excess of 10% of the sum assured, will alone qualify for deduction).
(ii) Any payment made to effect or keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (viii) hereinbelow, on the life of the individual, the wife or husband 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.
(iii) 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 wife or children, insofar as the sum deducted does not exceed 1/5th of the salary.
(iv) Any contribution made :
(a) by an individual to any Provident Fund to which the Provident Funds 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 minor of whom he is the guardian;
(c) by an employee to a recognised 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.
(v) Any deposit in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposit) Rules, 1959; as amended from time to time where such sums are deposited in an account standing in the name of an individual, or a minor of whom he is the guardian.
(vi) 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 savings 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. Interest on NSC (VI Issue) and NSC (VIII Issue) which is deemed as investment also qualifies for deduction.
(vii) Any sum paid as contribution
(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.
(viii) Any payment 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.
(ix) Any subscription not exceeding rupees ten thousand, made to any units of any Mutual Fund, notified under clause (23D) of section 10 or, of the Unit Trust of India established under the Unit Trust of India Act, 1963, under any plan formulated in accordance with any such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf.
(x) Any contribution made by an individual to any pension fund set up by any Mutual Fund notified under clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf.
(xi) 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.
(xii) Any subscription made to any such deposit scheme, 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.
(xiii) 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 assessees 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 repayment 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
6.1 Subject to the limits mentioned for the various items, the entitlement to tax rebate will be calculated at the rate of 20% of the total amount of the aforesaid savings, etc., in the case of individuals, and, at the rate of 25% in the case of an author or playwright or artist or musician or actor or sportsman (including an athlete) whose income derived from the exercise of his profession as such author/playwright/artist/musician/actor/sportsman/athlete constitutes twenty-five per cent or more of his total income. As per the amendment carried out by the Finance Act, 1992, the maximum tax rebate allowable will be Rs. 12,000 generally, and Rs. 17,500 in the case of authors, playwrights, artists, musicians, actors, sportsmen and athletes. There will, therefore, be an overall limit or savings which will qualify for tax rebate. In the case of individuals, the limit will be Rs. 60,000 and in the case of authors, sportsmen, etc., Rs. 70,000.
6.2 The Finance Act, 1992 has introduced a new provision in the form of section 88B which stipulates that an assessee, being an individual resident in India, who is of the age of 65 years or more at any time during the previous year and whose gross total income does not exceed Rs. 50,000 shall be allowed a deduction, from the amount of income-tax (as computed before allowing the rebate under Chapter VIII) on his total income chargeable to tax of an amount equal to 10% of such income-tax.
6.3 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 rebate. In case the DDO is not satisfied about the genuineness of the employees 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 rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the Assessing Officer. It may also be mentioned here that the deposits/subscriptions/payments towards the items qualifying for the tax rebate should be made out of the employees income chargeable to tax.
Calculation of income-tax and surcharge
7. (a) The net salary income in the case of each employee, arrived at after allowing the applicable deductions from the gross salary, is liable to income-tax during the financial year 1992-93, at the rates referred in para 2 above. After calculating the tax liability, the tax rebate provided for in section 88 and section 88B (wherever applicable) should be allowed as a deduction. The balance amount is the tax payable by the employee which is required to be deducted from the monthly salary in equal instalments. It may be noted here that the total tax rebate under sections 88 and 88B shall not in any case exceed the amount of income-tax on the total income of the assessee with which he is chargeable.
(b) Surcharge : In the case of every person having a total income exceeding Rs. 1,00,000 the amount of income-tax thus computed, as reduced by the rebate of tax, mentioned above shall be increased by a surcharge, for the purposes of the Union, calculated at the rate of 12% of such tax. This surcharge will, however, not apply to a non-resident.
(c) Rounding off: It may also be noted that the total income computed in accordance with the provisions of the Act should be rounded off to the nearest multiple of ten rupees by ignoring the fraction less than five rupees and increasing the fraction which is five rupees or more, to ten rupees. Similarly, the net amount of tax deductible should be rounded off to the nearest rupee by ignoring the fraction less than 50 paise and increasing the fraction which is fifty paise or more, to one rupee.
Miscellaneous provisions for information/guidance of DDOs
8. As stated in para 4 above, sub-section (1) of section 192 makes the person responsible for paying salary, also responsible for deducting income-tax at source from the payment of salary. The scope of deduction of tax at source from Salaries was further modified by the Finance Act, 1987 by the insertion of sub-sections (2), (2A) and (2B) in section 192. The salient features of these provisions as further modified by the Finance Act, 1989 are given below :
(a) 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 taxpayer 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 Salary 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 employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).
(b) Sub-section (2A) of section 192 provides that in respect of salary payment of employees of Government, Company, Co-operative Society, Local Authority, University, Institution, Association or Body, deduction of tax at source may be made after allowing relief under section 89(1), whenever salary, etc., is paid in arrears or in advance.
(c) Sub-section (2B) 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). Such income under
any other head should not be a loss. The employer shall take such other income
and tax, if any, deducted at source from such income, into account for the
purpose of computing tax deductible under section 192 of the Income-tax Act.
However, if such aggregation results in tax deductible which is less than in
the case where income under the head Salaries alone is taken into account for
computing tax deductible, then such aggregation under sub-section (2B) is not
permissible. In other words, a loss from any other source cannot be adjusted by
the DDO against salary income. To meet the requirement of these provisions, the
Central Government have enacted Rule 26B in the
Income-tax Rules. Detailed instructions in this regard were issued by the
Department vide Circular No. 504 [F. No. 275/138/87-IT(B)],
dated
8.1 Section 197 further enables the taxpayer 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 taxpayer 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.
8.2 In the case of pensioners who receive their pension from a nationalised 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 on account of standard deduction under section 16, the rebate in income-tax under section 88 on account of contributions to Provident Fund, Life Insurance, National Savings Certificates, etc., and the further tax rebate under section 88B (in the case of pensioners, residents in India, who are 65 years of age and above and, whose gross total income does not exceed Rs. 50,000 will be allowed by the concerned bank at the time of deduction of tax at source from the pension, before making payment to the concerned pensioners. Necessary instructions in this regard have been issued by the Reserve Bank of India to the State Bank and other Nationalised Banks vide RBIs Pension Circular (Central Series) No. 7/CDR/1992 [Ref. CO:DGBA:GA(NBS) No. 60/GA. 64(11 CVL)91/92] dated the 27th April, 1992, and these instructions should be followed by all such branches of the State Bank/Nationalised Banks as have been entrusted with the task of payment of pensions.
9. According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 192 shall pay, within the prescribed time, the sum so deducted to the credit of the Central Government in the 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 normally made within one week of the deduction. If a person fails to deduct tax at source, or, after deducting, fails to pay 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 fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which 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.
9.1 While making the payment of tax deducted at source to the credit of the Central Government, it may kindly 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 relevant challan for making payment of tax deducted at source from salaries is No. 9 with Blue Colour Band. 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.
9.2 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, in the case of employees receiving salary
income. The certificate has to be issued in Form No. 16 which has been
prescribed under Boards Notification No. S.O. 148(E), dated
9.3 According to the provisions of section 203A of the Income-tax
Act, it is obligatory for all persons responsible for deducting tax source to
obtain and quote the Tax-deduction Account Number (TAN) in the Challans, TDS certificates, returns, etc. Detailed
instructions in this regard are available in this Departments Circular No. 497
[F. No. 275/118/87-IT(B)], dated
9.4 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 31st May of the succeeding financial year, an annual return of deduction of tax to the designated/concerned Assessing Officer. This return has to be furnished in Form No. 24. It may be noted that a copy of each of the TDS certificates issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs.100 but which may extend to Rs. 200 for every day during which the failure continues, so however, that this sum shall not exceed the amount of tax which was deductible at source.
10. 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 and the Finance Act, 1992.
11. In case may assistance is required,the Assessing Officer/the local public Relations Officer of the Income-tax Department may be approached.
ANNEXURE
I
EXTRACT FROM THE FINANCE ACT,1992,PART III OF THE FIRST SCHEDULE
Paragraph A - Sub-Paragraph I
In the case of every individual or Hindu undivided family or other association of persons or body of individuals,whether incorporated or not,or every artificial juridical person referred it in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies,
Rates of income-tax
|
(1) |
where the total income does not exceed Rs. 28,000 |
Nil; |
|
(2) |
where the total income exceeds Rs. 28,000 but does not exceed Rs. 50,000 |
20 per cent of the amount by which the total income exceeds Rs. 28,000; |
|
(3) |
where the total income exceeds Rs. 50,000 but does not exceed Rs.1,00,000 |
Rs. 4,400 plus 30 per cent of the amount by which the total income exceeds Rs. 50,000; |
|
(4) |
where the total income exceeds Rs. 1,00,000 |
Rs. 19,400 plus 40 per cent of the amount by which the total income exceeds Rs. 1,00,000. |
Surcharge on income-tax
The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph or section 112 shall
(i) in the case of every individual, Hindu undivided family or association or persons or body of individuals referred to in sections 88 and 88B having a total income exceeding one hundred thousand rupees be reduced by the amount of rebate of income-tax calculated under those sections, and the income-tax as so reduced,
(ii) in the case of every persons,other than those mentioned in item (i), having a total income exceeding one hundred thousand rupees,
be increased by a surcharge for purposes of the
Provided that no such surcharge shall be payable by a non-resident.
ANNEXURE II
Example I
|
|
|
Rs. |
Rs. |
|
1. |
Total Salary Income (including allowances) |
|
76,000 |
|
2. |
Deposits under the Notified Schemes |
6,000 |
|
|
3. |
Contribution to G.P.F. |
12,000 |
|
|
4. |
Payment towards L.I.P. |
1,000 |
|
|
5. |
Contribution for participation in Unit linked Insurance Plan, 1971, made under section 19(1)(cc) of the Unit Trust of India Act,1963 |
300 |
23,520 |
|
6. |
Deposits in a 10-Year Account or 15-Year Account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 |
500 |
|
|
7. |
C.G.E.I.S. |
720 |
|
|
8. |
Subscription to National Savings Certificates,VIII Issue |
3,000 |
|
Computation of total income
|
1. |
Gross Total Salary Income |
76,000 |
|
2. |
Standard deduction |
(-)12,000 |
|
3. |
Gross Total Income (1-2) |
64,000 |
|
4. |
Tax on Total Income (Rs. 4,400, plus 30% of the amount in excess of Rs. 50,000, i.e., 30% of Rs.14,000) |
8,600 |
|
5. |
Deduct rebate on savings,etc., under section 88@ 20% of Rs. 23,520 |
4,704 |
|
6. |
Tax payable |
3,896 |
(Average monthly deduction comes to Rs. 325 for 11 months and Rs. 321 in the last month)
Example II
(Illustrating calculation of House Rent
Allowance under section 10(13A) in respect of residential accommodation
situated in
|
|
|
Rs. |
Rs. |
|
1. |
Salary (excluding allowances) |
|
1,20,000 |
|
2. |
House rent allowance received |
|
9,600 |
|
3. |
Actual Rent paid |
|
19,200 |
|
4. |
Deposits under Notified Schemes |
12,000 |
|
|
5. |
Contribution to General Provident Fund |
24,000 |
40,000 |
|
6. |
Life Insurance Policy (LIP) |
3,000 |
|
|
7. |
Deposits in a 10-year account under the post Office Savings Bank (Cumulative Time Deposit) Rules,1959 |
1,000 |
|
Computation of total income
|
1. |
Salary |
1,20,000 |
|
2. |
House Rent Allowance received |
9,600 |
|
3. |
Total salary income |
1,29,600 |
|
4. |
Less: House Rent Allowance exempt under section 10(13A): |
|
|
|
(a) Actual amount of HRA Received (Rs. 9,600); or |
|
|
|
(b) Expenditure on rent in excess of 10 per cent of salary (Rs. 19,200-Rs. 12,000 = Rs. 7,200); or |
|
|
|
(c) 50 per cent of salary (Rs.60,000) whichever is the least, therefore (b) is taken as exempt |
(-) 7,200 |
|
|
|
1,22,400 |
|
5. |
Standard deduction under section 16(i) @ 331/3per cent subject to a maximum of Rs.12,000 |
(-) 12,000 |
|
6. |
Gross Total Income |
1,10,400 |
|
7. |
Tax on Gross Total Income (Rs. 19,400+ 40 per cent of Rs. 10,400, i,e., 19,400 + 4,160) |
23,560 |
|
8. |
Deduct tax rebate on saving under section 88 (80 per cent of Rs.40,000) |
(-) 8,000 |
|
9. |
Tax payable |
15,560 |
|
10. |
Surcharge (12% of Rs.15,560 |
1,867 |
|
11. |
Total tax payable |
17,427 |
(Average monthly deduction comes to Rs. 1,4,52 for 11 months and Rs. 1,455 in the last month).
Example III
(Illustrating calculations
and valuation of some perquisites in case of an
employee of a private company posted at
|
|
|
|
Rs. |
|
1. |
Salary |
|
65,000 |
|
2. |
Bonus |
|
10,000 |
|
3. |
Free gas,electricity,water, etc.(actual bills paid by the Company) |
|
3000 |
|
4. |
Furniture at cost (including television set, radio set, refrigerator, other household appliances and air-conditioner) belonging to the company |
|
40,000 |
|
5. |
(i) Furnished flat provided to the employee for which actual rent paid by the Company |
|
48,000 |
|
|
(ii) Rent recovered from the employee |
|
6,000 |
|
6. |
Deposits under Notified Schemes |
5,000 |
|
|
7. |
Subscription to Mutual Fund |
8,000 |
|
|
8. |
Life Insurance Policy (LIP) |
2,000 |
24,000 |
|
9. |
Subscription to National Savings Certificates (VIII Issue) |
3,000 |
|
|
10. |
Contribution to Recognised Provident Fund |
6,000 |
|
|
|
|
|
|
Computation of total income
|
1. |
Salary |
65,000 |
|
|
2. |
Bonus |
10,000 |
75,000 |
|
3. |
Valuation of perquisites |
|
|
|
|
(a) Furnished flat at concessional rent under section 17(2) read with clauses (a) and (b) of rule 3 of the IT Rules, 1962. Fair Rental Value (FRV) (assumed to be equal to actual rent Rs. 48,000); 10% of salary including bonus |
7,500 |
|
|
|
Add: Excess of (FRV) over 60% of salary including bonus (i.e., Rs. 48,000 - 45,000) |
3000 |
|
|
|
Add: Perquisite of the furniture (10% of cost,i.e., Rs, 40,000) |
4000 |
|
|
|
|
14,500 |
|
|
|
Less: Rent recovered from the employee |
6,000 |
8,500 |
|
|
|
|
83,500 |
|
4. |
Free gas, electricity, etc., |
|
3,000 |
|
|
|
|
86,500 |
|
|
Less: Standard deduction under section 16(i) of the Income-tax Act, 1961, 331/3 per cent of amount subject to maximum of Rs.12,000 |
(-) 12,000 |
|
|
6. |
Gross Total income |
|
74,500 |
|
|
|
|
Rs. |
|
7. |
Tax on total income (Rs. 4,400 plus 30 per cent of Rs.74,500) |
|
11,750 |
|
8. |
Deduct tax rebate on savings (Notified Scheme, Mutual Fund, LIP, PF, NCS) @ 20 per cent of Rs.24,000 |
|
(-) 4,800 |
|
9. |
Tax payable |
|
6,950 |
(Average monthly deduction comes to Rs. 580 for 11 months and Rs. 570 in the last month).
