Circular : No. 1/2001, dated 17-1-2001.
558. Guidelines regarding filing of auditors report in
old format of Form No. 10CCAC, along with the return, in place of new format of
Form No. 10CCAC for claiming deduction under section 80HHC
1. The
provisions of section 80HHC require filing of Auditors Report in the prescribed
Form No. 10CCAC along with return of income for claiming the deduction under
the said section. This Form was revised by the Income-tax (Fifteenth Amendment)
Rules, 1992, with effect from 1-4-1992. Instances have been brought to the
notice of the Board that the benefit is, at times, denied in cases where the
Auditors Report has been filed in the pre-revised format.
2. The
matter has been examined in the CBDT and it is hereby clarified that the
submission of Auditors Report in the old format of Form No. 10CCAC in place of
the new format is a defect which can be corrected by filing the Auditors Report
in the revised format during the course of assessment proceedings.
Judicial Analysis
Explained in : CIT v. God
Granites [1999] 240 ITR 343 (Kar.), in following
words :
The subsequent circular [Circular No. 729, dated
1-11-1995] modifies the view of the Central Board of Direct Taxes [in Circular
No. 693, dated 17-11-1994] about the same facts relating to the condition in
which granite blocks are exported. There is no change in the procedure
undertaken by the exporters of late which have necessitated the Central Board
of Direct Taxes to issue the subsequent circular. The procedure remains the
same. The Central Board of Direct Taxes being of the view that earlier it had
taken a wrong view about the nature of export of granite blocks, on full
appraisal of facts expressed a correct factual view in its latter circular. Clarificatory amendments in law are always retrospective
unless the statute provides otherwise. In view of the subsequent circular the
earlier circular ceases to exist and it cannot be said that the earlier
circular shall apply to the assessment years till the issuance of the
subsequent circular and that the subsequent circular would apply to the
assessment years after it was issued. The Tribunal has recorded a firm finding
of fact which we have recorded in the earlier part of the judgment regarding
which Department has not claimed a question of law that the assessee was
exporting cut and polished granite blocks though not finally cut and precisely
polished. As the assessee had processed the rough mineral by cutting and
processing, it added a value to the marketable commodity thus entitling it to
the deduction under section 80HHC. (pp. 351, 352)
|
** |
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. . .
The subsequent circular would be applicable to the assessment years previous to
the issuance of this circular as well. (p. 353)
Circular : No. 2
233. Claim for depreciation -
Where required particulars have not been furnished[`1]*
1. Numerous instances have come to the notice of the Board
where assessees claim for depreciation duly shown in the return was not
considered by the Income-tax Officer because books of account produced were not
properly maintained and it was necessary to estimate profits by invoking the
proviso to section 13 of the 1922 Act. The course generally followed in such
cases was to estimate the net income. The decision of the appellate authorities
in such cases that the mere fact that net profits had been estimated could not
be a ground for saying that depreciation claimed in the returns had been duly
allowed as provided under the Act. On the contrary, they held, that since no
depreciation was actually allowed in the past years, the profit or loss under
section 10(2)(vii) would be computed without
making any deduction for depreciation for arriving at the written down value of
the asset.
2. The Board considered that where it is proposed to
estimate the profit and the prescribed particulars have been furnished by the
assessee, the depreciation allowance should be separately worked out. In
all such cases, the gross profit should be estimated and the deductions and
allowances including the depreciation allowance should be separately deducted
from the gross profit. If it is considered that the net profit should be
estimated, it should be estimated subject to the allowance for depreciation and
the depreciation allowance should be deducted therefrom.
3. Even where best judgment is made, the above procedure
should be adopted provided the required particulars have been furnished by the
assessee. In cases where required particulars have not been furnished by the
assessee and no claim for depreciation has been made in the return, the
Income-tax Officer should estimate the income without allowing depreciation
allowance. In such cases, the estimate of net profit would be naturally
higher than otherwise and the fact that the estimate has been made without
considering depreciation allowance may be clearly brought out in the assessment
order. In such cases, the written down value of depreciable assets would
continue to be the same as at the end of the preceding year as no depreciation
would actually be allowed in the assessment year.
Circular : No.
29-D(XIX-14) [F. No. 45/239/65-ITJ], dated 31-8-1965.
Judicial Analysis
Explained in
- In Beco Engg. Co. Ltd. v.
CIT [1984] 148 ITR 478 (Punj. & Har.), the above circular was explained with the following observations :
. . . The Central
Board of Revenue, in its Circular No. 29-D(XIX-14) of 1965, F. No.
45/239/65-ITJ, dated August 31, 1965, has provided that where the required
particulars have not been furnished by the assessee and no claim for
depreciation has been made in the return, the ITO should estimate the income
without allowing depreciation allowance. From the circular, it is evident that
in case the assessee has not claimed depreciation allowance, he cannot be
granted the same by the ITO. It has been settled by the Supreme Court in Navnit Lal C. Javeri v. K.K. Sen, AAC [1965]
56 ITR 198, that the circulars issued by the Department would be binding on it.
From the language of the section, read with the circular, it is clear that in
case an assessee has not claimed depreciation, the ITO cannot give the
allowance of depreciation to him. (pp. 481-482)
Explained in - In CIT
v. Friends Corporation [1989] 180 ITR 334 (Punj.
& Har.), it was observed as under :
There is no
gainsaying that allowance for depreciation is a benefit available to the
assessee to claim, but not one that can be thrust upon him against his wishes.
At any rate, in order to claim depreciation, the assessee must furnish the
requisite particulars as prescribed by the Income-tax Act and the Rules made thereunder. In the absence of such particulars, the
assessee cannot avail of, nor indeed can he be held entitled to, depreciation.
It would be pertinent in this behalf to advert to the judgment of this court.
In Beco Engineering Co. Ltd v. CIT [1984]
148 ITR 478, where a reference was made to Circular No. 29-D(XIX-14)
of 1965, dated August 31, 1965, issued by the Central Board of Direct Taxes
which provides that where the required particulars have not been furnished by
the assessee and no claim for depreciation has been made in the return, the
Income-tax Officer should estimate the income without allowing depreciation
allowance. Further, it was held that from the language of sections 32(1)(ii) and 34(1) read with the circular, it was clear
that in case an assessee had not claimed depreciation, the Income-tax Officer
could not give him depreciation allowance. (p. 335)
Explained in - In CIT
v. Arun Textile [1991] 192 ITR
700 (Guj.), it was observed as under :
. . . In this
context, we may also refer to the Circular of the Central Board of Revenue,29-D(XIX-14) of 1965 (F. No. 45/239/65-ITJ, dated August
31, 1965), which directed that, where the required particulars have not been
furnished by the assessee and no claim for depreciation has been made in the
return, the Income-tax Officer should estimate the income without allowing
depreciation allowance. Thus, as the assessee had not claimed depreciation
allowance and had made clear its intention not to claim the same, no necessary
particulars were furnished and it is obvious that the Income-tax Officer has no
occasion to allow any deductions. It was not open to the Income-tax Officer to
advert to the original returns for the purpose of allowing deductions which
claim was expressly withdrawn by filing the revised returns. (p. 706)
Explained in - In CIT
v. Shri Someshwar
Sahakari Sakhar Karkhana Ltd. [1989] 177 ITR 443 (Bom.),
the above circular was explained with the following observations
:
Our attention was
invited by counsel for the assessees to the judgment of the Gujarat High Court
in Chokshi Metal Refinery v. CIT [1977]
107 ITR 63, 70,71. Reference was there made to a
circular of the Central Board of Revenue [Circular No. 14(XL-35) of 1955, dated
April 11, 1955]. The circular required officers of the Department to assist a
taxpayer in every reasonable way, particularly in the matter of claiming and
securing reliefs. . . . Although, therefore, the
responsibility, for claiming refunds and relief rests with the assessees on
whom it is imposed by law, officers should (a) draw their attention to
any refunds or reliefs to which they appear to be
clearly entitled but which they have omitted to claim for some reason or
other.... Counsel for the assessees rightly relied upon this judgment as saying
that a claim had to be made by the assessee for a relief to which he was
entitled and that the Income-tax Officers duty was only to advise him of it.
In the instant
cases, therefore, the Income-tax Officer could certainly have advised the
assessees of their right to claim depreciation but he could not have given them
the allowance on his own.