Notes:
(i) In the case of Government servants, the value of perquisites of unfurnished accommodation provided free is determined in accordance with rules framed by the Government for allotment of residence to its employees.For determining the perquisite value of free furniture, it is taken as in other cases, at 10 per cent per annum of the original cost of the furniture or, if it is hired from a third party, the actual hire charges payable.
(ii) Where unfurnished accommodation is provided to its employees by the Reserve Bank of India or any other public sector body specified in sub-clause (2) of clause (a) of rule 3 of Income-tax Rules, say, a nationalised bank, State Trading Corporation, etc., it is taken as 10 per cent of the salary due to the employee and where the accommodation is furnished as in other cases, an additional 10 per cent of the original cost of furniture,or if it is hired from a third party, the actual hire charges payable therefor.
(iii) In the example given above the actual rent has been assumed to be equal to the Fair Rental Value. Fair Rental Value can , however, be different from the actual rent. It is defined in Explanation 2, below clause (a) of Rule 3 to mean in the case of an accommodation which is unfurnished,the rent which a similar accommodation would realise in the same locality or the municipal valuation in respect of the accommodation, whichever is higher.
(iv) In case the accommodation is situated in
Example IV
[Examples of income-tax
calculation in the case of an employee, posted in
|
|
|
Rs. |
Rs. |
|
1. |
Total Salary |
|
90,000 |
|
2. |
House Rent Allowance |
|
12,000 |
|
3. |
Subscription to units of Mutual Fund referred it in para 6(ix) |
12,000 |
|
|
4. |
Contribution to GPF, Payment of LIC premium,etc. |
15,000 |
27,000 |
|
5. |
Actual rent paid |
|
24,000 |
|
6. |
Payment of loan taken from LIC for construction of house |
|
12,000 |
|
|
Computation of total income |
Rs. |
|
|
1. |
Gross Total Salary |
Rs. |
90,000 |
|
2. |
House rent allowance received |
|
12,000 |
|
|
|
|
1,02,000 |
|
3. |
Less: Allowance under section 10(13A): (a) Actual amount of HRA received or |
12,000 |
|
|
|
(b) Expenditure on rent in excess of 10 per cent of salary (Rs. 24,0009,000) |
15,000 |
|
|
|
or |
|
|
|
|
(c) 50 per cent of salary, |
45,000 |
|
|
|
whichever is the least; therefore (a) is exempt |
|
(-) 12,000 |
|
|
|
|
90,000 |
|
4. |
Less: Standard deduction under section 16(i) of the Income- tax Act, 1961 at 331/3% of salary subject to a maximum of Rs. 12,000 |
|
(-) 12,000 |
|
5. |
Gross Total Income |
|
78,000 |
|
6. |
Tax on total income (Rs. 4,400 + 30 per cent of Rs. 28,000) |
|
12,800 |
|
7. |
Tax rebate to be allowed under section 88; |
|
|
|
|
Amounts qualifying for rebate: |
|
|
|
|
(i) Mutual Fund [Limited to Rs.10,000 see para 6(ix)] |
10,000 |
|
|
|
(ii) Contribution to GPF, LIC |
15,000 |
|
|
|
(iii) Repayment of Housing Loan [limited to Rs.10,000; see para 6(xiii)] |
10,000 |
|
|
|
Tax rebate (20 per cent of Rs. 35,000) |
|
7,000 |
|
8. |
Tax payable (6-7) |
|
5,800 |
(Average monthly deduction comes to Rs. 483 for 11 months and Rs.487 in the last month)
Example V
[Showing calculation of tax liabilities of a
person of 65 years of age (or more) and drawing pension]
|
|
|
Rs. |
Rs. |
|
1. |
Total pension income (Including dearness relief) |
|
48,000 |
|
2. |
Deposits under notified schemes |
2,000 |
|
|
3. |
Subscriptions to National Savings Certificates |
2,000 |
6,000 |
|
4. |
Subscription to Mutual Fund |
2,000 |
|
Computation of total income
|
|
|
Rs. |
|
1. |
Total Pension Income |
48,000 |
|
2. |
Standard deduction |
(-) 12,000 |
|
3. |
Gross total income |
36,000 |
|
4. |
Tax on Gross Total Income (20% of Rs. 36,000-Rs. 28,000) |
1,600 |
|
5. |
Tax Rebate under section 88B (i.e., 10 per cent of Rs.1,600 |
(-) 160 |
|
6. |
Tax payable |
1,440 |
|
7. |
Tax Rebate under section 88 (20 per cent of Rs 6,000) |
1,200 |
|
8. |
Net Tax payable |
240 |
ANNEXURE
III
FORM NO. 16
[See rule 31(1)(a)]
Certificate under section
203 of the Income-tax Act,1961 for tax deducted at
source from income chargeable under the head Salaries
|
Name and address of the Employer |
Name and Designation of the Employer |
|||
|
........................................................................ |
............................................................... |
|||
|
........................................................................ |
................................................................ |
|||
|
........................................................................ |
............................................................... |
|||
|
PAN /GIR NO. |
TAN |
PAN/GIR NO. |
|
|
|
TDS Circle where Annual Return/Statement under section 206 is to be filed |
PERIOD |
Assessment |
||
|
From |
To |
|||
|
|
|
|
|
|
DETAILS OF SALARY PAID AND ANY OTHER INCOME AND TAX
DEDUCTED
|
1. |
Gross Salary* |
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Rs.... |
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2. |
Less: Allowance to the extent exempt under section 10 |
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Rs.... |
Rs.... |
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3. |
Balance (1-2) |
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Rs.... |
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4. |
Deductions : |
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(a) Standard deduction |
Rs.... |
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(b) Entertainment allowance |
Rs.... |
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(c) Tax on Employment |
Rs.... |
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5. |
Aggregate of 4 (a to c) |
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Rs.... |
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6. |
Income chargeable under the head Salaries (3-5) |
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Rs.... |
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7. |
Add: Any other income reported by the employee |
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8. |
Gross Total Income (6+7) |
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Rs.... |
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9. |
Deductions under Chapter VI-A |
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Gross |
Qualifying |
Deductible |
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Amount |
Amount |
Amount |
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(a) |
Rs.... |
Rs.... |
Rs.... |
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(b) |
Rs.... |
Rs.... |
Rs.... |
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(c) |
Rs.... |
Rs.... |
Rs.... |
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(d) |
Rs.... |
Rs.... |
Rs.... |
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10. |
Aggregate of deductible amount under chapter VI-A |
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Rs.... |
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11. |
Total income (8-10) |
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Rs.... |
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12. |
Tax on total Income |
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Rs.... |
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13. |
Rebate and Relief under Chapter VIII |
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I. Under section 88 (please specify) |
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Gross |
Qualifying |
Tax |
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Amount |
Amount |
Rebate/Relief |
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(a) |
Rs.... |
Rs.... |
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(b) |
Rs.... |
Rs.... |
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(c) |
Rs.... |
Rs.... |
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(d) |
Rs.... |
Rs.... |
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(e) |
Rs.... |
Rs.... |
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(f) Total (a) to (e) |
Rs.... |
Rs.... |
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II. Under section 88A (please specify) |
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(a) |
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Rs.... |
Rs.... |
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(b) |
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Rs.... |
Rs.... |
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(c) Total (a) + (b) |
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Rs.... |
Rs.... |
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III. Under section 89 (Attach details) |
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Rs.... |
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14. |
Aggregate of Tax Rebates and relief at 13 Above [I(f) + II (c) + III] |
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Rs.... |
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15. |
Tax [payable (12-14) and surcharge thereon |
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Rs.... |
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16. |
Less: Tax deducted at source |
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Rs.... |
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17. |
Tax payable/Refundable (15-16) |
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Rs.... |
DETAILS OF
TAX DEDUCTED AND DEPOSITED INTO CENTRAL GOVERNMENT ACCOUNT
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Amount |
Date of payment |
Name of Bank & Branch where tax Deposited |
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Certified
that a sum of Rs. (in words)......... has been deducted at source and paid to
the credit of the Central Government.
Further certified that the above information is true and
correct as per records.
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Signature of the person responsible for
deduction of tax
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Place......... |
Full Name................... |
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Date.............. |
Designation................. |
Circular
: No. 630, dated
FINANCIAL YEAR 1992-93
1711.
Instructions for deduction of tax at source from interest on securities - Rate
of deduction from interest on securities during financial year 1992-93
1. Reference is invited to the Boards Circular No. 615, dated 22-11-1991 regarding deduction of income-tax at source from the payment of interest on securities for the financial year 1991-92.
2. For the financial year 1992-93, there is no change in the basic rates of tax and surcharge insofar as they relate to deduction of tax at source from the payment of interest on securities. The applicable rates have been given in para 3 of the Draft Circular enclosed.
3. It may be noted that
(a) tax will be deducted at source under section 193 at the time
of credit to the account of the payee or at the time of payment thereof,
whichever is earlier. For this purpose, credit to any suspense account or any
other account, by whatever name called, shall be
deemed to be a credit of such income to the account of the payee;
(b) tax
will not be deducted at source from any interest payable to a resident
individual on debentures issued by a company in which the public are
substantially interested, being debentures listed on a recognised
stock exchange in India in accordance with the Securities Contracts
(Regulation) Act, 1956, and, any rules made thereunder,
if the interest is paid by the company by an account payee cheque and the
amount of such interest or, as the case may be, the aggregate amount of such
interest paid or likely to be paid during the financial year by the company to
such individual does not exceed Rs. 2,500;
(c) tax
will not be deducted at source under section 193 in the case of a resident
individual who makes a declaration in Form No. 15F (vide Annexure II to
the enclosed draft circular) to the effect that tax on his estimated total
income of the financial year 1992-93 will be nil ;
(d) no tax will be deducted at source or it will be deducted at
a lower rate in the case of a person (including a company) where a certificate
under section 197 is issued by the Assessing Officer, specifying the rate of
such deduction of tax at source.
4. The responsibilities, obligations, etc., under the Income-tax Act, of the person deducting tax at source are described in para 6 of the enclosed draft circular. These must be scrupulously observed and discharged by all persons responsible for deducting tax at source.
5. On the basis of the enclosed draft circular, a circular may be issued by the concerned State Govts./Union Territory Administrations to all the Treasury Officers, Sub-Treasury Officers etc., with a view to ensuring that the relevant provisions of the Income-tax Act are strictly adhered to by the persons responsible for deducting tax at source.
Draft circular to all treasury officers, etc.
1. I am to invite your attention to this office letter regarding deduction of income-tax from interest on Government securities during the financial year 1991-92.
2. According to the provisions of section 193 of the Income-tax Act, 1961, the person responsible for paying any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax at the rates in force on the amount of interest payable. For this purpose, credit to any suspense account or any other account (by whatever name called) shall be deemed to be a credit of such income to the account of the payee.
3. Income-tax is to be deducted during the financial year 1992-93
from the entire amount of interest on securities at the following rates :
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I. |
In the case of a person other than a company : |
Rates of income-tax |
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(i) Where the person is resident in India-on income by way of interest payable on any security (excluding interest payable on a tax-free security of the Central or a State Government) |
10 per cent |
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(ii) Where the person
is not resident in |
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(1) In the case of a non-resident Indian |
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(A) on investment income and long- term capital gains |
20 per cent |
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(B) on income by way of interest payable on a tax-free security |
15 per cent |
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(C) on the whole of the other |
Income-tax at 30 per centincome of the amount of the income |
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or |
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Income-tax in respect of the income at the rates prescribed in Sub-paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1992 (vide Annexure I), if such income had been the total income, whichever is higher. |
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(2) In the case of any other person, |
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(A) on the income by way of interest on a tax-free security |
15 per cent |
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(B) on the whole of other income (excluding interest payable on a tax-free security) |
[As against 1(c) above] |
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II. |
In the case of a company; |
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(i) Where the company is a domestic company on income by way of interest on securities (excluding interest payable on a tax-free security) |
21.5 per cent |
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(ii) Where the company is not a domestic company |
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(A) on interest payable on a tax-free security |
44 per cent |
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(B) on interest on other securities |
65 per cent. |
Surcharge
on income-tax
The amount of tax deducted as per the rates given above shall be increased :
(i) by a surcharge for purposes of the
(ii) by a surcharge @ 15 per cent of such income-tax in the case
of a domestic company.
4. The term domestic company means an Indian company or any other
company which, in respect of its income liable to tax under the Income-tax Act,
1961, has made the prescribed arrangements for the declaration and payment
within
5. In making payment or crediting interest on Government securities from 1-4-1992, you are requested to deduct income-tax at the rates specified above, except in cases, where an exemption or abatement certificate granted by an Income-tax Officer/Assessing Officer under sub-section (1) of section 197 of the Income-tax Act, 1961, is produced. In this connection, the following points should be kept in view :
(i) exemption or abatement certificates issued before
(ii) where a certificate is issued by the Income-tax
Officer/Assessing Officer on or after
(iii) no
tax should be deducted in cases in which, from a certificate issued by the
Income-tax Officer/Assessing Officer or otherwise, you are satisfied that the
payee is a person exempt from payment of income-tax under sections 10 to 13A of
the Income-tax Act, 1961;
(iv) no
tax should be deducted from interest payable on 7-year National Savings
Certificates (IV Issue), National Development Bonds, etc., which have been
specifically exempted from the requirement of tax deduction at source under the
proviso to section 193 or from the interest payable on such
debentures/securities/bonds as have been specified by the Central Government by
notification in the Official Gazette under the proviso to section 193;
(v) no tax should be deducted from any interest payable on any
other security of the Central or State Government where the security is held by
a resident individual, and the holder makes a declaration in writing in
duplicate in the prescribed manner as provided in section 197A of the
Income-tax Act. A copy of declaration form prescribed under the provisions of
section 197A of the Income-tax Act is at Annexure-II. A copy of such
declaration should be forwarded by you on or before the seventh day of the
month next following the month in which the declaration is furnished by you, to
the Chief Commissioner/Commissioner of Income-tax concerned, as provided in
rule 29C(5) of the Income-tax Rules, 1962;
(vi) no tax should be deducted from any sum payable in respect of
any security owned by a Corporation established by or under a Central Act which
under any law for the time being in force is exempt from income-tax on its
income. Payments made to Life Insurance Corporation and Unit Trust of India are exempt from the requirement of T.D.S. by their
respective Acts;
(vii) under section 288B of the Income-tax Act, fractions of one
rupee contained in the amount of tax will have to be rounded off to the nearest
rupee by ignoring amounts less than fifty paise, and, increasing amounts of
fifty paise or more to one rupee. Hence, the amount of tax to be deducted at
source should be rounded off to the nearest rupee in accordance with the
aforesaid provisions of the Act.
6. The responsibilities, obligations, etc., under the Income-tax Act, of the person deducting tax at source, are as follows :
(a) According
to the provisions of section 200, any person deducting any sum in accordance
with the provisions of section 193 is required to pay, within the prescribed
time (as laid down in rule 30 of the Income-tax Rules, 1962) the sum so
deducted to the credit of the Central Government. In the case of deduction by
or on behalf of the Government, the sum has to be paid on the day of the deduction
itself. In other cases, normally, the sum has to be paid within one week from
the last day of the month in which the deduction is made. If a person fails to
pay tax to the credit of the Central Government, he shall be liable to action
under the provision of section 201. Sub-section (1A) of section 201 lays down
that such person shall also be liable to pay simple interest at fifteen per
cent per annum on the amount of such tax from the date on which such tax was
deductible to the date on which such tax is actually paid. Further, 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 which he
failed to deduct at source. In this regard, attention is also invited to the
provisions of section 276B which lays down that if a person fails to pay to the
credit of the Central Government the tax deducted at source by him, he shall be
punishable with rigorous imprisonment for a term which shall not be less than 3
months but which may extend to 7 years and with fine.
(b) According
to the provisions of section 203, every person deducting tax at source is
required to furnish a certificate to the effect that tax has been deducted and
to specify therein the amount so deducted and certain other particulars. The
certificate has to be furnished in Form No. 16A (see Annexure III)
within the prescribed period of one month and fourteen days to the person to
whose account credit is given or to whom payment is made by any mode, as the
case may be. Form No. 16A can be issued by the tax deductors
on their own stationery. Detailed instructions regarding the use of these forms
have been issued in Boards Circular No. 597 [F.No.
275/42/91-IT(B), dated
(c) According
to the provisions of section 203A, it is obligatory for all persons responsible
for deducting tax at source to obtain and quote the tax deduction account
number (TAN) in the challans, TDS certificates,
returns etc. Detailed instructions in this regard are available in the Boards
Circular No. 497 [F. No. 275/118/87-IT(B), dated
(d) According
to the provisions of section 206, read with rules 36A and 37 of the Income-tax
Rules, the prescribed person in the case of every officer 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 at source
shall prepare and deliver by the 30th June following the financial year, to the
designated/concerned Assessing Officers, the annual return of deduction of tax
from interest on securities in Form No. 25. It may be noted that a copy of each
TDS certificate issued during the financial year should be enclosed with the
annual return. If a person fails to furnish in due time the annual return he shall
be liable to pay by way of penalty, under section 272A, a sum which shall not
be less than Rs. 100 but which may extend to Rs. 200 for every day during which
the failure continues. the
maximum penalty will, however, not exceed the amount of tax deductible.
7. In case of any doubt, the Assessing Officer or the local Public Relations Officer of the Income-tax Department should be consulted.
Annexure
I
EXTRACT FROM THE FINANCE ACT, 1992, PART IIIOF THE FIRST SCHEDULE
Paragraph A, Sub-paragraph I
In the case of every individual or Hindu undivided family or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-paragraph II of this Paragraph or any other Paragraph of this Part applies :
Rates of income-tax
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(1) |
where the total income does not |
Nil; |
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exceed Rs. 28,000 |
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(2) |
where the total income exceeds |
20 per cent of the amount by which the total |
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Rs. 28,000 but does not exceed |
income exceeds Rs. 28,000; |
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Rs. 50,000 |
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(3) |
where the total income exceeds |
Rs. 4,400 plus 30 per cent of the amount by |
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Rs. 50,000 but does not exceed |
which the total income exceeds Rs. 50,000; |
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Rs. 1,00,000 |
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(4) |
where the total income exceeds |
Rs. 19,400 plus 40 per cent of the amount by |
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Rs. 1,00,000 |
which the total income exceeds Rs. 1,00,000. |
Surcharge on income-tax
The amount of income-tax computed in accordance with the preceding provisions of this sub-paragraph or section 112 shall,
(i) in the case of every individual, Hindu undivided family or association of persons or body of individuals referred to in sections 88 and 88B having a total income exceeding one hundred thousand rupees, be reduced by the amount of rebate of income-tax calculated under those sections, and the income-tax as so reduced,
(ii) in the case of every person, other than those mentioned in item (i), having a total income exceeding one hundred thousand rupees,
be
increased by a surcharge for purposes of the
Provided that no such surcharge shall be payable by a non-resident.
Annexure
II
FORM NO. 15F
[See Rule 29C(1)]
Declaration under section 197A(1) of the Income-tax Act, 1961 to be made by an individual claiming receipt of interest on securities without deduction of tax
I.........................................................................................................son/daughter/wife of.........................................................................resident of @................................................................do hereby declare :
1. that the securities,
particulars of which are given below, stand in my name and are beneficially
owned by me, and the interest therefrom is not
includible in the total income of any other person under sections 60 to 64 of
the Income-tax Act, 1961:
Description of
securities |
Number of
securities |
Dates of
securities |
Amount of
securities |
Date(s) on
which the securities were acquired by the declarant |
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2. that may present occupation is.............................................................................;
3. that the tax on my estimated total income including the interest on securities referred to in Paragraph 1 above, computed in accordance with the provisions of the Income-tax Act, 1961, for the previous year ending on......................relevant to the assessment year 19.......19.........will be nil.
4. *that I have not been assessed to income-tax at any time in the past but I fall within the jurisdiction of the Chief Commissioner or Commissioner of Income-tax....................;
or
that I was last assessed to income-tax for assessment year 19....19...........by the Assessing Officer.........................Circle/Ward/District and the permanent account number allotted to me is................;
5. that I am resident in
.....................................................
Signature of the declarant
Verification
I...............................do hereby declare that to the best of my knowledge and belief what is stated above is correct, complete and is truly stated.
Verified today, the.....................day
of...................19........
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Signature of Declarant
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Place......................... |
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Notes :
1. @ Give complete postal address.
2. The declaration should be furnished in duplicate.
3. *Delete whichever is not applicable.
4. Before signing the verification, the declarant should satisfy himself that the information furnished in the declaration is true, correct and complete in all respects. Any person making a false statement in the declaration shall be liable to prosecution, under section 277 of the Income-tax Act, 1961, and on conviction be punishable
(i) in a case where tax sought to be evaded exceeds one lakh rupees, with rigorous imprisonment which shall not be less than six months but which may extend to seven years and with fine;
(ii) in any other case, with rigorous imprisonment which shall not be less than three months but which may extend to three years and with fine.
[FOR USE BY THE PERSON TO WHOM THE DECLARATION IS FURNISHED]
1. Name and address of the person responsible for paying the interest on securities mentioned in Paragraph 1 of the declaration
2. Date on which the declaration was furnished by the Declarant
3. Period for which interest is paid
4. Amount of interest
5. Date on which interest is paid
Forwarded to the Chief Commissioner or Commissioner of
Income-tax............................
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Signature of the person |
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Place........ |
responsible for paying |
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Date......... |
interest on securities. |
ANNEXURE
III
FORM NO. 16A
[See Rule 31(1)(b)]
Certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961
[For interest on securities; dividends; interest on time deposits
referred to in clauses (vii) and (viia)
of sub-section (3) of section 194A; insurance commission; payments in respect
of deposits under National Savings Scheme; payment on account of repurchase of
units by the Mutual Fund or Unit Trust of India; commission, remuneration or
prize on sale of lottery tickets; commission or brokerage; income from units
referred to in section 196B]
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Name and address of the |
TDS circle |
Name and address of the |
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person deducting tax |
where Annual |
person to whom payment |
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................................................ |
Return under |
is made or in whose |
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................................................ |
section 206 is to |
account it is credited |
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be delivered |
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TAX DEDUCTION A/C NO. |
NATURE OF |
PAN/GIR NO. OF THE |
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OF THE DEDUCTOR |
PAYMENT |
PAYEE |
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PAN/GIR NO. OF THE |
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FOR THE PERIOD |
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DEDUCTOR |
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19 ..... TO 19 ..... |
DETAILS OF PAYMENT, TAX REDUCTION AND DEPOSIT OF
TAX INTO CENTRAL GOVERNMENT ACCOUNT
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Date of payment/ credit |
Amount paid/ credited (Rs.) |
Amount of income-tax deducted (Rs.) |
Rate at which deducted |
Date & challan
No. of deposit of tax into Central Govt. Account |
Name of the Bank & Branch where tax deposited |
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Certified that a sum of Rs.
(in words)........................has been deducted at source and paid to the credit
of the Central Government as per details given above.
..................................................................
Signature
of person responsible for deduction of tax
Place...............
Date................
Full Name ..........................
Designation........................
Circular
: No. 631, dated
Financial
Year 1992-93
1736.
Instructions for deduction of tax at source from winnings from lotteries or
crossword puzzles, horse races or from commission, etc. - Rates of tax
applicable during financial year 1992-93
1. Reference is invited to the Boards Circular No. 616, dated 22-11-1991 on the above mentioned subject wherein the rates at which the deduction of tax under sections 194B, 194BB and 194G of the Income-tax Act, 1961 was to be made during the financial year 1991-92, from winnings from lotteries, crossword puzzles, horse races and from commission, etc., paid on sale of lottery tickets, were communicated.
2. There is no change in the rates of tax which will be applicable during the financial year 1992-93 in the matter of deduction of tax at source under sections 194B, 194BB and 194G of the Income-tax Act. The salient provisions relating to deduction of tax at source under the aforesaid sections are as follows :
(i) As per section 194B, the persons responsible for paying to any person any income by way of winnings from lotteries or crossword puzzles, in an amount exceeding Rs. 5,000 (Rupees five thousand only) shall, at the time of payment thereof, deduct income-tax thereon at the rate in force. For the financial year 1992-93, the rate at which tax is to be deducted is 40% (plus surcharge referred in para 3).
(ii) As per section 194BB any person, being a book-maker or a person to whom a licence has been granted by the Government, under any law for the time being in force, for horse racing in any race course or for arranging for wagering or betting in any race course, who is responsible for paying to any person any income by way of winnings from any horse race in an amount exceeding Rs. 2,500 (Rupees two thousand and five hundred only) shall, at the time of payment thereof, deduct income-tax thereon at the rates in force, viz., 40% (plus surcharge referred in para 3).
(iii) As per section 194G(1), any person who is responsible for paying, on or after the 1st day of October, 1991, to any person who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called), on such tickets in an amount exceeding Rs. 1,000 (Rupees one thousand only), shall at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by issue of a cheque or a draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of 10% (plus surcharge referred in para 3). It is clarified in this regard that where any such income, e.g., commission, remuneration, etc., is credited to any account, whether called Suspense Account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the tax thereon will have to be deducted at source.
3. The amount of income-tax to be deducted at the aforesaid rates
shall be further increased by a surcharge, for the purposes of the
(i) In a case where the payee is a non-corporate resident person 12%
(ii) In a case where the payee is a domestic company 15%.
4. The responsibilities, obligations, etc., under the Income-tax Act, of the persons deducting tax at source are as follows :
(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of sections 194B, 194BB and 194G, etc., shall pay, within the prescribed time, the sum so deducted, to the credit of the Central Government. Reference in this regard is invited to rule 30 of the Income-tax Rules, 1962 which prescribes the time for payment of tax into the Governments account. Normally, the tax is required to be deposited within one week from the date of deduction of tax. Where, however, deduction is made by or on behalf of the Government, the sum has to be credited to the Central Government on the day of the deduction itself. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Central Government, he shall be liable to pay simple interest at fifteen per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid into the Government account. Reference in this regard is also invited to section 271C, according to which, a person who fails to deduct the whole or any part of the tax as required under the provisions of Chapter XVII of the Act, shall 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, the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months but which may extend to seven years, and with fine.
(b) According to the provisions of section 203, every person responsible for deducting tax at source is required to furnish a certificate to the effect that the tax has been deducted and, to specify therein, the amount deducted and certain other prescribed particulars. The certificate has to be furnished within the prescribed period (as given in rule 31 of the I.T. Rules, generally, within one month and fourteen days of the date of payment/credit) to the person to whose account credit is given or to whom payment is made or, to whom the cheque or warrant is issued, as the case may be. The certificate for tax deduction under section 194G has to be issued in Form No. 16A (copy enclosed at Annexure I) on tax deductors own stationery. In case of deduction under sections 194B and 194BB however, the certificate is required to be furnished in Form 16B, printed by the Central Government (which is to be obtained from the concerned Commissioner of Income-tax by making a nominal payment). If a person fails to furnish the certificate of tax deduction he shall be liable to pay, by way of penalty, under section 272A, a sum which shall not be less than Rs. 100, but which may extend to Rs. 200 for each day during which the failure continues.
(c) According to the provisions of section 203A, it is obligatory for all persons responsible for deducting tax at source to obtain a Tax deduction Account Number (TAN) and quote the same in the challans, TDS certificates, returns, etc. Detailed instructions in this regard are available in this Departments Circular No. 497, dated 9-10-1987. If a person fails to comply with the provisions of section 203A, he shall pay, by way of penalty, under section 272BB, a sum which may extend to Rs. 5,000.