In our view, to sum
up on the first issue, the assessee has a choice to claim or not to claim a
deduction on account of depreciation. If he chooses not to claim it, the
Income-tax Officer is not entitled to allow a deduction on account of
depreciation. (p. 450)
Approved in - The above circular was referred to and impliedly
approved in CIT v. Bishambar Dayal & Co. [1994] 210 ITR 118 (All.), with the
following observations :
. . . The Income-tax
Appellate Tribunal relied upon a circular of the Central Board of Direct Taxes
No. 29D(xix)
of 1965, F. No. 45/239/65-ITC, dated March 31, 1965. Under this circular, the
Board had issued instructions that where income is proposed to be computed by
applying a net rate and the assessee has furnished the prescribed particulars
for the claim in respect of depreciation, the depreciation should be allowed
separately and deducted out of the gross profits. The order of the Income-tax
Appellate Tribunal is in conformity with the circular issued by the Central
Board of Direct Taxes. No provision of the Income-tax Act was brought to our
notice which makes the claim to depreciation inadmissible where the income is
computed by applying the flat rate. In our opinion, the order of the Income-tax
Appellate Tribunal does not give rise to any statable
question of law.... (p. 120)
Explained in - The above circular was explained in Chopra Bros.
(
. . . In the order
of the learned Accountant Member, the entire circular of the Board was reproduced.
I do not wish to reproduce the circular again, but the need to issue such
circular arose because determination of income by estimating the net profit
without mentioning anything about the allowance of depreciation led to several
legal difficulties in assessing the profits arising on the sale of assets by
applying the provisions of section 10(2)(vii)
of the Indian Income-tax Act, 1922. The Board, therefore, considered that,
where it was proposed to estimate the profit and where the prescribed
particulars were furnished by the assessee, the depreciation allowance should
be separately worked out. In all such cases, the gross profit should be
estimated and the deductions and allowances including depreciation allowance
should be separately deducted from the profit so that the net profit can be
arrived at. If it is considered that the net profit should be estimated, it
should be estimated subject to allowance of depreciation and the depreciation
allowance should be deducted therefrom. This was
what was contained in paragraph 2 of the circular. The circular is, therefore,
very categorical and unambiguous and directs the Assessing Officers to work out
the depreciation separately even in cases where the net profit is to be
estimated. I do not, therefore, see how the learned Commissioner (Appeals)
could bring himself to say that the circular is inapplicable. The reasoning
given by him is rather strange. In paragraph 3 of the circular, the Board has
gone a step further and said that even when a best judgment assessment was
made, the procedure mentioned above should be scrupulously followed. This is
another reason why I am astonished at the way in which the circular of the
Central Board of Direct Taxes was, if I may use the expression, deliberately
and with a conscious design sidetracked. Beneficial circulars and benevolent
circulars should receive the highest respect and consideration at the hands of
the Assessing Officers, particularly, at the level of the Commissioner
(Appeals) because that was the policy of the Central Board of Direct Taxes,
which means the Government. They are not supposed to go against the intention
of the Government in implementing laws. They must advance the course of justice
by extending the benefits. There is no room for personal predilections in
implementing the fiscal laws. The spirit more than the letter should receive
the highest consideration. I am, therefore, of the opinion that both the
Income-tax Officer and the Commissioner (Appeals) have erred in appreciating
the circular and in not applying it.... (pp. 56-57) [Emphasis supplied]
Explained in - CIT v. Jain
Construction Co. [2000] 110 Taxman 156 (Raj.) in
following words :
It appears that the Board felt it necessary to issue
the aforesaid circular for determination of income by estimating the net profit
without mentioning anything about the allowance of depreciation, which led to
several legal difficulties arising on the sale of assets by applying the
provisions of section 10(2)(vii). The Board, therefore, considered that
where it is proposed to estimate the profit and the prescribed particulars have
been furnished by the assessee, the depreciation allowance should be separately
worked out. In all such cases, the gross profit should be estimated and the
deductions and allowances including the depreciation allowance should be
separately deducted from the gross profit so that the net profit can be arrived
at. If it is considered that the net profit should be estimated, it should be
estimated subject to the allowance of depreciation and the depreciation
allowance should be deducted therefrom. (pp. 163-165)
Circular : No. 3/2001, dated 9-2-2001.
414. Filing of Audit Report under sections 44AD(6), 44AE(7) and 44AF(5) of the Income-tax Act, 1961,
for the assessment year 1998-99
1. Sections
44AD, 44AE and 44AF of the Income-tax Act, 1961, provide for estimating the
income under the head Profits and gains of business or profession in the cases
of assessees engaged in the business of (i)
civil construction, (ii) plying, hiring or leasing goods carriages, and
(iii) retail businesses; provided the turnover or the number of vehicle,
as the case may be, is below a specified figure.
2. Up to the
assessment year 1997-98, under the provisions of the Income-tax Act, the above
assessees could return income lower than the estimated income subject to
compulsory scrutiny under section 143(3) of the Income-tax Act, 1961.
3. For the
assessment year 1998-99 and subsequent years, sub-section (6) of section 44AD,
sub-section (7) of section 44AE and sub-section (5) of section 44AF provide
that in case of a returned income lower than the income estimated under the
provisions of corresponding section, the assessees must keep and maintain such
books of account or other documents as required under sub-section (2) of
section 44AA and get their accounts audited and furnish a report of such audit
as required under section 44AB. The requirement of section 44AB is that the
audit report must be audited by an accountant before the specified date and the
same must also be furnished by that date in a prescribed form.
4.
Sub-section (6) of section 44AD, sub-section (7) of section 44AE and
sub-section (5) of section 44AF were inserted with retrospective effect from
1-4-1998 by the Finance Act, 1999. Accordingly, the assessees were not in
position to file audit report for the assessment year 1998-99 before the
specified date; as on that date these sub-sections did not exist in the
statute. Hence, the default of the assessees in complying with the requirement
of filing audit report before the specified date for the assessment year
1998-99 was due to circumstances beyond the control of such assessees. To
remove the genuine hardship in all such cases, the Board hereby directs that for
the assessment year 1998-99, the audit report, where called for under the
provisions of sections 44AD(6), 44AE(7) and 44AF(5), if not filed by the
specified date as stipulated under section 44AB, could be filed anytime before
the completion of assessment and in all such cases, the provisions of sections
44AD(6), 44AE(7) and 44AF(5) will be deemed to have been complied with.
Circular : No. 4/2001, dated 12-2-2001.
Financial year 2000-2001
962. Instructions for deduction of tax at source from
salaries during the financial year 2000-2001 - Taxation Laws (Amendment)
Ordinance, 2001
An additional surcharge of 2% has also been levied vide
the Taxation Laws (Amendment) Ordinance, 2001 for the purpose of deduction of
tax at source. In view of this, the amount of income-tax computed at the
prescribed rates shall be reduced by the amount of rebate of income-tax
calculated under Chapter VIII-A and the income-tax so reduced shall be
increased by a surcharge :
(a) @ 12% of such income-tax where the
total income exceeds sixty thousand rupees but does not exceed one lakh fifty thousand rupees;
(b) @ 17% of such income-tax where the
total income exceeds one lakh fifty thousand rupees.
Surcharge is payable by both resident and non-resident
assessees.
In view of this, Drawing and Disbursing Officers are
required to take into account the revised rates of surcharge at 12% or 17%, as
the case may be, while computing the tax deductible at source under section 192
of the Act during the financial year 2000-01.
2. Reference
is invited to the Taxation Laws (Amendment) Ordinance, 2001, dated February 3,
2001 whereby it has been notified that the benefit of 100% deductions will be
available to the assessees under section 80G of the Income-tax Act, 1961, in
respect of donations made to :
(i) any fund set up by the State
Government of Gujarat exclusive for providing reliefs
to the victims of earthquake in Gujarat,
(ii) any trust, institution or fund during
the period beginning on the 26th day of January, 2001 and ending on the 30th
day of September 2001, for providing relief to the victims of earthquake in
Gujarat.
3. In this
regard attention is drawn to para 5.4(6) dealing with Deductions under Chapter
VI-A of the Act of Circular No. 798, dated October 30, 2000 on the above
subject wherein it is clarified that no deduction should be allowed by the
Drawing and Disbursing Officers from the salary income in respect of any donations
made for charitable purposes. The tax relief on such donations as admissible
under section 80G of the Act, will have to be claimed by the taxpayers in the
return of income. However, DDOs on due verification may allow donations to the
extent of 50% or 100% of the contribution, as the case may be, to such bodies
as mentioned in the aforesaid Circular.
4. The
matter relating to Deduction of tax at Source from Salaries has been considered
by the Board in the light of the extension of benefit of 100% deduction under
section 80G of the Act as discussed in para 2 above. It has been decided that
in such cases, where the donations are being deducted out of the salaries
payable to the employees by the employers themselves for making payment of the
consolidated donations to any trust, institution or fund for providing relief
to the victims of earthquake in Gujarat, the Drawing and Disbursing Officers
may allow the benefit of 100% deduction on such donations in respect of such
employees while computing the tax deductible at source under the provisions of
section 192 of the Act during the financial year 2000-01. However, the
employers must ensure that the payment of consolidated donations deducted out
of the salaries payable to the employees during the current financial year is
made latest by April 15, 2001 to approved trust, institution or fund for
providing relief to the victims of earthquake in Gujarat and the fact of such
payment should be clearly indicated in the receipt issued to the employees by
the employers in this regard.