(d) According to the provisions of section 206, read with rules 36A and 37 of the Income-tax Rules, the prescribed persons 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 the provisions of Chapter XVII of the Income-tax Act (which includes sections 194B, 194BB and 194G) shall, within the prescribed time, after the end of each financial year, prepare and deliver or cause to be delivered to the designated/concerned Assessing Officer, a return of deduction of tax under sections 194B, 194BB and 194G. The returns for tax deduction under sections 194B and 194BB have to be filed by 31st May following the financial year in which tax deduction is made. These returns have to be filed in the prescribed forms (Nos. 26B and 26BB, respectively). For deduction under section 194G, the return has to be filed in form No. 26H by the 30th June, following the financial year in which the deduction is made. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty, under section 272A, a sum which will not be less than Rs. 100 per day, and, not more than Rs. 200 per day, for each day during which the default continues; so, however, that this amount shall not exceed the amount of tax which was deductible at source.
5. It may be added that the Finance Act, 1992 has inserted sub-sections (2) and (3) in section 194G with effect from 1-6-1992 in order to obviate the hardship in the case of persons, engaged in the lottery business, whose total income bears no tax liability or bears a tax liability justifying deduction of tax at source at a rate lower than 10%. Such person can make an application in this behalf to the Assessing Officer, who will, after satisfying himself of the correctness of the facts and circumstances of the case, give to him such certificate as may be appropriate. On the basis of this certificate, the persons responsible for paying the income by way of commission, remuneration or prize (by whatever name called) shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
6. These instructions have been issued with a view to helping the persons responsible for making deduction of tax at source under sections 194B, 194BB and 194G. However, if there is any doubt, a reference may be made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962 and the Finance Act, 1992. In case any assistance is required, the Assessing Officer concerned, or, the Local Public Relations Officer of the Income-tax Department may be approached.
Annexure I
Form No. 16A
[See rule 31(1)(b)]
Certificate of deduction of tax at source under section
203 of
the Income-tax Act, 1961
For interest on securities; dividends; interest on time deposits
referred to in clauses (vii) and (viia)
of sub-section (3) of section 194A; insurance commission; payments in respect
of deposits under National Savings Scheme; payments on account of repurchase of
units by the Mutual Fund or Unit Trust of India; commission, remuneration or
prize on sale of lottery tickets; commission or brokerage; income from units
referred to in section 196B
|
Name and address of the person deducting tax |
TDS circle where Annual Return under section 206 is to be delivered |
Name and address of the person to whom payment is made or in whose account it is credited |
|
...................................................... |
................................................... |
........................................................ |
|
...................................................... |
................................................... |
........................................................ |
|
...................................................... |
................................................... |
........................................................ |
|
|
|
|
|
TAX DEDUCTION A/C NO. OF THE DEDUCTOR |
NATURE OF PAYMENT |
PAN/GIR NO. OF THE PAYEE |
|
PAN/GIR NO. OF THE DEDUCTOR |
. |
FOR THE PERIOD.............19......... TO 19.......... |
DETAILS OF PAYMENT, TAX
DEDUCTION AND DEPOSIT OF TAX INTO CENTRAL GOVERNMENT ACCOUNT
|
Date of payment/credit |
Amount paid/credited (Rs.) |
Amount of income-tax deducted (Rs.) |
Rate at which deducted |
Date & Challan No. of deposits of tax into Central Government Account |
Name of bank and branch where tax deposited |
|
|
|
|
|
|
|
Certified that a sum of Rs. (in
words)..........................has been deducted at source and paid to the
credit of the Central Government as per details given above.
|
Place....................... |
................................................................. |
|
Date........................ |
Signature of person responsible for deduction of tax |
|
|
Full Name........................................... |
|
|
Designation........................................ |
Circular : No. 632, dated
SECTION
194C l PAYMENTS TO CONTRACTORS
AND SUB-CONTRACTORS
Instructions regarding deduction of tax at source from
payments to contractors, etc.
FINANCIAL YEAR 1992-93
1765.
Deduction of tax at source - Payments made to contractors and sub-contractors -
Rates of tax applicable during financial year 1992-93
1. Reference is invited to Boards Circular No. 613, dated 14-11-1991 on the above subject.
2. According to the provisions of section 194C of the Income-tax Act, 1961, any person responsible for paying any sum to any resident contractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the bodies specified therein shall, at the time of credit of such sum to the account of the contractor, or, payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 2% of such sum as income-tax on income comprised therein. The bodies are :
(a) the Central Government or any State Government; or
(b) any local authority; or
(c) any corporation established by or under a Central, State or Provincial Act ; or
(d) any company ; or
(e) any co-operative society ; or
(f)* any authority, constituted in India by or under any law, engaged either for the purposes 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 both ; or
(g)* any society
registered under the Societies Registration Act, 1860 or under any law
corresponding to that Act in force in any part of
(h)* any trust ; or
(i)* any University established or incorporated by or under a Central, State or Provincial Act, and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956.
(*These have been added by the Finance Act, 1992 with effect from 1st June, 1992).
3. Similarly when a contractor makes payment of a sum to a resident sub-contractor in pursuance of a contract with the sub-contractor, for carrying out the whole or any part of the work undertaken by him he is required to deduct an amount equal to 1% of such sum as income-tax on income comprised therein.
4. The amount of income-tax to be deducted at the aforesaid rates
is to be further increased by a surcharge at the following rates
:
|
(i) in a case where the payee is a non-corporate resident person |
12% |
|
(ii) in a case where the payee is a domestic company |
15% |
5.1 No deduction of tax is, however, required to be made from any sum credited or paid in pursuance of a contract, referred to in the foregoing paragraphs, if the consideration for the contract does not exceed Rs. 10,000.
5.2 Further, where the Assessing Officer is satisfied that the total income of a contractor or a sub-contractor justifies the deduction of income-tax, at a lower rate or no deduction of income-tax, the Assessing Officer can give to him such certificate as may be appropriate. For this, an application has to be made to the Assessing Officer on Form No. 13C. During the validity of this certificate, deduction of tax at source will be made in accordance with the direction given in the certificate.
6. The responsibilities, obligations, etc., under the Income-tax Act, of the persons deducting tax at source under section 194C, are briefly as follows :
(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 194C is required to pay, within the prescribed time, the sum so deducted to the credit of the Central Government in the prescribed manner (vide rule 30 of the Income-tax Rules, 1962). In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, normally, the sum has to be paid within one week from the last day of the month in which the deduction is made. If a person fails to deduct tax at source, or, after deducting, fails to pay the tax to the credit of the Government, 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 also be liable to pay simple interest at fifteen per cent per annum of the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, section 271C lays down that if a 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. In this regard, attention is also invited to the provisions of section 276B, which 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 not be less than 3 months but which may extend to 7 years and with fine.
(b) According to the provisions of section 203, read with rule 31, every person deducting tax at source is required to furnish a certificate to the effect that tax has been deducted and to specify therein the amount so deducted and certain other particulars. The certificate has to be furnished in Form No. 16B, within the prescribed period of one month and fourteen days to the person to whose account credit is given or to whom payment is made, by any mode, as the case may be. Form No. 16B is printed by the Central Government and can be procured from the Income-tax Department on payment of a nominal consideration. If a person fails to furnish a certificate as required under section 203, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs.100 but which may extend to Rs. 200 for every day during which the failure continues.
(c) According to the provisions of section 203A,
it is obligatory for all persons responsible for deducting tax at source to
obtain and quote the Tax-deduction Account Number (TAN) in the challans, TDS certificates, returns, etc. Detailed
instructions in this regard are available in Boards Circular No. 497 [F.No. 275/118/87-IT(B)], dated
(d) According to the provisions of section 206, read with rules 36A and 37, of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, 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 at source from payment to contractor or sub-contractor, shall prepare and deliver by the 30th June following the financial year an annual return of deduction of tax under section 194C. This return is to be furnished in Form No. 26C, to the designated/concerned Assessing Officer. It may be noted that a copy of each TDS certificate issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. The maximum penalty will, however, not exceed the amount of tax which was deductible at source.
7. These instructions are not exhaustive and are issued only with a view to helping the person responsible for making deduction of tax at source under section 194C. For further details, the provisions of the Income-tax Act, 1961 and the Income-tax Rules, 1962 have to be consulted. In case, any assistance is required, the Assessing Officer concerned or the local Public Relations Officer of the Income-tax Department may be approached.
Circular : No. 633, dated
FNANCIAL YEAR
1992-93
1768.
Instructions for deduction of tax at source from insurance commission, etc. -
Rates of tax applicable during financial year 1992-93
1. Reference is invited to the Boards Circular No. 614, dated 14-11-1991 wherein the rates at which the deduction of income-tax at source was to be made during the financial year 1991-92, from payment of income by way of insurance commission, under section 194D of the Income-tax Act, 1961, were communicated.
2. There is no change in the rates for deducting income-tax from
insurance commission paid during the financial year 1992-93. These rates are as
under :
|
(i) in the case of a non-corporate resident person |
10% |
|
(ii) in the case of a domestic company |
21.5% |
3. Further, the amount of income-tax deducted at the aforesaid rates is to be increased by a surcharge at the rate of 12 per cent in the case of a non-corporate resident person and at the rate of 15 per cent in the case of a domestic company.
4. It may be noted that the provisions of section 194D apply in relation to income by way of insurance commission paid to a resident only. However, under the provisions of section 195, income-tax is required to be deducted from payments (including payments by way of insurance commission) made to a non-corporate non-resident assessee or to a foreign company also.
5. According to the provisions of section 194D, any person paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of insurance policies) is required to deduct at the time of actual payment or at the time of credit of such income, whichever is earlier, income-tax at the rates in force. However, no such deduction is required to be made in a case where the amount of such income or the aggregate amount of such income during the financial year does not exceed Rs. 5,000.
6. There is also a provision in the Income-tax Act, for deduction of tax at source under section 194D at a lower rate, or no deduction in certain cases. For this purpose, a certificate for deduction of tax at lower rate or no deduction can be obtained from the Assessing Officer, under the provisions of sub-section (1) of section 197, which has been amended by the Finance Act, 1992 so as to enable any person (including a company) to obtain this certificate, in case his total income justifies deduction of tax at a lower or nil rate. For this purpose, an application can be made in Form No. 13, to the Assessing Officer. Where any such certificate is given, the person responsible for paying the insurance commission shall deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
7. The responsibilities, obligations, etc., under the Income-tax Act, of the person deducting tax at source, are as follows :
(a) According to the provisions of section 200, any person deducting any sum in accordance with the provisions of section 194D shall pay, within the prescribed time (as laid down in rule 30 of the Income-tax Rules, 1962), the sum so deducted to the credit of the Central Government. In the case of deduction by or on behalf of the Government, the sum has to be paid on the day of the deduction itself. In other cases, normally, the same has to be paid within one week from the last day of the month in which the deduction is made. If a person fails to pay the tax to the credit of the Central Government, 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 15% per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. Further, 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 of the Act lays down that if a person fails to pay to the credit of the Central Government the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.
(b) According to the provisions of section 203, every person deducting tax at source is required to furnish a certificate to the effect that the tax has been deducted, and, to specify therein the amount deducted, and, certain other particulars. This certificate, for deduction of tax at source under section 194D, has to be furnished within one month of the close of the financial year to the person to whose account credit is given or to whom payment is made by any mode, as the case may be. The certificate should be issued in Form No. 16A (Annexure I) by the tax deductors on their own stationery. If a person fails to issue a certificate as required by section 203, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day during which the failure continues.
(c) According to the provisions of section 203A 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 Number (TAN) in the
challans, TDS certificates, returns, etc. Detailed
instructions in this regard are available in the Boards Circular No. 497 [F.
No. 275/118/87-IT(B)], dated
(d) According to the provisions of section 206, read with rules 36A and 37, of the Income-tax Rules, the prescribed person in the case of every office of Government, the principal officer in the case of every company, 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 at source, shall prepare and deliver by the 30th June following the financial year, to the designated/concerned Assessing Officer the annual return of deduction of tax from insurance commission in Form No. 26D. It may be noted that a copy of each TDS certificate issued during the financial year should be enclosed with the annual return. If a person fails to furnish in due time the annual return, he shall be liable to pay, by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues. However, the maximum penalty will not exceed the amount of tax deductible.
8. These instructions are not exhaustive and are issued only with a view to helping the person responsible for making deduction of tax at source under section 194D. Wherever there is any doubt, a reference may be made to the provisions of the Income-tax Act, 1961 and the Finance Act, 1992. In case any assistance is required, the Assessing Officer concerned or the Local Public Relations Officer of the Income-tax Department may be approached.
Circular : No. 634,
dated
Section
206C l Profits And Gains From Business of Trading In
Alcoholic liquor,
1189. Instructions regarding deduction of tax at source on profits and gains from the business of trading in alcoholic liquor, forest produce, etc.
Clarification I
1. Considerable difficulty has been felt in the past in assessing income of persons who take contracts for sale of liquor, forest produce, etc. It has been the Departments experience that for taking such contracts, firms or associations of persons are specifically constituted and very often no trace is left of them or their members after the contract has been executed. Persons have also been found to have taken contracts in benami names by floating undertakings or associations for short periods. Since tax is payable in the assessment years on the incomes of the previous years, the time by which the incomes from such sources become assessable, such persons become untraceable. Moreover, at the time of assessment years in these cases, either the accounts are not available or they are mostly incorrect or incomplete. Thus, even if assessments could be made on ex parte basis, it becomes almost impossible to collect the tax found due, either because it becomes difficult to establish the identity of the persons and trace them or because of the fact the persons in whose names contracts were taken are men of no means. With a view to combating large scale tax evasion by persons deriving incomes from such business, the Finance Act, 1988 has inserted a new section 44AC to provide for determination of income in such cases. Further, with a view to facilitating collection of taxes from such assessees, the Finance Act, 1988 has inserted a new section 206C to provide for collection of such tax at source.
2. Sections 44AC and 206C are reproduced below :
(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in case of an assessee, being a person other than a public sector company (hereafter in this section referred to as the buyer), obtaining in any sale by way of auction, tender, or any other mode, conducted by any other person or his agent (hereafter in this section referred to as the seller),
(a) any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor a sum equal to forty per cent of the amount paid or payable by the buyer as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head Profits and gains of business or profession;
(b) the right to receive any goods of the nature specified in column (2) of the Table below, or such goods as the case may be, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table of the amount paid or payable by the buyer in respect of the sale of such right or as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head Profits and gains of business or profession.