Circular : No. 5/2001, dated 2-3-2001.
1177. Problems
faced by assessees in getting due credit for tax deducted at source under
section 199
1. A number of representations has been received by the
Board pointing out the problems being faced by the assessees in getting due
credit for tax deducted at source under the provisions of section 199 of the
Income-tax Act, 1961 in respect of tax deducted in terms of section 194-I of
the Act. Such problems in getting due credit for tax deducted at source mainly
relate to the following situations :
(a) Tax
is deducted at source under the provisions of section 194-I of the Act on
advance rent pertaining to more than one financial year to be adjusted against
future rent.
(b) Subsequent
to the deduction of tax at source on advance rent pertaining to one or more
financial years :
(i) Rent agreement gets
terminated/cancelled resulting into refund of balance amount of advance rent to
the tenant.
(ii) Rented
property is transferred by way of sale, lease, gift, etc., with tenant in
occupation or otherwise resulting into refund of balance amount of advance rent
to the transferee or the tenant, as the case may be.
2.1 In the situation mentioned at (a) in para
above, difficulty in getting due credit for tax deducted arises because the
entire amount of advance rent does not accrue to the assessees as income in one
financial year since the income from the property is taxed on the basis of
annual letting value whereas the tax is deducted at source on the entire amount
of advance rent pertaining to more than one financial year. Therefore, credit
for entire amount of tax deducted at source is not allowed in terms of section
199 of the Act because the credit is to be given for the assessment year for
which such income is assessable. Thus, the assessees do not get credit for the
entire amount of tax deducted at source in the first assessment year, in which
part of the advance rent is offered as rental income, on the basis of the Certificate
furnished under section 203 of the Act. Further there is a difficulty in
claiming the credit in the remaining assessment years to which balance of
advance rent relates in the absence of the Certificate for tax deducted at
source for these years.
2.2 In the situation as at (b) mentioned at Para
1, difficulty in getting due credit for tax deducted at source arises because
rental income ceases to accrue to the assessees on account of
termination/cancellation of Rent agreement of transfer of the rented property
subsequent to the deduction of tax at source on advance rent pertaining to one
or more financial years. The credit is not given in the hands of the assessees
in whose names Certificate for tax deduction at source stands because there is
no relatable rental income and, further credit for tax is not allowed to any
person other than the person in whose name Certificate for tax deducted at
source has been issued. Thus, in such cases, even though tax has been deducted
at source and paid to the Government, due credit for such tax deducted is not
allowed.
3. The
matter has been considered by the Board and it has been decided that credit for
tax deducted at source shall be allowed to the assessees on whose behalf such
tax has been deducted and to whom Certificate for tax deducted at source has
been furnished under section 203 of the Act as under :
(i)
In such cases as referred to in
(a) above where advance rent is spread over more than one financial year
and tax is deducted thereon, credit shall be allowed in the same proportion in
which such income is offered for taxation for different assessment years based
on the single Certificate furnished for tax so deducted on the entire advance
rent.
(ii) In respect of the situation as at (b),
credit for the entire balance of tax deducted at source, which has not been
given credit so far, shall be allowed in the assessment year relevant to the
financial year during which the rent agreement gets terminated/cancelled or
rented property is transferred and balance of advance rent is refunded to the
transferee or the tenant, as the case may be.
Circular :
No. 6/2001, dated 5-3-2001.
226. Taxation of foreign telecasting
companiesGuidelines for computation of income-tax, etc.
1. A number
of representations have been received from foreign telecasting companies
regarding their taxability and the extent of income that could be said to
accrue or arise to them from their operations in
2. The
matter has been examined in the Board and the assessment records of some of
these companies have also been looked into. Since this is a new area of
commercial activity, no uniform basis is being adopted by the Assessing
Officers at different stations for computing the income in the absence of country-wise
accounts of the foreign telecasting companies. It has, therefore, been decided
by the Board to prescribe guidelines for the purpose of proper and efficient
management work of the assessment of foreign telecasting companies.
3. It is
seen that out of the gross amount of bills raised by a foreign telecasting
company, the advertising agent retains commission at 15 per cent or so.
Similarly, the Indian agent of the foreign telecasting company retains his
service charges at 15 per cent or so of the gross amount. The balance amount of
approximately 70 per cent is remitted abroad to the foreign company. So far as
the income of Indian advertising agent and the agent of the non-resident
telecasting company are concerned, the same is liable to tax as per the accounts
maintained by them. As regards the foreign telecasting companies which are not
having any branch office or permanent establishment in
4. In the
absence of country-wise accounts and keeping in view the substantial capital
cost, installation charges and running expenses, etc., in the initial years of
operation, it would be fair and reasonable if the taxable income is computed at
10 per cent of the gross receipts (excluding the amount retained by the
advertising agent and the Indian agent of the non-resident foreign telecasting
company as their commission/charges) meant for remittance abroad. The Assessing
Officers shall accordingly compute the income in the cases of the foreign
telecasting companies which are not having any branch office or permanent
establishment in India or are not maintaining country-wise accounts by adopting
a presumptive profit rate of 10 per cent of the gross receipts meant for
remittance abroad or the income returned by such companies, whichever is higher
and subject the same to tax at the prescribed rate, i.e., 55 per cent at
present.
5. It has
also been decided that while assessing the income in the aforesaid manner,
penalty proceedings may not be initiated in the cases in which taxes due along
with the interest are paid voluntarily within 30 days of the date of issue of
this circular.
6. It is
clarified that these guidelines would be applicable to all pending cases
irrespective of the assessment year involved until 31st March, 1998, after
which the position with regard to the reasonableness of the rate of profits of
such companies will be reviewed.
Circular : No. 742, dated 2-5-1996.
CLARIFICATION 1
The Central Board of
Direct Taxes, vide Circular No. 742, dated 2nd
May, 1996, issued guidelines for taxation and computation of income of foreign
telecasting companies. The guidelines were applicable up to 31st March, 1998.
It has been decided to extend the circular beyond 31st March, 1998, and the
guidelines issued in the abovementioned circular would be applicable to all
pending cases irrespective of the assessment year involved until further
orders.
Circular : No. 765, dated 15-4-1998.
Clarification 2
1. The Central Board of Direct Taxes vide
Circular No. 742, dated 2-5-1996 had laid down certain guidelines for the computation
of profits of FTCs from advertisement payments
received by them from
2. The total income of FTCs
from advertisements, hitherto computed on a presumptive basis shall now be
determined by the Assessing officers in accordance with the other provisions of
the Income-tax Act, 1961 in relation to the assessment year 2002-2003 and
subsequent assessment years. In case, accounts for Indian operations are not
available, the provisions of rule 10 of the Income-tax Rules, 1962 may be
invoked. Where an FTC is a resident of a country with whom
3. It may be reiterated that the guidelines for computation
of profits of FTCs in Circular No. 742 and 765 were
applicable only to the income stream from advertising. Other kinds of income
like subscription charges receivable from cable operators in respect of pay
channels and income from the sale or lease of decoders, etc., shall continue to
be taxed in accordance with the paragraph 2 above.
Judicial Analysis
Explained in - TVM Limited
v. CIT [1999] 102 Taxman 578 (AAR-New Delhi) in following words:
[Guidelines contained in Circular No. 742, dated
2-5-1996 regarding taxation of foreign telecasting companies] are only general
in character and it is open to assessees to accept them if they are beneficial
to them. To the extent these guidelines purport to extent the applicability of
the presumptive rate of profits even to cases where the foreign telecasting
company has no permanent establishment in
Circular : No. 7/2001, dated 21-3-2001.
537. Submission of certificate for claiming deductions
under section 80G in respect of donations made by an employee to the Prime
Ministers National Relief Fund, the Chief Ministers Relief Fund and the
Lieutenant Governors Relief Fund
In view of the occurrence of unforeseen national
calamities of immense magnitude like the
Circular : No. 8/2001, dated 16-5-2001.
773. Condonation of delay in filing refund claim and claim of
carry forward of losses under section 119(2)(b)
1. The Boards order under section 119(2)(b), dated
12th October, 1993 and Circular No. 670 dated 26th October, 1993 [F. No.
225/208/93/IT (A-II)] lay down procedure for condonation
of delay in belated claims of refunds. These provide that CIT has power to
condone delay in case of genuine hardship of refund claims up to Rs. 10,000 and CCIT up to Rs. 1,00,000. The power of condonation
in cases of refund claims of more than Rs. 1,00,000 as well as power of rejection in all cases lie with
the Board.
2. Under the existing circular, apart from the conditions
prescribed under earlier orders dated 5-2-1988 and 17-8-1988 issued from [F.
No. 225/201/87/IT (A-II)], the following additional conditions are required to
be fulfilled before the condonation of delay in
filing belated refund claims can be considered :
(i) the refund arises as a result of
excess tax deducted at source, collected at source and payments of advance tax
under the provisions of Chapters XVII-B, XVII-BB and XVII-C, respectively and
the amount of refund does not exceed Rs. 1 lakh for any assessment year;
(ii) the returned income is not a loss where the assessee claims
the benefit of carry forward of the loss;
(iii) the refund claimed is not supplementary in nature, i.e.,
claim for additional amount of refund is made after the completion of the
original assessment for the same assessment year; and
(iv) the income of the assessee is not assessable in the hands of
any other person under any of the provisions of the Act.
3. Subsequently the Karnataka High Court in the case of Associated
Electro Ceramics v. Chairman, Central Board of Direct Taxes [1993]
201 ITR 501 held that the Board have power to condone the delay in cases having
claim of carry forward of losses. The department did not file special leave
petition against this order. Subsequently the matter was taken up with the
Ministry of Law who also agreed with the view that the Board have power to
condone the delay in filing the return under section 119(2)(b) of the
Income-tax Act, 1961, in a case having claim of carry forward of losses.
4. Hence, conditions at Serial No. (ii) of Order
under section 119(2)(b) dated 12th October, 1993 stipulating that the
delay cannot be condoned in cases where returned income is a loss and assessee
claims benefit of carry forward of the loss, is not legally tenable.
5. In view of the Board, hereby, clarify that delay in
making refund claim as well as claim of carry forward of losses, both can be
condoned in cases where returned income is a loss, provided other conditions
are satisfied. The monetary limits prescribed for condonation
of delay in making refund claims, by different IT authorities, will apply to condonation of delay in cases of claim of carry forward of
losses as well.
Circular : No. 9/2001, dated 9-7-2001.
916. Clarification regarding treatment of tax paid
under section 172(3)/(4) by a non-resident engaged in
shipping business
1. The Board
had earlier issued Circular No. 730 regarding treatment of tax paid under
section 172(3) by a non-resident engaged in the shipping business. Under the
provisions of section 172, every time a ship belonging to or chartered by a
non-resident makes a voyage from a port in India, carrying passengers,
livestock, mail or goods shipped at a port in India, 7.5 per cent of the amount
paid or payable on account of the carriage of the passengers etc. is deemed as
the income and tax is levied on such income at a rate applicable to a foreign
company. The assessment and the payment is to be made before the ship is
granted the port clearance. The exception is that, in suitable cases the ship
may be allowed to leave provided satisfactory arrangements are made to ensure
that the return of income if filed and payment of tax is made within 30 days of
the departure of the ship.
2. Under the
provisions of section 172(7), the non-resident owner or charterer
is allowed an option to be assessed on his total income of the previous year in
accordance with other provisions of the Act. When such option is exercised and
an assessment is made accurately, the tax already paid under the provisions of
section 172(4) by the non-resident owner or charterer
would be treated as tax paid in advance for that assessment year before
determining the amount of tax finally due.
3. The
question that arose for consideration of the Board at the time of issue of
Circular No. 730 was that when a regular assessment is made under section
143(3), read with the provisions of section 172(7), whether such an assessee
would liable to levy of interest under sections 234B and 234C or not. On the
other hand, in case of a refund, the question of entitlement of interest under
section 244A would also rise. The Board, vide Circular No. 730, dated
14-12-1995 clarified that the assessee, who exercises his option under section
172(7) to get his total income assessed in accordance with the other provisions
of the Act, is neither liable to pay interest under sections 234B and 234C, nor
entitled to receive interest under section 244A of the Income-tax Act, 1961.
4. This
issue has subsequently been discussed and decided by the Supreme Court in the
case of A.S. Glittre D/5 I/S Garonne
vs. CIT [1997] 225 ITR 739. It has been held that the payment of tax
under section 172(3)/(4) is at par with advance tax
instalments. Hence, in case of a regular assessment under section 172(7) the
assessee is entitled to refund, as well as interest on such refund.
5. The
Circular No. 730 issued by the Central Board of Direct Taxes on this issue is,
under the circumstances, no longer legally tenable and is, therefore, withdrawn.
It is clarified that in case of a regular assessment under section 172(7),
the non-resident assessee is liable to pay interest under sections 234B and
234C and also entitled to receive interest under section 244A of the Income-tax
Act, 1961 as the case may be.
Circular : No. 10/2001, dated 19-7-2001.
809. Widening of tax base
vide Notification Nos. S.O. 409(E), dated 10-5-2001 and S.O. 410(E), dated
10-5-2001 [See 116 Taxman 101 (St.)]
Vide Notification
S.O. No. 410(E), dated 10-5-2001, the One-by-six scheme has been extended to
all urban areas in the country, the term urban area being defined by the 1991
Census of India. As per this notification urban areas will include Towns and
Urban Agglomerations 1991 as listed in Table A-4 of the Second Part of Part
II-A of Series-I of the Census of India, 1991. The said notification is general
in nature and covers the entire country including the State of
Name of
the towns/urban agglomerations
|
|||
|
1. |
Anantnag |
19. |
Rajauri |
|
2. |
|
20. |
Kulgaon |
|
3. |
|
21. |
Tral |
|
4. |
|
22. |
Samba |
|
5. |
|
23. |
Pulwama |
|
6. |
Baramula |
24. |
Arnia |
|
7. |
Sopore |
25. |
Kishtwar |
|
8. |
Kathua |
26. |
Cherari Sharif |
|
9. |
Udhampur |
27. |
Mattan |
|
10. |
|
28. |
Akhnoor |
|
11. |
Bandipore |
29. |
Handwara |
|
12. |
Punch |
30. |
Bhaderwah |
|
13. |
Pampore |
31. |
Rehambal |
|
14. |
Bijbehara |
32. |
Parole |
|
15. |
Ranbirsingh Pora |
33. |
Doda |
|
16. |
Shupiyan |
34. |
Pattan |
|
17. |
Ganderbal |
35. |
Badgami Bagh |
|
18. |
Leh |
|
|
2. The floor
areas applicable for these towns and urban agglomerations shall be the same as
notified vide Notification No. S.O. 409(E), dated
10-5-2001.
Circular : No. 11/2001, dated 23-7-2001.
SECTION 14A
Heads of Income
SECTION
14A l
expenditure incurred in relation to income not includible in total income
178. Clarification regarding restriction on re-opening
of completed assessments on account of provisions of section 14A
1. The
Finance Act, 2001 has inserted section 14A in the Income-tax Act, 1961 wherein
it was specifically provided that no deduction shall be allowed in respect of
expenditure incurred by the assessee in relation to income which does not form
part of total income under the Act. The amendment takes effect from 1-4-1962.
2. Section
14A was introduced retrospectively in order to clarify and state the position
of law that any expenditure relatable to income which does not form part of
total income cannot be set off against other taxable income. This section was
not introduced with prospective effect, as that would have implied that before
the introduction of the said provisions, expenditure incurred to earn exempt
income was allowable.
3. Instances
of reopening of old assessments, which had attained finality, after insertion
of section 14A in the Act, have come to the notice of the Board. Reopening of
past completed assessments, having attained finality, on the basis of newly
inserted provisions of section 14A is likely to cause hardship to a large
number of taxpayers and would result in increasing avoidable litigation.
4. The Board
have considered this matter and hereby directs that
the assessments where the proceedings have become final before the first day of
April, 2001 should not be re-opened under section 147 of the Act to disallow
expenditure incurred to earn exempt income by applying the provisions of newly
inserted section 14A of the Act.
Circular : No. 12/2001, dated 23-8-2001.
Sections 92 &
92A to 92F l Transfer pricing
721. Clarification on provisions governing transfer
price in an international transaction
The Finance Act, 2001, has substituted the existing
section 92 of the Income-tax Act by new sections 92 and 92A to 92F. These new
provisions lay down that income arising from an international transaction
between associated enterprises shall be computed having regard to the arms
length price. The term associated enterprise has been defined in section 92A.
Section 92B defines an international transaction between two or more associated
enterprises. The provisions contained in section 92C provide for methods to
determine the arms length price in relation to an international transaction,
and the most appropriate method to be followed out of the specified methods.
While the primary responsibility of determining and applying an arms length
price is on the assessee, sub-section (3) of section 92C empowers the Assessing
Officer to determine the arms length price and compute the total income of the
assessee accordingly, subject to the conditions provided therein. Section 92D
provides for certain information and documents required to be maintained by
persons entering into international transactions, and section 92E provides for
a report of an accountant to be furnished along with the return of income.