Table
|
Sl. No. |
Nature of goods
|
Percentage
|
|
(1) |
(2) |
(3) |
|
(i) |
Timber obtained under a forest lease |
Thirty-five per cent |
|
(ii) |
Timber obtained by any mode other |
Fifteen per cent |
|
|
than under a forest lease |
|
|
(iii) |
Any other forest produce not being timber |
Thirty-five per cent |
(2) For the removal of doubts, it is hereby declared that the provisions of sub-section (1) shall not apply to a buyer (other than a buyer who obtains any goods from any seller which is a public sector company) in the further sale of any goods obtained under or in pursuance of the sale under sub-section (1).
(3) In a case where the business carried on by the assessee does not consist exclusively of trading in goods to which this section applies and where separate accounts are not maintained or are not available, the amount of expenses attributable to such other business shall be an amount which bears to the total expenses of the business carried on by the assessee the same proportion as the turnover of such other business bears to the total turnover of the business carried on by the assessee.
Explanation : For the purposes of this section, Seller means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm.
The provisions of this section will apply only to an assessee being a
person other than a public sector company, referred to as buyer of any goods in
the nature of alcoholic liquor for human consumption (other than Indian-made
foreign liquor) or such goods as are mentioned in clause (b) of
sub-section (1) of section 44AC, at the point of first sale. The
provisions of this section shall not apply to any buyer in the second or
subsequent sale of such goods. This amendment will take effect from
(1) Every person, being a seller referred to in section 44AC, shall, at the time of debiting of the amount payable by the buyer referred to in that section to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax on income comprised therein :
Table
|
Sl. No. |
Nature of goods |
Percentage
|
|
(1) |
(2) |
(3) |
|
(i) |
Alcoholic liquor for human consumption (other |
Fifteen per cent |
|
|
than Indian-made foreign liquor) |
|
|
(ii) |
Timber obtained under a forest lease |
Fifteen per cent |
|
(iii) |
Timber obtained by any mode other than under |
Ten per cent |
|
|
a forest lease |
|
|
(iv) |
Any other forest produce not being timber |
Fifteen per cent. |
Provided that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid table are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this sub-section shall not apply so long as the certificate is in force.
(2) The power to recover tax by collection under sub-section (1) shall be without prejudice to any other mode of recovery.
(3) Any person collecting any amount under sub-section (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs.
(4) Any amount collected in accordance with the provisions of this section and paid under sub-section (3) shall be deemed as payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to him for the amount so collected on the production of the certificate furnished under sub-section (5) in the assessment made under this Act for the assessment year for which such income is assessable.
(5) Every person collecting tax in accordance with the provisions of this section shall, within ten days from the date of debit or receipt of the amount, furnish to the buyer to whose account such amount is debited or from whom such payment is received, a certificate to the effect that tax has been collected, and specifying the sum so collected, the rate at which the tax has been collected and such other particulars as may be prescribed.
(6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).
(7) Without prejudice to the provisions of sub-section (6), if the seller does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of two per cent per month or part thereof on the amount of such tax from the date on which such tax was collectable to the date on which the tax was actually paid.
(8) Where the tax has not been paid as aforesaid, after it is collected, the amount of tax together with the amount of simple interest thereon referred to in sub-section (7) shall be charged upon all the assets of the seller.
It may be noted that the sum collected at source in accordance with the
provisions of section 206C should be increased by a surcharge for the purpose
of the
This amendment will be effective from 1st June, 1988.
The Board by Notification No. SO 557(E), dated 9th June, 1988 has made necessary amendments in the Income-tax Rules, 1962 in this regard. It may be noted that failure to pay tax collected at source, a new challan form has been devised.[`3]*
Circular : No. 525, dated
Clarification
II
1. Attention is invited to this Departments Circular No. 525, dated 24-11-1988 wherein the rates at which collection of income-tax have to be made at source during the financial year 1988-89 in respect of profits and gains from the business of trading in alcoholic liquor (other than Indian-made foreign liquor), timber and other forest produce were communicated.
2. Subsequent to the issue of the aforesaid circular, the Direct Tax Laws (Amendment) Act, 1989 substituted the words Ten per cent by words Five per cent occurring in column 3 against item (iii) of the table below sub-section (1) of section 206C of the Income-tax Act, thereby providing that in respect of the timber obtained by any mode other than forest lease, income-tax shall be collected at the rate of 5 per cent of the purchase price payable by the buyer. The said amendment has come into effect from 1-6-1988. The Direct Tax Laws (Amendment) Act has also inserted a new sub-section (5A) in section 206C to provide that every person collecting tax in accordance with the provisions of section 206C shall prepare half-yearly returns for the period ending on the 30th September and 31st March in each financial year and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars as may be prescribed in the rules. It may also be added that the Direct Tax Laws (Amendment) Act has inserted a proviso to clause (a) of sub-section (1) of section 44AC of the Income-tax Act which provides that clause (a) relating to determination of profits in the trading of goods, in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor) at 40 per cent of the purchase price, shall not apply where the goods are not obtained by way of auction and where the sale price of such goods as sold by the buyer is fixed by or under any State Act. In such cases, tax will not be required to be collected under section 206C.
3. Subject to the amendments/modifications mentioned in para 2 above, the instructions contained in the Departments Circular No. 525, dated 24-11-1988 will be applicable during the current financial year also i.e., 1989-90. It may be noted that as per the provisions of the Finance Act, 1989 in cases in which tax has to be collected under section 206C, the collection shall be made at the rates specified in that section, i.e., at the rate of 15 per cent of the amount payable by the buyer (at the rate of 5 per cent in the case of timber obtained by any mode other than forest lease), and it shall be further increased by surcharge for the purpose of the Union calculated at the rate of 8 per cent of such collection.
4. It may also be mentioned that the tax so collected is to be paid within seven days to the credit of the Central Government, as provided in sub-section (3) of section 206C. Failure to do so attracts prosecution under section 276BB of the Income-tax Act. Failure to collect the tax from the buyers of the goods mentioned in sections 44AC and 206C makes the seller of the goods responsible for paying the tax to the Central Government in terms of sub-section (6) of section 206C.
Circular : No. 535, dated
Clarification
III
1. Attention is invited to this Departments Circular No. 525, dated 24-11-1988 and No. 535, dated 26-6-1989, wherein the provisions relating to collection of income-tax at source under section 206C of the Income-tax Act in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc. were communicated.
2. According to sub-section (5A) of section 206C, every person
collecting tax in accordance with the provisions of the said section shall
prepare half-yearly returns for the period ending on 30th September and 31st
March in each financial year and deliver or cause to be delivered to the
prescribed income-tax authority, the said returns in such form and verified in
such manner and setting forth such particulars and within such time as may be
prescribed. A new rule 37E prescribing the half-yearly returns regarding tax
collected at source u/s 206C(5A) and another rule 37F prescribing the
income-tax authorities to whom these half-yearly returns are to be furnished,
have been inserted by the Income-tax Rules, 1962, vide Notification No. S.O. 149(E), dated
Circular : No. 565, dated
Clarification
IV
1. Reference is invited to Boards Circular No. 565, dated 11-7-1990 regarding collection of income-tax at source under section 206C of the Income-tax Act in respect of profits and gains from the business of trading in alcoholic liquor, forest produce etc., as also to earlier Circulars referred to in paragraph 1 of Circular No. 565.
2. As a result of different systems prevailing in different
States, the term purchase price, used in section 44AC of the Income-tax Act was
being understood in different ways. In order to clarify this point, the Finance
Act, 1990 has amended the said section to provide that the purchase price would
mean any amount (by whatever name called) paid or payable by the buyer to
obtain the goods referred to in that section, except the bid amount in an
auction. Accordingly, the excise duty paid or payable by the buyer will also
form part of the purchase price for the purposes of section 44AC. On the same
analogy, the Nirgam Mulya
or Issue Price which is paid by a buyer in the State of
3. The above amendment has come into force with effect from the assessment year 1991-92 and, therefore, will be applicable to the collections under section 206C made during the financial year 1990-91.
4. The Finance Act, 1990 has further amended section 44AC so as to include a co-operative society also within the meaning of the term seller as defined therein. The said amendment has also come into effect from assessment year 1991-92 and will, accordingly, apply to collections made under section 206C during the financial year 1990-91.
Circular : No. 585, dated
Judicial analysis
Explained in - The above circular was explained in Badhar Khan Pukhraj v. Deputy Commissioner (Asstt.) [1993] 112 Taxation 74 (Trib.), in the following words :
17. The above
circular clearly shows that since the provisions of section 44AC were being
understood in different ways, a necessity of clarifying the position was felt.
In view of this state of affairs regarding the scope and application of section
44AC it would not be unreasonable to hold that a substantial point of dispute
was there, involved in the assessment in this case, and that the nature of such
dispute went beyond the scope of adjustment contemplated under section 143(1)
and which could have been made by rectifying an arithmetical error in the
return. In that sense of the matter there existed
mistake apparent from record in the intimation sent by the DC (Asstt.) under section 143(1) after making adjustments. In
fact, the existence of such a mistake or error apparent from record was
appreciated in his second order dated 2-1-1992 by the Assessing Officer himself
when he corrected or rectified the mistake regarding inclusion of cost price of
Rum in the computation of purchase price. We are thus satisfied that the order
under appeal which has the effect of upholding the legality and validity of
intimation sent under section 143(1) is not correct in law and is required to
be vacated. We hold accordingly and direct that the addition of Rs. 1,05,39,059 made by the DC (Asstt.)
by way of making adjustments be cancelled. (pp. 80-81)
Clarification
V
1. Attention is invited to the Boards Circular No. 565, dated 11-7-1990 regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc. and filing of half-yearly returns in this regard.
2. The Finance (No. 2) Act, 1991 does not make any change in the
rates of tax applicable for the collection of tax at source under section 206C
for the financial year 1991-92. These rates and other relevant provisions are
enumerated below.
3. Sub-section (1) of section 206C lays down that every person,
being a seller referred to in section 44AC shall, at the time of debiting of
the amount payable by the buyer to the account of the buyer or at time of
receipt of such amount from the said buyer in cash or by issue of cheque or
draft or by any other mode, whichever is earlier, collect from the buyer of the
goods of the nature specified below, a sum equal to the percentage, as
mentioned against each, of such amount as income-tax on the income comprised
therein :
|
(i) |
Alcoholic liquor for human consumption (other than Indian-made foreign liquor) |
15% |
|
(ii) |
Timber obtained under a forest lease |
15% |
|
(iii) |
Timber obtained by any mode other than under a forest lease |
5% |
|
(iv) |
Any other forest produce not being timber |
15% |
Further, according to the provisions of the Finance (No.2) Act, 1991, the amount of tax collectible at source at the aforesaid rates shall be increased by a surcharge at the rate of 15 per cent where the buyer is a domestic company and 12 per cent in respect of other buyers.
4. It may be clarified that seller for the aforesaid purpose means the Central Government or a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society. It is also clarified that the provisions of section 44AC, and, consequently, those of section 206C will apply only to an assessee being a person (as defined in the Act) other than a public sector company, referred to as buyer of any goods, in the preceding paragraph, at the point of first sale and not in the case of second or subsequent sale of such goods.
5. It is further clarified that in the case of goods of the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor), the aforesaid provisions shall not apply to a buyer where such goods are not obtained by him by way of auction and where the sale price of such goods to be sold (further) by the buyer is fixed by or under any State Act.
6. It is also clarified that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief, any of the goods referred to above are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of sub-section (1) of section 206C shall not apply so long as the certificate remains in force. Reference in this regard may be made to rule 37C of the Income-tax Rules, 1962 and Form No. 27C prescribed thereunder.
7. The responsibilities, obligations, etc., under the Income-tax Act of the person collecting tax at source under section 206C, are as follows :
(a) According to the provisions of sub-section (3) of section 206C, any person collecting any amount, as aforesaid, shall pay within seven days the amount so collect to the credit of the Central Government or as the Board directs.
(b) According to the provisions of sub-section (5) of section 206C, every person collecting tax as aforesaid shall within ten days from the date of debit, or receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that tax has been collected, specifying the sum so collected and the rate at which the tax has been collected and such other particulars as may be prescribed. On production of this certificate by the buyer, credit shall be given to him for the amount so collected in the assessment made under the Act for the assessment year for which such income is assessable. Reference in this regard may be made to rule 37D of the Income-tax Rules, 1962 and Form No. 27D prescribed thereunder.
If a person fails to issue the certificate of tax collected at source by him, as aforesaid, he shall be liable to pay by way of penalty under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.
(c) If any person responsible for collecting tax under the provisions of section 206C fails to collect the tax, he shall still be liable in terms of sub-section (6) of section 206C to pay the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.
(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government he shall be liable in terms of sub-section (7) of section 206C to pay simple interest @ 2% per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which such tax was actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years and with fine.
8. Sub-section (5A) of section 206C lays down that every person collecting tax in accordance with the provisions of the said section shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year, and, deliver or cause to be delivered to the designated/concerned Assessing Officer the said returns. Under rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or, any other forest produce not being timber, as the case may be, within a period of 1 month from the end of the half-yearly period to which the return relates.
If a person fails to furnish the aforesaid returns in time, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.
9.These instructions are not exhaustive and are issued only with a view to helping the persons responsible for making collection of tax at source under section 206C. Wherever, there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961, and the Finance (No. 2 ) Act, 1991. In case any assistance is required, the Assessing Officer concerned or local Public Relations Officer of the Income-tax Department may be approached.
Circular : No. 620, dated
Clarification
vi
1. Attention is invited to the Boards Circular No. 620, dated 6-12-1991 regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc., during the financial year 1991-92.
2. The Finance Act, 1992 does not make any change in the rates of tax applicable for the collection of tax at source under section 206C for the financial year 1992-93. However, section 44AC, which was hitherto interlinked with section 206C, has been deleted by the Finance Act, 1992. Simultaneously, certain amendments consequential to the deletion of section 44AC have been made in section 206C.
3.1 Sub-section (1) of the amended section 206C enjoins that every person, being a seller shall, at the time of debiting of the amount payable by the buyer, to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode,whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax :
Table
|
Sl. No. |
Nature of goods |
Percentage
|
|
(1) |
(2) |
(3) |
|
(i) |
Alcoholic liquor for human consumption |
Fifteen per cent |
|
|
(other than Indian-made foreign liquor) |
|
|
(ii) |
Timber obtained under a forest lease |
Fifteen per cent |
|
(iii) |
Timber obtained by any mode other than |
Five per cent |
|
|
under a forest lease |
|
|
(iv) |
Any other forest produce not being timber |
Fifteen per cent |
3.2 The term buyer in section 206C is defined to mean a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table referred above or the right to receive any such goods but does not include :
(i) a public sector company,
(ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or
(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act.