The Board have prescribed
rules 10A to 10E in the Income-tax Rules, 1962, giving the manner and the
circumstances in which different methods would be applied in determining arms
length price and the factors governing the selection of the most appropriate
method. The form of the report of the accountant and the documents and
information required to be maintained by the assessees have also been
prescribed.
The aforesaid provisions have been enacted with a view
to provide a statutory framework which can lead to computation of reasonable,
fair and equitable profit and tax in India so that the profits chargeable to
tax in India do not get diverted elsewhere by altering the prices charged and
paid in intra-group transactions leading to erosion of our tax revenues.
However, this is a new legislation. In the initial
years of its implementation, there may be room for different interpretations
leading to uncertainties with regard to determination of arms length price of
an international transaction. While it would be necessary to protect our tax
base, there is a need to ensure that the taxpayers are not put to avoidable
hardship in the implementation of these regulations.
In this background the Board have decided the following :
(i) The Assessing Officer shall not make
any adjustment to the arms length price determined by the taxpayer, if such
price is up to 5 per cent. less or up to 5 per cent. more than the price determined by the Assessing Officer. In
such cases the price declared by the taxpayer may be accepted.
(ii) The provisions of sections 92 and 92A
to 92F come into force with effect from 1st April, 2002, and are accordingly
applicable to the assessment year 2002-03 and subsequent years. The law
requires the associated enterprises to maintain such documents and information
relating to international transactions as may be prescribed. However, the
necessary rules could be framed by the Board only after the Finance Bill
received the assent of the President and have just been notified. Therefore,
where an assessee has failed to maintain the prescribed information or
documents in respect of transactions entered into during the period 1-4-2001 to
31-8-2001 the provisions of section 92C(3) should not be invoked for such
failure. Penalty proceedings under section 271AA or 271G should also not be
initiated for such default.
(iii)
It should be
made clear to the concerned Assessing Officer that where an international
transaction has been put to a scrutiny, the Assessing Officer can have recourse
to sub-section (3) of section 92C only under the circumstances enumerated in
clauses (a) to (d) of that sub-section and in the event of
material information or documents in his possession on the basis of which an
opinion can be formed that any such circumstances exists. In all other cases,
the value of the international transaction should be accepted without further
scrutiny.
Circular : No. 13 of 2001, dated 9-11-2001.
Section
115JA/Section 115jb l Minimum alternate tax
743. Minimum Alternate Tax (Mat) on Companies
Salient features of MAT proposed to be levied on
companies by the Finance (No. 2) Bill, 1996 vide proposed section 115JA.
The Government has proposed to levy a Minimum
Alternate Tax (MAT) on companies, which was announced by the Finance Minister
in the Budget Speech on 22nd July, 1996. A new section 115JA is being inserted
in the Income-tax Act, 1961 for this purpose. The salient features of the
proposed MAT are as follows :
1.
Applicable to only companies except those engaged in infrastructure and power
sectors [section 80-IA].
2. Payment
of a minimum tax by deeming 30 per cent of the book profits computed under the
Companies Act, 1956 as taxable income, in a case where the total income as
computed under the provisions of the Income-tax Act, 1961 is less than 30 per
cent of the book profit where the total income, as computed under the normal
provisions of the Income-tax Act is more than 30 per cent of the book profit,
tax shall be charged on the same.
3. The
effective minimum alternate tax, at the existing rates of taxation, works out
to 12 per cent of the book profits.
4. Income
arising from Free Trade Zones (FTZs) [section 10A],
100 per cent Export-Oriented Undertakings (EOUs)
[section 10B], charitable activities [sections 11 and 12], investment by a
venture capital company and other exempted incomes [section 10] are excluded
from the purview of the alternate tax.
5. Since the
alternate tax is applicable only where the normal total income computed is
lower than 30 per cent of the book profits, so long as the enterprises (other
than FTZ units and EOUs) earning income from export
profits do not have their component of export income higher than 70 per cent of
the book profits, the provisions of section 115JA will not be attracted. In
other words, the MAT will apply only to such cases where export profits forming
part of book profits of an assessee exceed 70 per cent of the total profits.
This is illustrated as under :
|
Company A |
|
|
Book profits |
100 |
|
Less :
Export profits |
70 |
|
Balance profits |
30 |
[assuming
that the profit rate is same in export and other activities]
The minimum
alternate tax is not leviable in this case, as the
non-export profits are equal to 30 per cent of the book profits. Hence, entire
export profits are tax-free.
|
Company B |
|
|
Book profits |
100 |
|
Less :
Export profits |
80 |
|
Balance profits |
20 |
[assuming
that the profit rate is same in export and other activities]
As the balance
profits are less than 30 per cent of the book profits, MAT will be levied on 30
per cent of the book profits comprising 10 per cent attributable to export and
20 per cent to non-export activities (which are otherwise taxable). Thus, out
of the 80 per cent of the export profits, only 10 per cent will bear tax at the
effective rate of 4.3 per cent including surcharge.
|
Company C |
|
|
Book profits |
100 |
|
Less :
Export profits |
90 |
|
Balance profits |
10 |
[assuming that the profit
rate is same in export and other activities]
As the balance profits are less than 30 per cent of
the book profits, MAT will be levied on 30 per cent of the book profits
comprising 20 per cent attributable to export and 10 per cent to non-export
activities (which are otherwise taxable). Thus, out of the 90 per cent of the
export profits, only 20 per cent will bear tax at the effective rate of 8.6 per
cent including surcharge.
Keeping in view the tax burden on other companies, the
tax burden on companies engaged in export business is very light.
Press Note : Dated 24th July, 1996 issued by the Central Board
of Direct Taxes.
743A. Liability for payment of advance tax under new
MAT provisions of section 115JB of the Income-tax Act
The Finance Act, 2000, inserted section 115JB of the
Income-tax Act, 1961, with effect from 1-4-2001, i.e., from the
assessment year 2001-02 providing for levy of Minimum Alternate Tax on
companies. Section 115JB conceptually differs from erstwhile section 115JA,
which provided for MAT on companies, so far as it does not deem any part or the
whole of book profit as total income. However, the new provision of section 115JB
provides that if tax payable on total income is less than 7.5% of book profit,
the tax payable under this provision shall be 7.5% of book profit.
2. Instances have come to the notice of the Board that
a large number of companies liable to tax under the new MAT provisions of
section 115JB are not making advance tax payments. It may be emphasised that the new provision of section 115JB is a
self-contained code. Sub-section (1) lays down the manner in which income-tax
payable is to be computed. Sub-section (2) provides for computation of book
profit. Sub-section (5) specifies that save as otherwise provided in this
section, all other provisions of this Act shall apply to every assessee, being
a company mentioned in that section. In other words, except for substitution of
tax payable under the provision and the manner of computation of book profits, all
the provisions of the tax including the provision relating to charge,
definitions, recoveries, payment, assessment, etc., would apply in respect of
the provisions of this section.
3.
The scheme of the Income-tax Act also needs to be referred to. Section 4 of the
Income-tax Act charges to tax the income at any rate or rates which may be
prescribed by the Finance Act every year. Section 207 deals with the liability
for payment of advance tax, and section 209 deals with its computation based on
the rates in force for the financial year, as are contained in the Finance Act.
The rates of tax are provided in the finance Act. The first provisio
to section 2(8) of the Finance Act, 2001, reads as under :
Provided that in cases to which the provisions of
Chapter XII or Chapter XII-A or section 115JB or sub-section (1A) of section
161 or section 164A or section 167B of the Income-tax Act apply, advance tax
shall be computed with reference to the rates imposed by this sub-section or
the rates as specified in that Chapter or section, as the case may be :
The third proviso to section 2(8) of the Finance Act,
2001, further provides that the tax payable by way of advance tax in respect of
income chargeable under section 115JB, shall be
increased by a surcharge of 2%. The Finance Act, 2000, also contained similar
provisions.
4. It is, thus, abundantly clear that all companies
are liable for payment of advance tax having regard to the provisions contained
in new section 115JB. Consequently, the provisions of sections 234B and 234C
for interest on defaults in payment of advance tax and deferment of advance tax
would also be applicable where facts of the case warrant.
5. This may be brought to the notice of all officers
working in your region.
FINANCE
ACT, 2001 - CIRCULAR NO. 14/2001
· Amendments
to Wealth-tax Act
· Amendments
to Expenditure-tax Act
· Amendments
to National Bank for Agriculture and Rural Development act, 1981
· Amendments
to National Banking Housing Act, 1987
· Amendments
to Small Industries Development Bank of India Act, 1989
Circular : No. 15/2001, dated 12-12-2001.