3.3 The term seller means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society.
4. The amount of tax collectible at source at the rates referred to in paragraph 3.1 shall be increased by a surcharge at the rate of 15 per cent where the buyer is a domestic company and at the rate of 12 per cent in respect of other buyers.
5. It is clarified that the provisions of sub-section (1) of section 206C in relation to a buyer will not apply to a public sector company, and, to any other buyer who obtains the said goods at a second or subsequent sale of such goods. Thus, these provisions will aply only at the point of the first sale of such goods.
6. It is also clarified that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that, to the best of his belief, any of the goods referred to in the Table in paragraph 3.1 are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of sub-section (1) of section 206C shall not apply so long as the certificate remains in force. Reference in this regard may be made to rule 37C of the Income-tax Rules, 1962, and Form No. 27C prescribed thereunder.
7. The responsibilities, obligations, etc., under the Income-tax Act of the person collecting tax at source under section 206C, are as follows :
(a) Any person collecting any amount under section 206C (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs.
(b) Every person collecting tax shall from the date of debit or within ten days of receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that tax has been collected, specifying the sum so collected and the rate at which the tax has been collected and such other particulars as may be prescribed. On production of this certificate by the buyer, credit shall be given to him for the amount so collected in the assessment made under the Act for the assessment year for which such income is assessable. Reference in this regard may be made to rule 37D of the Income-tax Rules, 1962 and Form No. 27D prescribed thereunder. If a person fails to issue the certificate of tax collected at source by him he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.
(c) If any person responsible for collecting tax fails to collect the tax, he shall still be liable to pay in terms of sub-section (6) of section 206C, the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.
(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government, he shall be liable in terms of sub-section (7) of section 206C to pay simple interest @ 2 per cent per month or part thereof, on the amount of such tax from the date on which such tax was collectible to the date on which such tax was actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall not be less than 3 months and which may extend up to 7 years and with fine.
(e) Every person collecting tax shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year, and, deliver or cause to be delivered to the designated/concerned Assessing Officer the said returns. Under rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or, any other forest produce not being timber, as the case may be, within a period of one month from the end of the half-yearly period to which the return relates.
(f) If a person fails to furnish the half-yearly returns in time, he shall be liable to pay by way of penalty, under section 272A, a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.
8. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for collecting tax at source under section 206C. Wherever, there is any doubt, a reference may be made to the relevant provisions of the Income-tax Act, 1961, and the Finance Act, 1992. In case any assistance is required, the Assessing Officer concerned or local Public Relations Officer of the Income-tax Department may be approached.
Clarification
VII
1. Attention is invited to the Boards Circular No. 634, dated 20-8-1992 regarding collection of income-tax at source under section 206C of the Income-tax Act, in respect of profits and gains from the business of trading in alcoholic liquor, forest produce, etc., during the financial year 1992-93.
2. The Finance Act, 1993 does not make any change in the rates of tax applicable for the collection of tax at source under section 206C for the financial year 1993-94.
3.1 Sub-section (1) of section 206C enjoins that every person, being a seller shall at the time of debiting of the amount payable by the buyer, to the account of the buyer, or, at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the Table, of such amount as income-tax :
Table
|
Sl. No. |
Nature of goods |
Percentage
|
|
(1) |
(2) |
(3) |
|
(i) |
Alcoholic liquor for human consumption |
Fifteen per cent |
|
|
(other than Indian-made foreign liquor) |
|
|
(ii) |
Timber obtained under a forest lease |
Fifteen per cent |
|
(iii) |
Timber obtained by any mode other than |
Five per cent |
|
|
under a forest lease |
|
|
(iv) |
Any other forest produce not being timber |
Fifteen per cent |
3.2 The term buyer in section 206C is defined to mean a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table referred above or the right to receive any such goods but does not include :
(i) a public sector company,
(ii) a buyer in the future sale of such goods obtained in pursuance of such sale, or
(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act.
3.3 The term seller means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society.
4.The amount of tax collectible at source at the rates referred to in paragraph 3.1 shall be increased by a surcharge at the rate of 15 per cent where the buyer is a domestic company and at the rate of 12 per cent in respect of other buyers.
5. It may be noted that the provisions of sub-section (1) of section 206C in relation to a buyer will not apply to a public sector company, and, to any other buyer who obtains the said goods at a second or subsequent sale of such goods. Thus, these provisions will apply only at the point of the first sale of such goods.
6. It is also clarified that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that, to the best of his belief, any of the goods referred to in the Table in paragraph 3.1 are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of sub-section (1) of section 206C shall not apply so long as the certificate remains in force. Reference in this regard may be made to rule 37C of the Income-tax Rules, 1962, and Form No. 27C prescribed thereunder.
7. The responsibilities, obligations, etc., under the Income-tax Act, of the person collecting tax at source under section 206C, are as follows :
(a) Any person collecting any amount under section 206C (1) shall pay within seven days the amount so collected to the credit of the Central Government, or, as the Board directs.
(b) Every person collecting tax shall, within ten days from the date of debit, or, receipt of the amount, furnish to the buyer to whose account such amount is debited, or, from whom such payment is received, a certificate to the effect that the tax has been collected, specifying the amount of tax and the rate at which it has been collected, and, such other particulars as may be prescribed. This certificate has to be issued in Form No. 27D prescribed under rule 37D of the Income-tax Rules, 1962. On production of this certificate by the buyer, credit shall be given to him for the amount so collected, in the assessment made under the Act for the assessment year for which such income is assessable. If a person fails to issue the certificate of tax collected at source by him, he shall be liable to pay, by way of penalty, under section 272A(2), a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for every day during which the failure continues.
(c) If any person responsible for collecting tax fails to collect the tax, he shall himself be liable to pay, in terms of sub-section (6) of section 206C, the tax to the credit of the Central Government within the period of seven days referred to in sub-para (a) above.
(d) If the seller fails to collect the tax, or, after collecting the tax, fails to pay it to the credit of the Central Government, he shall be liable in terms of sub-section (7) of section 206C to pay simple interest @ 2 per cent per month or part thereof, on the amount of such tax from the date on which such tax was collectible to the date on which such tax is actually paid. Further, section 276BB lays down that if a person fails to pay to the credit of the Central Government the tax collected by him as required under the provisions of section 206C, he shall be punishable with rigorous imprisonment for a term which shall be not less than three months but which may extend up to 7 years, and with fine.
(e) Every person collecting tax shall prepare half-yearly returns for the period ending on 30th September and 31st March in each financial year, and, deliver or cause to be delivered to the designated/concerned Assessing Officer, the said returns. Under Rule 37E of the Income-tax Rules, 1962, these returns are to be furnished in Form No. 27EA, 27EB, 27EC or 27ED relating respectively to alcoholic liquor for human consumption, timber obtained under a forest lease, timber obtained by any mode other than under a forest lease, or, any other forest produce not being timber, as the case may be, within a period of one month from the end of the half-yearly period to which the return relates.
(f) If a person fails to furnish the half-yearly returns in time, he shall be liable to pay by way of penalty, under section 272A (2) a sum which shall not be less than Rs. 100 but which may extend to Rs. 200 for each day during which the default continues. However, the penalty shall not exceed the amount of tax which was collectible at source.
8. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for collecting tax at source under section 206C. Whenever there is any doubt, reference may be made to the relevant provisions of the Income-tax Act, 1961, and Income-tax Rules, 1962. In case any assistance is required, the Assessing Officer concerned or the local Public Relations Officer of the Income-tax Department may be contacted.
Circular :No. 660, dated
Judicial analysis
Explained in - In Satya Pal Amrik Singh
& Co. v.
. . . Vide circular dated September 15, 1993, the Central Board of Direct Taxes has clarified that section 206C(1) of the Act in relation to the buyer will not apply to public sector undertakings/companies and to any other buyer who obtains goods at a subsequent sale of such goods and the provisions of section 206C will apply only at the time of first sale. Admittedly, CITCO is a public sector undertaking and, therefore, the provisions of section 206C are not attracted in its case. If this position of CITCO is taken into consideration in the light of our finding that the sale of liquor by CITCO to L-14 licensees falls within the expression subsequent sale as used in paragraph 5 of the circular issued by the Central Board of Direct Taxes, there can be no escape from the conclusion that the deduction of tax at source from the petitioners is illegal and without jurisdiction. As a logical corollary, it has to be held that the provisions of section 206C as amended by the Finance Act, 1992, are not available to the Income-tax Department to compel CITCO to deduct income-tax at source from the petitioners. (p. 663)
Circular : No.
635, dated
Schedule
II
Valuation of Gifts
SCHEDULE
II l VALUATION OF GIFTS
1468. Clarification
in respect of valuation of gifts of shares/debentures on or after 1-4-1992
under the Gift-tax Act in view of the omission of Part C of Schedule III to the
Wealth-tax Act
1. Under the Gift-tax Act, 1958, the value of any property, other than cash, transferred by way of gift, shall be its value as determined in the manner laid down in Schedule II to the Gift-tax Act, where it has been stated that the value shall be determined in accordance with the provisions of Schedule III to the Wealth-tax Act with certain modifications.
2. Part C of Schedule III to the Wealth-tax Act, 1957 contains rules for determining value of shares in or debentures of companies. However, the above Part C of Schedule III is omitted by the Finance Act, 1992 with effect from 1-4-1993.
3. This omission of Part C of Schedule III to the Wealth-tax Act has created some doubts about the determination of the value of shares in or debentures of companies under the Gift-tax Act.
4. The matter has been considered. It is clarified that omission of Part C of Schedule III to the Wealth-tax Act does not affect the determination of value of shares in or debentures of companies under the Gift-tax Act. For this limited purpose, this Part C of Schedule III to the Wealth-tax Act can be taken to be on the statute even after 1-4-1993. For the purpose of the Gift-tax Act, the value of shares in or debentures of companies shall continue to be determined as per rules in Part C of Schedule III to the Wealth-tax Act.
FINANCE
ACT, 1992 - CIRCULAR NO. 636, DATED 31-8-1992
- Amendments at a glance
- Rate structure
- Amendments to Income-tax Act
- Amendments to Wealth-tax Act
- Amendments to Interest-tax Act
- Amendments to Expenditure-tax Act
Circular : No.
637, dated
SECTION
5 l CHARGEABLE EXPENDITURE
1470.
Whether World Bank
1. Under section 3 of the United Nations (Privileges and Immunities)
Act, 1947, read with section 18 of the Schedule to the said Act, officials of
International Organisations like the World Bank
Mission Staff staying in hotels on official duty, are accorded the same
privileges in respect of exchange facility as are accorded to the officials of
comparable ranks forming part of Diplomatic Missions to the Government
concerned. Based on this provision, the Board vide
Circular No. 637, dated
2. The exemption from the levy of the expenditure-tax in respect of any expenditure which is incurred or the payment for which is made in foreign exchange has since been withdrawn from 1-10-1992. The Board has now been advised that consequent to this amendment in section 5 of the Expenditure-tax Act, the officials of the international organiations to which provisions of section 18 of the Schedule to the United Nations (Privileges and Immunities) Act, 1947 have been extended including the World Bank Mission Staff staying in hotels on official duty shall no longer be entitled for exemption from the levy of the expenditure-tax on the chargeable expenditure incurred by them. However, the chargeable expenditure for the levy of the expenditure-tax will continue to exclude the expenditure incurred by persons within the purview of the Vienna Convention on Diplomatic Relations, 1961 or the Vienna Convention on Consular Relations, 1963.
3. The Board Circular No. 637, dated 2-9-1992 stands modified accordingly.
Circular : No. 658, dated
CLARIFICATION
1
Under the provisions of section 5 of the Expenditure Tax Act, 1987, any expenditure incurred by persons within the purview of the Vienna Convention on Diplomatic Relations, 1961, or the Vienna Convention on Consular Relations, 1963, is not to be considered as a chargeable expenditure for the levy of the expenditure tax. The Board has been advised that this exemption is available to the officials of all international organisations to which the provisions of section 18 of the Schedule to the United Nations (Privileges and Immunities) Act, 1947, apply. Under this section, Diplomatic Missions and their personnel and the World Bank Mission Staff staying in hotels on official duty are covered. The expenditure incurred by such persons is, therefore, not to be considered as a chargeable expenditure under the Expenditure Tax Act, 1987.
Circular : No. 638,dated
1582.
Agreement for avoidance of double taxation and prevention of fiscal evasion
with
Whereas the annexed Agreement between the Government of the Republic
of India and the Government of the Peoples Republic of China for the avoidance
of double taxation and the prevention of fiscal evasion with respect to taxes
on income has come into force on the 21st day of November, 1994 after the
notification by both the Contracting States to each other of the completion of
the procedures required under their laws for bringing into force of the said
Agreement in accordance with Article 28 of the said Agreement;
Now, therefore, in exercise of the powers conferred by section 90 of
the Income-tax Act, 1961 (43 of 1961), the Central Government hereby directs
that all the provisions of the said Agreement shall be given effect to in the
Union of
Notification : No. GSR 331(E), dated 5-4-1995.
annexure
AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND
THE GOVERNMENT OF THE PEOPLES REPUBLIC OF CHINA FOR THE
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF
FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
The Government of the
Article 1 : Personal scope - This Agreement shall apply to persons who are residents of one or both of the Contracting States.
Article 2 : Taxes covered - 1.
This Agreement shall apply to taxes on income imposed on behalf of a
2. There shall be regarded as taxes on income, all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, as well as taxes on capital appreciation.
3. The existing taxes to which the Agreement shall apply are :
(a) in
(i) the individual income-tax;
(ii) the income-tax for enterprises with foreign investment and foreign enterprises;
(iii) the local income-tax;
(hereinafter referred to as Chinese Tax).
(b) in
the income-tax including any surcharge thereon;
(hereinafter referred to as Indian Tax).
4. This Agreement shall also apply to any identical or substantially similar taxes which are imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes referred to in paragraph 3. The competent authorities of the Contracting States shall notify each other of any substantial changes which have been made in their respective taxation laws within a reasonable period of time after such changes.