Financial year 2001-2002
961. Instruction for deduction of tax at source from
salaries during the Financial year 2001-2002 under
section 192
1. Reference
is invited to Circular No. 798, dated 30-10-2000 wherein the rates of deduction
of income-tax from the payment of income under the head Salaries under section
192 of the Income-tax Act, 1961, during the financial year 2000-2001, 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 2001-2002 and explain certain related
provisions of the Income-tax Act.
Finance Act, 2001
2. According
to the Finance Act, 2001, income-tax is required to be deducted under section
192 of the Income-tax Act, 1961 from income chargeable under the head Salaries
for the financial year 2001-2002 (i.e., assessment year 2002-2003) at
the following rates:
Rates of Income-tax
|
1. |
Where the total
income does not |
Nil |
|
|
exceed Rs. 50,000. |
|
|
2. |
Where the total
income exceeds |
10 per cent, of
the amount by |
|
|
Rs. 50,000 but does not exceed |
which the total
income exceeds |
|
|
Rs. 60,000. |
Rs. 50,000 |
|
3. |
Where the total
income exceeds |
Rs. 1,000 plus 20 per cent of the |
|
|
Rs. 60,000 but does not exceed |
amount by which
the total income |
|
|
Rs. 1,50,000 |
exceeds Rs. 60,000 |
|
4. |
Where the
total income exceeds |
Rs. 19,000 plus 30
per cent of |
|
|
Rs. 1,50,000 |
the amount by
which the total income exceeds Rs. 1,50,000. |
Surcharge on
income-tax
The amount of
income-tax computed in accordance with the preceding provisions of this
paragraph shall be reduced by the amount of rebate of income-tax calculated
under Chapter VIIIA and the income tax so reduced shall be increased by a
surcharge at the rate of two per cent of such income-tax where the total income
exceeds sixty thousand rupees.
However, the total
amount payable as income-tax and surcharge shall not exceed the total amount
payable as income-tax on a total income of Rs. 60,000
by more than the amount of income that exceeds Rs.
60,000.
Surcharge is payable
by both resident and non-resident assessees.
Section 192 of
the Income-tax Act, 1961 : Broad Scheme of tax
deduction at Source from Salaries etc.
3.1 Every person who is responsible for paying any income
chargeable under the head Salaries shall deduct income-tax on the estimated
income of the assessee under the head Salaries for the financial year
2001-2002. The income-tax is required to be calculated on the basis of the
rates given above and shall be deducted on average at the time of each payment.
No tax will, however, be deducted at source in any case unless the estimated
salary income including the value of perquisites, for the financial year
exceeds Rs. 50,000. (Some typical examples of
computation of tax are given at Annexure I).
3.2 Sub-section (2) of section 192 deals with situations
where an individual is working under more than one employer or has changed from
one employer to another. It provides for deduction of tax at source by such
employer (as the tax payer may choose) from the aggregate salary of the
employee who is or has been in receipt of salary from more than one employer.
The employee is now required to furnish to the present/chosen employer details
of the income under the head 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).
3.3 Under sub-section (2A) of section 192 where the
assessee, being a Government servant or an employee in a Company, Co-operative
Society, Local Authority, University, Institution, Association or Body is entitled
to the relief under sub-section (1) of section 89, he may furnish to the person
responsible for making the payment referred to in Para (3.1), such particulars
in Form No. 10E duly verified by him, and thereupon the person responsible as
aforesaid shall compute the relief on the basis of such particulars and take
into account in making the deduction under Para (3.1) above.
Explanation : For this purpose University means a University
established or incorporated by or under a Central, State or Provincial Act, and
includes an institution declared under section 3 of the University Grants
Commission Act, 1956 (3 of 1956), to be University for the purpose of the Act.
3.4 Sub-section (2B) of section 192 enables a tax payer
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) vide Annexure
II. Such income should not be a loss under any such head other than the
loss under the head Income from house property for the same financial year. The
person responsible for making payment (DDO) shall take such other income and
tax, if any, deducted at source from such income, and the loss if any, under
the head Income from house property into account for the purpose of computing
tax deducible under section 192 of the Income-tax Act. It is, however, provided
that this sub-section shall not in any case have the effect of reducing the tax
deductible except where the loss under the head Income from house property has
been taken into account, from income under the head Salaries below the amount
that would be so deductible if the other income and the tax deducted thereon
had not been taken into account.
In other words, the
DDO can take into account the loss from house property only for working out the
amount of total tax to be deducted. While taking into the account the loss from
house property, the DDO shall ensure that the assessee files declaration in
Form No. 12C and encloses therewith a computation of such loss from house
property.
Sub-section (2C) lays down that a person responsible for paying any income
chargeable under the head Salaries shall furnish to the person to whom such
payment is made a statement giving correct and complete particulars of
perquisites or profits in lieu of salary provided to him and the value thereof
in such form and manner as may be prescribed.
(i) For the purpose of computing loss
under the head Income from house property in respect of a self-occupied
residential house, the ceiling of deduction of interest on borrowed capital
invested in the acquisition or construction of a self-occupied residential
house has been enhanced to Rs. 1,50,000
w.e.f. assessment year 2002-2003. The enhanced limit
of Rs. 1,50,000 is also
applicable in cases where the house property cannot be occupied by the owner by
reason of the fact that owing to his employment, business or profession carried
on at any other place, he has to reside at that other place in a building not
belonging to him. However, this deduction on account of interest up to a limit
of Rs. 1,50,000, is available only if such loan has
been taken for constructing or acquiring the residential unit on or after
1-4-1999 and the construction or acquisition of the residential unit out of
such loan has been completed before 1-4-2003.
(ii) The
essential conditions necessary for availing higher deduction of interest are
that the relevant loan must have been taken after 1-4-1999 and the acquisition
or construction of residential unit must be completed before 1-4-2003. There is
no stipulation regarding the date of commencement of construction.
Consequently, the construction of the residential unit could have commenced
before 1-4-1999 but, as long as its construction/acquisition is completed
before 1-4-2003, the higher deduction would be available. Also, there is no
stipulation regarding the construction/acquisition of the residential unit
being entirely financed by loan taken after 1-4-1999. (The loan taken prior to
1-4-1999 will carry deduction of interest up to Rs.
30,000 only).
3.5 The provisions of sub-section (3) of section 192
allow the deductor to make adjustments for any excess or shortfall in the
deduction of tax already made during the financial year, in subsequent
deductions during that financial year itself.
3.6 The trustees of a Recognised
Provident Fund or any person authorised by the
regulations of the fund to make payment of accumulated balances due to
employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth
Schedule to the Act applies, at the time when the accumulated balance due to an
employee is paid, make therefrom the deduction
specified in rule 10 of Part A of the Fourth Schedule.
3.7 Where any contribution made by an employer, including
interest on such contributions, if any, in an approved Superannuation Fund is
paid to the employee, tax on the amount so paid shall be deducted by the
trustees of the Fund to the extent provided in rule 6 of Part B of the Fourth
Schedule to the Act.
3.8 For the purposes of deduction of tax on salary payable
in foreign currency, the value in rupees of such salary shall be calculated at
the prescribed rate of exchange.
Persons
responsible for deducting tax and their duties
4.1 Under clause (i) of
section 204 of the Act the persons responsible for paying for the purpose of
section 192 means the employer himself or if the employer is a company, the
company itself including the principal officer thereof.
4.2 The tax determined as per para 7 should be deducted
from the salary under section 192 of the Act.
4.3 Section 197 enables the tax-payer to make an
application in Form No. 13 to his Assessing Officer, and, if the Assessing
Officer is satisfied that the total income of the tax-payer justifies the
deduction of income-tax at any lower rate or no deduction of income-tax, he may
issue an appropriate certificate to that effect which should be taken into
account by the Drawing and Disbursing Officer while deducting tax at source. In
the absence of such a certificate from the employee, the employer should deduct
income-tax on the salary payable at the normal rates :
Circular No. 147, dated 28-10-1974.
4.4 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 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.
4.5 If a person fails to deduct the whole or any part of
the tax at source or, after deducting, fails to pay the whole or any part of
the tax to the credit of the Central Government within the prescribed time, he
shall be liable to action in accordance with the provisions of section 201.
Sub-section (1A) of section 201 lays down that such person shall be liable to
pay simple interest at fifteen per cent per annum w.e.f.
1-6-2001 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.
4.6
According to the provisions of section 203, every person responsible for
deducting tax at source is required to furnish a certificate to the payee to
the effect that tax has been deducted and to specify therein the amount
deducted and certain other particulars. This certificate, usually called the
TDS certificate, has to be furnished within a period of one month from the end
of the relevant financial year. Even the banks deducting tax at the time of
payment of pension are required to issue such certificates. In the case of
employees receiving salary income including pension, the certificate has to be
issued in Form No. 16 which has been prescribed under Boards Notification No.
S.O. 940(E), dated 25-9-2001. It is, however, clarified that there is no
obligation to issue the TDS certificate (Form 16) in case tax at source is not
deductible/deducted by virtue of claims of exemptions and deductions. As per
the amended section 192, the responsibility of providing correct and complete
particulars of perquisites or profits in lieu of salary given to an employee is
placed on the person responsible for paying such income i.e., the person
responsible for deducting tax at source. The form and manner of such
particulars are prescribed in rule 26A, Form 12BA and Form 16 of the Income-tax
Rules as amended by Notification No. 940(E), dated 25-9-2001. A new form (Form
12BA) stating the nature and value of perquisites is to be provided by the
employer in case of salary above Rs. 1,50,000. In other cases, the information would have to be
provided by the employer in the amended Form 16. In either case, Form 16 with
Form 12BA or Form 16 by itself have to be furnished within a period of one
month from the end of relevant financial year.
The newly amended section 192 casting an obligation on
the employer for providing a statement showing the value of perquisites
provided to the employee is a serious responsibility of the employer which is
expected to be discharged in accordance with law and rules of valuation framed thereunder. Any false information, fabricated documentation
or suppression of requisite information will entail consequences therefor provided under the law.
A specimen of these certificates is enclosed at Annexure
III. These certificates are to be issued on the tax-deductors
own stationery within one month from the close of the financial year i.e.,
by April 30 of every year. If he fails to issue these certificates to the
person concerned as required by section 203, he will be liable to pay, by way
of penalty, under section 272A, a sum which shall be Rs.
100 for every day during which the failure continues.
4.7
According to the provisions of section 203A of the Income-tax Act, it is
obligatory for all persons responsible for deducting tax at source to obtain
and quote the Tax-deduction Account No. (TAN) in the Challans,
TDS-certificates, returns etc. Detailed instructions in this regard are
available in this Departments Circular No. 497 (F. No. 275/118/87-IT(B) dated 9-10-1987). If a person fails to comply with the
provisions of section 203A, he will be liable to pay, by way of penalty, under
section 272BB, a sum of ten thousand rupees. Similarly, as per section
139A(5B), it is obligatory for persons deducting tax at source to quote PAN of
the persons from whose income-tax has been deducted in the statement furnished
under section 192(2C), certificates furnished under section 203 and all returns
prepared and delivered as per the provisions of section 206 of the Income-tax
Act, 1961.
4.8
According to the provisions of section 206 of the Income-tax Act, read with
rules 36A and 37 of the Income-tax Rules, the prescribed person in the case of
every office of Government, the principal officer in the case of every company,
the prescribed person in the case of every local authority or other pubic 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 following the 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 be Rs. 100 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.
4.9 A return
filed on a floppy, diskette, magnetic cartridge tape, CD-ROM or any other
computer readable media as may be specified by the Board shall be deemed to be
a return for the purposes of section 206 and the Rules made thereunder,
and shall be admissible in any proceeding thereunder,
without further proof of production of the original, as evidence of any
contents of the original or of any fact stated therein. While receiving such
returns on computer media, necessary checks by scanning the documents filed on
computer media will be carried out and the media may be duly authenticated by
the Assessing Officer.
4.10 While
making the payment of tax deducted at source to the credit of the Central
Government, it may be ensured that the correct amount of income-tax is recorded
in the relevant challan. It may also be ensured that the right type of challan
is used. The 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.
4.11 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 and the tax rebate
under section 88B (in the case of pensioners, resident in India, who are 65
years of age or more : refer Para 6(17)) 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 pensioner. As regards the
tax rebate under section 88 on account of contribution to Life Insurance,
Provident Fund, NSC etc., if the pensioners furnish the relevant details to the
banks, the tax rebate at the specified rate may also be allowed. Necessary
instructions in this regard were issued by the Reserve Bank of India to the
State Bank of India and other nationalised Banks vide
RBIs Pension Circular (Central Series) No. 7/C.D.R./1992 (Ref. CO:DGBA:GA(NBS) No. 60/GA.64 (11CVL)-91/92), dated the 27th
April, 1992, and, these instructions should be followed by all the branches of
the Banks, which have been entrusted with the task of payment of pensions.
Further all branches of the banks are bound under section 203 to issue
certificate of tax deducted in Form 16 to the pensioners also vide CBDT
Circular No. 761, dated 13-1-1998.
4.12 Where
Non-Residents are deputed to work in India and taxes are borne by the employer,
if any refund becomes due to the employee after he has already left India and
has no bank account in India by the time the assessment orders are passed, the
refund can be issued to the employer as the tax has been borne by it : Circular No. 707, dated 11-7-1995.
4.13 TDS
certificates issued by Central Government Departments which are making payments
by book adjustment, should be accepted by the
Assessing Officers if they indicate that credit has been effected to the
Income-tax Department by book adjustment and the date of such adjustment is
given therein. In such cases the Assessing Officers may not insist on details
like challan numbers, dates of payment into Government Account etc., but they
should in any case satisfy themselves regarding the genuineness of the
certificates produced before them : Circular No. 747,
dated 27-12-1996.
4.14 There
is a specific procedure laid down for refund of payments made by the deductor
in excess of taxes deducted at source, vide Circular No. 285, dated
21-10-1980.
4.15 In
respect of non-residents, the salary paid for services rendered in India shall
be regarded as income earned in India, so as to specifically provide that any
salary payable for rest period or leave period which is both preceded or
succeeded by service in India and forms part of the service contract of
employment will also be regarded as income earned in India.
Estimation of income under the head Salaries
5.1 Income
chargeable under the head Salaries.
(1) The following income shall be chargeable to
income-tax under the head Salaries:
(a) any salary
due from an employer or a former employer to an assessee in the previous year,
whether paid or not.
(b) any salary
paid or allowed to him in the previous year by or on behalf of an employer or a
former employer though not due or before it became due to him.
(c) any arrears
of salary paid or allowed to him in the previous year by or on behalf of an
employer or a former employer if not charged to income-tax for any earlier
previous year.
(2) For the removal of doubts it is clarified that
where any salary paid in advance is included in the total income of any person
for any previous year it shall not be included again in the total income of the
person when the salary becomes due. Any salary, bonus, commission or remuneration,
by whatever name called, due to, or received by, a partner of a firm from the
firm shall not be regarded as Salary.
(3) Salary includes wages, fees, commissions,
perquisites, profits in lieu of, or, in addition to salary, advance of salary,
annuity or pension, gratuity, payments in respect of encashment of leave etc.
It also includes the annual accretion to the employees account in a recognised provident fund to the extent it is chargeable to
tax under rule 6 of Part A of the Fourth Schedule of the Income-tax Act.
Contributions made by the employer in excess of 12 per cent of the salary of
the employee, alongwith interest applicable, shall be included in the income of
the assessee for the previous year. Other items included in salary, profits in lieu
of salary and perquisites are described in section 17 of the Income-tax Act.
The scope of the term profit in lieu of salary has been amended so as not to
include interest on contributions or any sum received under a Keyman insurance policy including the sum allocated by way
of bonus on such policy. For the purposes of this sub-clause, the expression Keyman insurance policy shall have the meaning assigned to
it in clause (10D) of section 10. It may be noted that, since salary
includes pensions, tax at source would have to be deducted from pension also,
if otherwise called for. However, no tax is required to be deducted from the
commuted portion of pension as explained in clause (3) of para 5.2 of this
Circular.
(4) Section 17 defines the terms salary, perquisite
and profits in lieu of salary. Perquisite, includes
the value of any benefit or amenity granted or provided free of cost or at concessional rate, in specified cases. Perquisites are
charged to tax under the existing provisions for employees who are directors of
companies or have substantial interest in a company, or have an income from
salaries, excluding the value of all benefits or amenities, exceeding Rs. 24,000. The Finance Act, 2001 amends the provision to
raise the monetary limit to Rs. 50,000. The
definition of perquisite has also been amended to include the value of any
other fringe benefit or amenity as may be prescribed. The details of fringe
benefits are to be calculated in the manner prescribed in the Income-tax Rules.
It is further provided that profits in lieu of salary shall include amounts
received in lump sum or otherwise, prior to employment or after cessation of
employment for the purposes of taxation. The new rules for valuation of
perquisite have been prescribed in the amended Rule 3:
I. Accommodation - Under the old Rule 3 for purpose of valuation of the perquisite of
unfurnished accommodation all employees were divided into three categories;
Central and State Government employees, employees of Public Sector Undertaking
and Semi-Government Organisation and others
including, private sector employees. Under the new rule 3, for purposes of
valuation of perquisite of accomodation, employees
are divided into two categories insteadGovt. and State Govt. employees; and Others.
For employees of the Central and State Government the
value of perquisite shall be equal to the licence fee
charged for such accommodation.