Article 3 : General definitions - 1. For the purposes of this Agreement, unless the context otherwise requires,
(a) the term China means the Peoples Republic of China; when used in geographical sense means all the territory of the Peoples Republic of China, including its territorial sea, in which the Chinese laws relating to taxation apply, and any area beyond its territorial sea, within which the Peoples Republic of China has sovereign rights of exploration for any exploitation of resources of the sea-bed and its sub-soil and superjacent water resources in accordance with international law;
(b) the term India means the territory of the Republic of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdictions, according to the Indian law and in accordance with international law;
(c) the terms a
(d) the term tax means Chinese tax or Indian tax, as the context requires;
(e) the term person includes an individual, a company and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;
(f) the term company means any body corporate or any entity which is treated as a body corporate for tax purposes;
(g) the terms enterprise of a Contracting State and enterprise of the other Contracting State mean, respectively, and enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;
(h) the term nationals
means any individual possessing the nationality of a
(i) the term
international traffic means any transport by a ship or aircraft operated by an
enterprise which is a resident of a
(j) the term competent
authority means, in the case of
2. As regards the application of this Agreement by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State concerning the taxes to which this Agreement applies.
Article 4 : Resident - 1.
For the purposes of this Agreement, the term resident of a
2. Where by reason of the provisions of paragraph 1 an individual
is a resident of both
(a) He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
(b) If the State in which he has his centre of
vital interests cannot be determined, or if he has not a permanent home
available to him in either
(c) If he has an habitual
abode in both Contracting States or in neither of them, he shall be deemed to
be a resident of the
(d) If he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other
than an individual is a resident of both Contracting States, then it shall be
deemed to be a resident of the
Article 5 : Permanent establishment - 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
2. The term permanent establishment includes especially :
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
(g) a warehouse, in relation to a person providing storage facilities for others;
(h) a farm, plantation or other place where agriculture, forestry, plantation or related activities are carried on;
(i) an installation or structure used for the exploration or exploitation of natural resources, but only if so used for a period of more than 183 days;
(j) a building site or construction, installation or assembly project or supervisory activities in connection therewith, where such site, project or activities (together with other such sites, projects or activities, if any) continue for a period of more than 183 days;
(k) the furnishing of services other than technical services as defined in Article 12 (Royalties and Fees for Technical Services), by an enterprise of a Contracting State through employees or other personnel in the other Contracting State, but only if activities of that nature continue within that other Contracting State for a period or periods aggregating more than 183 days.
3. Notwithstanding the preceding provisions of this Article, the term permanent establishment shall be deemed not to include :
(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(c) the maintenance of a sock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise;
(e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.
4. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom the provisions of paragraph 5 apply - is acting in a Contracting State on behalf of an enterprise of the other Contracting State, has and habitually exercises an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.
5. An enterprise of a
6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.
Article 6 : Income from immovable
property - 1. Income derived by a resident of a
2. The term immovable property shall have the meaning which it has
under the law of the
3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.
Article 7 : Business profits - 1.
The profits of an enterprise of a
The provisions of this paragraph shall, however, not apply if the enterprise proves that the above activities could not have been undertaken by the permanent establishment or have no relation with the permanent establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.
3. Insofar as the tax law of a Contracting State provides with respect to a specific business activity that the profits to be attributed to a permanent establishment are to be determined on the basis of a deemed profit, nothing in paragraph 2 shall preclude that Contracting State from applying those provisions of its law, provided that the result is in accordance with the principles contained in this Article.
4. In determining the profits of a permanent establishment, there shall be allowed as deduction expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the Contracting State in which the permanent establishment is situated or elsewhere in accordance with the provisions of tax law of that Contracting State.
5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.
6. For the purposes of paragraphs 1 to 5, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.
7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.
Article 8 : Shipping and air transport - 1. Profits derived by an enterprise which is a resident of a Contracting State from the operation by that enterprise of ships or aircraft in international traffic shall be taxable only in that Contracting State.
2. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived by an enterprise described in paragraph 1 from the transportation by sea or air respectively of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft including :
(a) the sale of tickets for such transportation ;
(b) the rental of ships or aircraft connected with such transportation; and
(c) income from use, maintenance, or rental of containers (including trailers, barges, and related equipment for the transport of containers) operated in international traffic.
3. For the purposes of this Article, interest on funds directly connected with the operation of ships or aircraft in international traffic shall be regarded as profits described in this Article, and the provisions of Article 11 (interest) shall not apply in relation to such interest.
4. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.
Article 9 : Associated enterprises - 1. Where
(a) an enterprise of a
(b) the same persons
participate directly or indirectly in the management, control or capital of an
enterprise of a
and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by the reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that Contracting State - and taxes accordingly - profits on which an enterprise of the other Contracting State has been charged to tax in that other Contracting State, and the profits so included are profits which would have accrued to the enterprise of the first-mentioned Contracting State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall, if necessary, consult each other.
Article 10 : Dividends - 1.
Dividends paid by a company which is a resident of a
2. However, such dividends may also be taxed in the
3. The term dividends as used in this Article means income from shares, or other rights, not being debt claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.
4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that either Contracting State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base, in such case the provisions of Article 7 or Article 14, as the case may be, shall apply.
5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other Contracting State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other Contracting State, nor subject the companys undistributed profits to a tax on the companys undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other Contracting State.
Article 11 : Interest - 1.
Interest arising in a
2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and derived by the Government of the other Contracting State, a political sub-division, a local authority and the Central Bank thereof or any financial institution wholly owned by that Government, or by any other resident of that other Contracting State with respect to debt claims indirectly financed by the Government of that other Contracting State, a political sub-division, a local authority, and the Central Bank thereof or any financial institution wholly owned by that Government shall be exempt from tax in the first-mentioned Contracting State.
4. The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtors profits, and in particular, income from Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.
6. Interest shall be deemed to arise in a
7. Where, by reason of a special relationship between the payer
and the beneficial owner or between both of them and some other person, the
amount of the interest, having regard to the debt-claim for which it is paid,
exceeds the amount which would have been agreed upon by the payer and the
beneficial owner in the absence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount. In such case, the excess
part of the payments shall remain taxable according to the laws of each
Article 12 : Royalties and fees for
technical services - 1. Royalties or fees for technical services
arising in a
2. However, such royalties or fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties or fees for technical services.
3. The term royalties as used in this Article means payment of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
4. The term fees for technical services as used in this Article means any payment for the provision of services of managerial, technical or consultancy nature by a resident of a Contracting State in the other Contracting State, but does not include payment for activities mentioned in paragraph 2(k) of Article 5 and Article 15 of the Agreement.
5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right, property or contract in respect of which the royalties or fees for the technical services are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.
6. Royalties or fees for technical services shall be deemed to
arise in a
7. Where, by reason of a special relationship between the payer
and the beneficial owner or between both of them and some other person, the
amount of the royalties or fees for technical services, having regard to the
use, right or information for which they are paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the
absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each
Article 13 :
Capital gains - 1. Gains derived by a resident of a
2. Gains from the alienation of movable property forming part of business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other Contracting State.
3. Gains from the alienation of ships or aircraft operated in
international traffic or movable property pertaining to the operation of such
ships or aircraft shall be taxable only in the
4. Gains from the alienation of shares of the capital stock of a
company the property of which consists directly or indirectly principally of
immovable property situated in a
5. Gains from the alienation of any property other than that referred to in the preceding paragraphs of this Article, arising in a Contracting State, may be taxed in that Contracting State.
Article 14 : Independent personal services - 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that Contracting State except in one of the following circumstances, when such income may also be taxed in the other Contracting State :
(a) if he has a fixed
base regularly available to him in the other
(b) if his stay in the other Contracting State is for a period or periods exceeding in the aggregate 183 days in the taxable year concerned; in that case, only so much of the income as is derived from his activities performed in that other Contracting State may be taxed in that other Contracting State.
2. The term professional services includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.
Article 15 :
Dependent personal services - 1. Subject to the provisions of
Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration
derived by a resident of a Contracting State in respect of an employment shall
be taxable only in that Contracting State unless the employment is exercised in
the other Contracting State. If the employment is so exercised, such
remuneration as is derived therefrom may be taxed in
that other
2. Notwithstanding the provisions of paragraph 1, remuneration
derived by a resident of a
(a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in the taxable year concerned; and
(b) the remuneration is
paid by, or on behalf of, an employer who is not a resident of the other
(c) the remuneration is
not borne by a permanent establishment or a fixed base which the employer has
in the other
3. Notwithstanding the provisions of paragraphs 1 and 2 of this
Article, remuneration derived in respect of an employment exercised abroad a
ship or aircraft operated by an enterprise which is a resident of a
Article 16 :
Directors fees - Directors fees and other similar payments derived by a
resident of a
Article 17 : Artistes and sportspersons - 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activities as such exercised in other Contracting State, may be taxed in that other Contracting State.
2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.
3. Notwithstanding the provisions of paragraphs 1 and 2, income derived by entertainers or sportsperson who are residents of a Contracting State from the activities exercised in the other Contracting State either as a part of culture exchange between the Contracting States or supported wholly or substantially from the public funds in either of the Contracting States or political sub-divisions or local authorities thereof, shall be exempt from tax in that other Contracting State.
Article 18 : Pensions - 1. Subject to the provisions of paragraph 2 of Article 19, pensions, annuity and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that Contracting State.
2. Notwithstanding the provisions of paragraph 1, pensions, annuity paid and other similar payments made by the Government of a Contracting State or a political sub-division or a local authority thereof under a public welfare scheme of the special security system of that Contracting State shall be taxable only in that Contracting State.
Article 19 : Remuneration and pensions in respect of Government services - 1. (a) Remuneration, other than pension, paid by the Government of a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to the Government of that Contracting State or a political sub-division or local authority thereof, in the discharge of functions of a governmental nature, shall be taxable only in that Contracting State.
(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that other Contracting State and the individual is a resident of that other Contracting State who :
(i) is a national of that
other
(ii) did not become a
resident of that other
2. (a) Any pension paid by, or out of funds to which contributions are made by the Government of a Contracting State or a political sub-division or a local authority thereof to an individual in respect of services rendered to the Government of that Contracting State or a political sub-division or a local authority thereof shall be taxable only in the Contracting State.
(b) However, such pension shall be taxable only in the other
3. The provisions of Articles 15, 16, 17 and 18 shall apply to
remuneration and pensions in respect of services rendered in connection with a
business carried on by the Government of a
Article 20 : Payments received by professors, teachers and research scholars - 1. An individual who is, or immediately before visiting a Contracting State was, a resident of the other Contracting State and is present in the first-mentioned Contracting State for the primary purpose of teaching giving lectures or conducting research at a university, college, school or educational institution or scientific research institution approved by the Government of the first-mentioned Contracting State shall be exempt from tax in the first mentioned Contracting State, for a period of three years from the date of his arrival in the first-mentioned Contracting State, in respect of remuneration for such teaching, lectures or research.
2. This Article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons.
Article 21 : Payments received by students, trainees and apprentices - 1. A student, business apprentice or trainee who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education, training shall be exempt from tax in that first-mentioned State on the following payments or income received or derived by him for the purpose of his maintenance, education or training :
(a) payments derived from
sources outside that
(b) grants, scholarships or awards supplied by the Government or a scientific, educational, cultural or other tax-exempt organization; and
(c) income derived from
personal services performed in that
2. The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, but in no event shall any individual have the benefits of this Article, for more than five consecutive years from the date of his first arrival in that Contracting State.
Article 22 :
Other income - 1. Items of income of a resident of a
2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.
3. Notwithstanding the provisions of paragraphs 1 and 2, items of
income of a resident of a
Article 23 :
Methods for the elimination of double taxation - 1. In
(a) Where a resident of
(b) Where the income derived from India is a dividend paid by a company which is a resident of India to a company which is a resident of China and which owns not less than 10 per cent of the shares of the company paying the dividend, the credit shall take into account the tax paid to India by the company paying the dividend in respect of its income.
2. In
Where a resident of
3. The tax paid in a Contracting State mentioned in paragraphs 1 and 2 of this Article shall be deemed to include the tax which would have been payable but for the legal provisions concerning tax reduction exemption or other tax incentives of the Contracting States for the promotion of economic development.
Article 24 :
Non-discrimination - 1. Nationals of a
2. The taxation on a permanent establishment which an enterprise
of a
3. Where a Contracting State charges the profits of a permanent establishment which an enterprise of the other Contracting State has in the first-mentioned Contracting State at a rate of tax which is different from that imposed on the profits of a similar enterprise of the first-mentioned Contracting State, it shall not be construed as discrimination under this Article.
4. Nothing contained in this Article shall be construed as
obliging a
5. Except where the provisions of paragraphs 1 of Article 9, paragraph 7 of Article 11, or paragraph 7 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State subject to the provisions of domestic laws of that Contracting State.
6. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected in the same circumstances and under the same conditions.
7. In this Article, the term taxation means taxes which are the subject of this Agreement.
Article 25 : Mutual agreement procedure - 1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.
2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve, the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the provisions of this Agreement. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.
3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in this Agreement.
4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of paragraphs 2 and 3. When it seems advisable for reaching agreement, representatives of the competent authorities of the Contracting States may meet together for an oral exchange of opinions.
Article 26 :
Exchange of information - 1. The competent authorities of the
Contracting States shall exchange such information (including documents) as is
necessary for carrying out the provisions of this Agreement or of the domestic
laws of the Contracting States concerning taxes covered by the Agreement,
insofar as the taxation thereunder is not contrary to
this Agreement, in particular for the prevention of evasion of such taxes. The
exchange of information is not restricted by Article 1. Any information
received by a
2. In no case shall the provisions of paragraph 1 be construed so
as to impose on a
(a) to carry out
administrative measures at variance with the laws and administrative practice
of that or of the other
(b) to supply information
or documents which is not obtainable under the laws or in the normal course of
the administration of that or of the other
(c) to supply information or documents which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (order public).
Article 27 : Diplomatic agents and consular officers - Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.
Article 28 : Entry into force - This Agreement shall enter into force on the thirtieth day after the date on which diplomatic notes indicating the completion of internal legal procedures necessary in each country for the entry into force of this Agreement have been exchanged. This Agreement shall have effect :
(a) in China, in respect of income arising in any taxable year beginning on or after the first day of January next following the calendar year in which this Agreement enters into force;
(b) in
Article 29 : Termination - This Agreement shall remain in force indefinitely but either of the Contracting States may, on or before the thirtieth day of June in any calendar year beginning after the expiration of a period of five years from the date of its entry into force, give written notice of termination to the other Contracting State through the diplomatic channels. In such event this Agreement shall cease to have effect :
(a) in
(b) in
In witness whereof, the undersigned, being duly
authorized thereto, have signed the present Agreement.
Done in duplicate at
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Protocol
At the signing of the Agreement between the Government of the Republic of India and the Government of the Peoples Republic of China for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on Income (hereinafter referred to as The Agreement) both sides have agreed upon the following which form an integral part of the Agreement :
1. With reference to paragraph (1d) of Article 3 :
It is understood that the term tax should not include any penalty imposed for non-compliance of the laws and regulations relating to the taxes to which this Agreement applies.
2. With reference to Article 8, the exemption shall also include:
(i) in
(ii) in
3. With reference to Article 26:
The competent authorities of the Contracting States shall agree from time to time on the information or documents which shall be necessarily furnished on a routine basis.
In witness whereof, the undersigned, being duly
authorized thereto, have signed the present Protocol.
Done in duplicate at
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Circular : No. 639, dated
797. Where
last day for filing of income/loss return is a day on which income-tax office
is closed, assessee can file return on next day afterwards on which office is
open and return will be considered to have been filed within specified time
limit
1. Representations have been received by the Board seeking clarifications as to whether, the assessee could file a return of income/loss under the Income-tax Act, 1961 on the next working day following a holiday and claim it to have been filed within the statutory time limit.
2. The matter has been examined in consultation with the Ministry of Law and the Board are advised that, in such cases, section 10 of the General Clauses Act, 1897 will be applicable. According to this section, where any act or proceeding is directed or allowed to be done or taken in any court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the court or office is open.
3. In view of the above, it is hereby clarified that where the last day for filing return of income/loss is a day on which the office is closed, the assessee can file the return on the next day afterwards on which the office is open and, in such cases, the return will be considered to have been filed within the specified time limit.
4. This clarification also applied to the returns under other direct tax enactments.
Circular : No. 640, dated
Section
10(10C) l Amount RECEIVED IN ACCORDANCE WITH ANY SCHEME
OR SCHEMES OF VOLUNTARY RETIREMENT
74.
Clarification of queries regarding guidelines for purposes of section 10(10C)
Clause (10C) of section 10 of the Income-tax Act, 1961, deals with income-tax exemption on payments received at the time of voluntary retirement. The provisions of this clause which covered earlier only the payments received by employees of public sector companies have been amended by the Finance Act, 1992, to include therein the payments received by employees of companies other than public sector companies also. Under the amended provisions of this clause, the payments on account of voluntary retirement are to be exempt from income-tax only if the schemes governing the said payments are in accordance with the guidelines prescribed in this behalf. It has further been provided that such guidelines may include the criteria of economic viability. In the case of companies other than public sector companies, the schemes are not only to be in accordance with the prescribed guidelines but are also to be approved by the Chief Commissioner or, as the case may be, the Director General in this behalf. The amended provisions apply in relation to assessment year 1993-94 and subsequent years.
2. The guidelines for the purposes of section 10(10C) of the Income-tax Act have been laid down in the Income-tax Rules, 1962, by inserting a new rule 2BA therein. The guidelines provide that the scheme of voluntary retirement framed by a company should be in accordance with the following requirements, namely :
(i) it applies to an employee of the company who has completed ten years of service or completed 40 years of age;
(ii) it applies to all employees (by whatever name called), including workers and executives of the company excepting Directors of the company;
(iii) the scheme of voluntary retirement has been drawn to result in overall reduction in the existing strength of the employees of the company;
(iv) the vacancy caused by voluntary retirement is not to be filled up, nor the retiring employee is to be employed in another company or concern belonging to the same management;
(v) the amount receivable on account of voluntary retirement of the employees, does not exceed the amount equivalent to one and one-half months salary for each completed year of service or monthly emoluments at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation. In any case, the amount should not exceed rupees five lakhs in case of each employee; and
(vi) the employee has not availed in the past the benefit of any other voluntary retirement scheme.
3. The Income-tax (Sixteenth Amendment) Rules, 1992, inserting rule 2BA regarding guidelines for the purposes of section 10(10C) in the Income-tax Rules, was notified on 18-8-1992 and also came into force with effect from the said date.
4. The Board have received a number of queries with reference to these guidelines. These are clarified as under :
Question 1 - As rule 2BA regarding guidelines for the purposes of section 10(10C) has come into force with effect from 18-8-1992, whether the payments made under the schemes of voluntary retirement between 1st April to 18th August, 1992 will get the benefit of income-tax exemption?
Answer - The provisions of section 10(10C) of the Income-tax Act have been amended through Finance Act, 1992, with effect from 1-4-1993. Accordingly, the amended provisions will apply in relation to assessment year 1993-94 and subsequent years. Though the rule containing the guidelines for the purposes of section 10(10C) came into force with effect from 18-8-1992, the payments received between 1-4-1992 and 18-8-1992 by the retiring employees of a company under the voluntary retirement scheme will also be entitled for income-tax exemption under section 10(10C) of the Income-tax Act, provided the voluntary retirement scheme is in accordance with the guidelines contained in the said rule and satisfies the conditions laid down in the section.
Question 2 - Are the companies permitted to offer different schemes of voluntary retirement to different classes of employees, provided the payments thereunder do not exceed the monetary limit prescribed in the guidelines ?
Answer - Yes. The companies can frame different schemes of voluntary retirement for different classes of their employees. However, these schemes have to conform to the guidelines prescribed in rule 2BA of the Income-tax Rules.
Question 3 - Is the amount representing the lower of the two limits specified in item (v) of rule 2BA (the limits being the amount equivalent to one and one-half months salary, for each completed year of service or monthly emoluments at the time of retirement multiplied by the balance months of service let before the date of retirement on superannuation) to be allowed under the scheme of voluntary retirement?
Answer - Item (v) of rule 2BA does not require that the amount representing the lower of the aforesaid two limits is to be allowed under the scheme of voluntary retirement. The amount receivable by an employee on account of his voluntary retirement can be either of the aforesaid two amounts. However, the amount which will qualify for exemption under section 10(10C) will be up to rupees five lakhs only.
Question 4 - What is the meaning of expressions salary and monthly emoluments used in item (v) of rule 2BA ?
Answer - These expressions mean salary including dearness allowance, if the terms of employment so provide, but exclude all other allowances and perquisites.
Question 5 - When payment is to be computed on the basis of one and one-half months salary for each completed year of service, whether the different levels of salaries for each completed year of service are to be taken instead of the last salary drawn?
Answer - It is the last salary drawn which is to form the basis for computing the amount of payment.
Question 6 - Where the amount receivable on account of voluntary retirement exceeds rupees five lakhs in case of an employee, whether the entire amount receivable or only the excess of the amount above rupees five lakhs is to be subjected to income-tax?
Answer - Only the amount representing the excess above the limit of rupees five lakhs is to be subjected to income-tax.
Question 7 - If the amount receivable by way of voluntary retirement is calculated on the basis of a formulation other than what has been specified in item (v) of rule 2BA and such amount does not exceed rupees five lakhs, will such amount be entitled to income-tax exemption?
Answer - The amounts receivable on account of voluntary retirement of an employee which are not in accordance with the guidelines contained in rule 2BA, are not entitled to income-tax exemption under section 10(10C) of the Income-tax Act.
Question 8 - Whether the amount receivable on account of voluntary retirement of an employee of a company which has been set up less than ten years ago is entitled to income-tax exemption under section 10(10C)?
Answer - One of the requirements in the guidelines prescribed for schemes of voluntary retirement is that the scheme should apply to an employee of a company who has completed ten years of service or forty years of age. Since the employee of a company (presuming that he is less than forty years of age) which has been set up less than ten years ago, cannot satisfy the aforesaid requirement, the amount receivable by him shall not be entitled to income-tax exemption under section 10(10C).
Question 9 - Can the scheme of voluntary retirement be made applicable to the employees of an undertaking of a company rather than the entire company ?
Answer -Item (iii) of rule 2BA provides that the scheme of voluntary retirement should be drawn to result in overall reduction in the existing strength of the employees of the company. If the said condition is met, the scheme framed can be made applicable to the employees of an undertaking of a company rather than the entire company itself.
Question 10 - Can a scheme of voluntary retirement be drawn to result in overall reduction in the existing strength of the employees of an undertaking of a company instead of the entire company?
Answer - Item (iii) of rule 2BA specifies that the scheme of voluntary retirement should be drawn to result in overall reduction in the existing strength of the employees of a company. This requirement reflects the criterion of economic viability for framing the schemes of voluntary retirement. The scheme which does not result in overall reduction in the existing strength of the employees of a company will not be in accordance with the guidelines prescribed for the purposes of section 10(10C).
Question 11 - In deciding the issue of economic criteria, whether only the cases of loss-making companies are to be considered?
Answer - The requirement in the guidelines which reflects the economic criterion is to the effect that the scheme of voluntary retirement has been drawn to result in overall reduction in the existing strength of the employees of the company. Therefore, schemes can be drawn even by profit-making companies.
Question 12 - Whether income-tax exemption on the amount of voluntary retirement is available when the amount payable is in addition to normal retirement benefits like provident fund, gratuity, pension, etc., payable under the terms governing the employment?
Answer - Yes. The provisions regarding income-tax exemption on the amount receivable on account of voluntary retirement are separate from the provisions which govern taxation of provident fund, gratuity, pension, etc.
Question 13 - Whether any tax needs to be deducted at source by the employer from the amount of voluntary retirement when all the conditions specified in section 10(10C) and rule 2BA are satisfied?
Answer - No. If all the conditions specified in section 10(10C) read with rule 2BA are satisfied, the employer need not deduct tax at source from the amount of voluntary retirement to an employee.
Judicial Analysis
explained in - Jodhraj Singh v. Union of India [2000]
113 Taxman 199 (
Answer to question No. 1 in Circular No. 640, dated 26-11-1992 recognises that the Voluntary Retirement Scheme must satisfy the conditions laid down under section 10(10C) of the Act, viz., the scheme being an approved one. (p. 203)
Circular: No.
641, dated 9-12-1992.
Special provisions relating to retail trade,
etc.
Sections 115K to 115N l Special provisions relating
to retail trade, certain vocations, etc.
744. Certain
clarifications regarding the new simplified procedure for small businessmen
The Finance Act, 1992 has inserted a new Chapter XII-C in the Income-tax Act, which provides for a simplified scheme for payment of income-tax by small businessman. Comments or clarifications on some questions and doubts are mentioned below :
1. What is meant by the term vocation?
Vocation has been defined to include tailoring, hair-cutting, washing clothes, typing, photocopying, repair work of any kind and other services of a similar nature. Other services of a similar nature would include vocations which are of the same genus as the ones mentioned in the definition, that is to say, vocations which do not require any substantial intellectual input. Illustrations of this would be persons earning their livelihood as carpenters, electricians, plumbers, painters, welders, lathe machine operators, taxi drivers, etc. The simplified procedure will, thus, not be available to professionals like lawyers, accountants, consultants, engineers, architects, teachers, etc.
2. What is the statement which is required to be filed?
The statement-cum-challan required to be filed is Form No. 4A for individuals and ordinary HUFs and Form No. 4B for HUFs having at least one member with taxable income of his own.
3. Where will the forms be available?
The forms will be available at bank counters. Forms will also be sent to the local associations of small businessmen. Forms advertised in the newspapers can also be photocopied and filed in duplicate. Payment of tax has to be made at the bank counters. There is no need to go to the Income-tax Office for this purpose.
4. What happens if a survey team goes to a business premises and the owner of the premises shows evidence of payment of tax under the simplified procedure?
When a survey team comes across a taxpayer who has paid tax under the simplified procedure, the survey team will not ask any further question regarding the business or vocation declared in Form No. 4A/4B.
5. Why have survey at all once the new scheme has been announced?
Survey operations are intended to obtain information regarding all kinds of assessees irrespective of nature of income and turnover. The present scheme is, however, restricted only to individuals and HUFs having income from retail trade, eating house or from a vocation. It is also limited in terms of level of income and turnover. As stated above the survey team will not ask any further questions regarding the business or vocation declared in Form 4A or 4B.
6. Why is this scheme limited to two assessment years only?
The scheme is experimental and is initially operative for two years. Looking at the response and the success of the scheme, the Government may consider extension of this scheme.
7. What is meant by not assessed to income-tax for any assessment year, commencing on or before 1-4-1992?
The scope of the expression not assessed to income-tax for any assessment year, commencing on or before 1-4-1992 covers all persons who have not filed returns so far although they have taxable income.
8. How is the income from any source other than the business or vocation computed?
The persons opting for the scheme should not have income exceeding Rs. 5,000 from any source other than the business or vocation. He may, for instance, have income from interest, house property, dividend, salary, etc. This, in the aggregate, should not exceed Rs. 5,000 even before making any deduction under section 80L. From this aggregate amount, a deduction under section 80L will be allowed.
9. Will the department try to ascertain whether the taxpayer had taxable income for the preceding assessment years?
The department will not take any action to initiate any proceedings for any earlier years merely because the assessee has filed a statement-cum-challan under the new scheme. In all cases where the assessee filing the statement in Form No. 4A/4B is actually carrying on the business or vocation mentioned in the scheme, no enquiry will be carried out.
10. Once a person files Form No. 4A/4B and pays the tax for 1993-94 and 1994-95, will the department make enquiry regarding source of capital employed in the business/vocation for these two years?
..................... No.
11. Will the department make such enquiry for years prior to or subsequent to these two years?
No such enquiry will be made. The scheme is applicable to persons who are genuinely engaged in small business or vocation and whose turnover does not exceed Rs. 5 lakhs and income does not exceed Rs. 35,000. It is not expected that such people will be persons with much capital. It must be remembered that this scheme is intended to help small taxpayers who have not hitherto been assessed and save them the bother of contacting the Income-tax Office. It is not intended for persons who indulge in creating cases of capital build-up.
12. Section 115N seems to bar other proceedings only in respect of income from retail trade. What about income from an eating place or from a vocation?
The protection given by section 115N applies to all persons who file the statements in Form No. 4A/4B under the provisions of section 115K.
13. Should a person, who files Form No. 4A/4B, apply for a Permanent Account Number under section 139A?
No, he need not.
FINANCE (NO. 2) ACT, 1991 - CIRCULAR NO. 621,
DATED 19-12-1991, AS AMENDED BY CIRCULAR NO. 642, DATED 11-12-1992 AND CIRCULAR
NO. 698, DATED 28-12-1994
- Amendments at a glance
- Rate structure
- Amendments to Income-tax Act
- Amendments to Wealth-tax Act
- Amendments to Gift-tax Act
- Amendments to Interest-tax Act
- Amendments to Expenditure-tax Act