For all others, i.e., those salaried taxpayers
not in employment of the Central Government and the State Government, the
valuation of perquisite in respect of accommodation would be at prescribed
rates. The rate is 10 per cent of salary in cities having population exceeding
four lakhs as per the 1991 census. For other places,
the perquisite value would be 7.5 per cent of salary.
The scope of the word accommodation has been widened
by clarifying that is includes a house, flat, farm house, hotel accommodation,
guest house, a caravan, mobile home, ship etc. However, the value of any
accommodation located in a remote area provided to an employee working at a
mining site or an on-shore oil exploration site or a project execution site or
an accommodation provided in an offshore site will not be treated as a
perquisite. A project site for the purposes of this sub-rule means a site of
project upto the stage of its commissioning. A remote
area means an area located at least 40 kilometres
away from a town having a population not exceeding 20,000 as per the latest
published all
The definition of salary for calculating perquisite
value is the same as per earlier Rules. The only change is that, medical
allowances and reimbursement for treatment of serious illnesses as prescribed
in proviso below section 17(2)(vi) have now
been excluded from the definition of salary for this purpose. For furnished
accommodation, the provision of valuation of perquisite of furnishing, fittings
and furniture at 10 per cent of original cost per annum or actual hire charges is
continued.
If an accommodation is provided by an employer in a
hotel the value of the benefit in such a case shall be 24 per cent of the
annual salary or the actual charges paid or payable to such hotel, whichever is
lower, for the period during which such accommodation is provided as reduced by
any rent actually paid or payable by the employee. However, where in cases the
employee is provided such accommodation for a period not exceeding in aggregate
fifteen days on transfer from one place to another, no perquisite value for
such accommodation provided in a hotel shall be charged. It may be clarified
that while services provided as an integral part of the accommodation, need not
be valued separately as perquisite any other services over and above that for
which the employer makes payment or reimburses the employee shall be valued as
a perquisite as per the residual clause. In other words, composite tariff for
accommodation will be valued as per these Rules and any other changes for other
facilities provided by the hotel will be separately valued under the residual
clause. Also, if on account of an employees transfer from one place to another,
the employee is provided with accommodation at the new place of posting while
retaining the accommodation at the other place, the value of perquisite shall
be determined with reference to only one such accommodation which has the lower
value as per the table prescribed, for a period upto
90 days. However, after that the value of perquisite shall be charged for both
accommodations as prescribed.
II. Motor Car
- Under the old rules the basis of valuation of perquisite of a motor car
provided by the employer was the sum actually expended by the employer,
including expenditure on maintenance, running cost and remuneration of
chauffeur, in case of exclusively personal use, and apportionment of the same
in case of part personal and part official use. However, for simplicity it is
also provided that where determination of the above basis is difficult, the
valuation would be as per prescribed rates. The criteria for small and large
cars have been revised on the basis of their engine capacity only. Where the
car is used exclusively for personal purposes of the employee or any member of
his household, the perquisite value shall be taken to be the full amount of
expenditure incurred by the employer including the remuneration paid to the
chauffeur and the normal wear and tear calculated at 10 per cent of the cost of
the car. However, the normal wear and tear cost will not be calculated in a
hired car as the replacement of the same is not the responsibility of the
employer. The rates for part official and part personal use of motor cars have
now been revised as follows:
|
|
Small car (upto 1.6 ltrs. Engine capacity) |
Large car (above 1.6 ltrs.
Engine capacity) |
Chauffeur where provided by employer to run the
motor car an additional amount as below is also charged |
|
Car owned/hired |
Rs. 1,200 per |
Rs. 1,600 per |
Rs. 600 per |
|
by employer and |
month |
month |
month |
|
maintained and |
|
|
|
|
run at their cost. |
|
|
|
|
Car owned/hired by |
Rs. 400 per |
Rs. 600 per |
Rs. 600 per |
|
employer but run |
month |
month |
month |
|
at employees cost |
|
|
|
However, where a second and additional cars are
provided, such other cars shall be deemed to be for personal use and the value
of perquisite shall be computed accordingly. Where fuel and upkeep cost of the
employees car is borne or reimbursed by the employer, the amount reasonably
attributable to business use is not to be charged as perquisite. For this, user
details in the form of log books, odometer reading, etc. should be maintained.
Where the car is used partly for purposes of official duties and partly for
private or personal use and such details are not available or not properly
maintained, the amount paid for or reimbursed less Rs.
1,200 per month for small car or Rs. 1,600 per month
for large car would be valued as a perquisite. A higher amount may be deducted
on the basis of proper maintenance of details of official use. For claiming
higher amount of official use in respect of reimbursement of car expenses or
wholly official use of car provided by an employer, the following details and
documents need to be maintained:
(i) the employer has maintained complete
details of journeys undertaken for official purpose which may include date of
journey, destination, mileage and the amount of expenditure incurred thereon;
(ii) the employee
gives a certificate that the expenditure was incurred wholly and exclusively
for the performance of his official duty;
(iii) the
supervising authority of the employee, wherever applicable, gives a certificate
to the effect that the expenditure was incurred wholly and exclusively for the
performance of official duties.
However, these rules of valuation for employee owned
cars should not be taken to apply to conveyance allowance regularly paid or
payable to the employee under terms of employment or otherwise. The conveyance
allowance is a cash disbursement and is to be taxed separately as an allowance
subject to the provisions contained in section 10(14). What the present rules
provide for is the value of perquisite where the expenses on the running or
maintenance of employee owned car is met or reimbursed by the employer.
III. Personal attendants etc. - The old rules provided for valuation of perquisite
of free services of a sweeper, a gardener and a watchman at Rs.
120 per month. Under the new rules the value of free service of all personal
attendants including a sweeper, gardener, and a watchman is to be at actual
cost to the employer. Where the attendant is provided at the residence of the
employee, full cost will be taxed as perquisite in the hands of the employee
irrespective of the degree of personal service rendered to him. Any amount paid
by the employee for such facilities or services shall be reduced from the above
amount.
IV. Gas, electricity and water - For free supply of gas, electricity and water for
household consumption the old rules already provide that the amount paid by the
employer to the agency supplying the amenity shall be the value of perquisite.
However, when the supply is made from employers own resources, the value of
perquisite was taken as Nil. The separate provision in the old rules of
valuation at 6.25% of salary of the taxpayer for part official use is
discontinued. Under the new rules even where the supply is made from the
employers own resources, the manufacturing cost per unit incurred by the
employer would be the value of perquisite. Any amount paid by the employee for
such facilities or services shall be reduced from the above amount.
V. Free or concessional
education - The old rules already
provide that value of free education facility would be the expenditure incurred
by the employer. Under the new rules, free or concessional
education shall be valued in a manner assuming that such expenses are borne by
the employee, and would cover cases where an employer, may be running,
maintaining or directly or indirectly financing the educational institution.
Any amount paid by the employee for such facilities or services shall be
reduced from the above amount. However, where such educational institution
itself is maintained and owned by the employer or where such free educational facilities
are provided in any institution by reason of his being in employment of that
employer, the sub-rule shall not apply if the cost of such education or such
benefit per child does not exceed Rs. 1,000 p.m.
VI. Free or concessional
journeys - Under the old rules where
an employee avails of free or concessional journeys
in conveyance owned by the undertaking for the purpose of transport of
passengers or goods, the value of perquisite was taken as Nil.
However, under the new rules the value at which such benefit or amenity is
offered by such undertaking to the public, the value of perquisite shall now be
taken as such value as reduced by any amount actually paid by the employee. The
conveyance may be owned, leased or made available by any other arrangement by
the undertaking. Journey tickets for leave travel, tours and transfers which
are already exempt under sections 10(5) and 10(14) would continue to be exempt.
VII. Interest free or concessional
loans - It is common practice
particularly in financial institutions to provide interest free or concessional loans to employees. The value of such
perquisite would be the excess of interest payable at prescribed interest rate
over interest if any actually paid by the employee. The prescribed interest
rate would now be 10% p.a. for loans for housing and conveyance and 13% p.a.
for other loans. Perquisite value would be calculated on the basis of the
maximum outstanding monthly balance by the simple interest method. Such housing
or conveyance loans must be for acquiring capital assets i.e., house or
conveyance, as the case may be, and not for repairs thereof, however extensive
they may be. For valuing perquisites under this rule, any other method of
calculation and adjustment otherwise adopted by the employer shall not be
material for purposes of this rule. However, small loans upto
Rs. 20,000 in the aggregate are exempt. Loans for
medical treatment specified in Rule 3A are also exempt, provided the amount of
loan for medical reimbursement is not reimbursed under any medical insurance
scheme. Where any medical insurance reimbursement is received, the perquisite
value at normal rates shall be charged from the date of reimbursement on the
amount reimbursed, but not repaid against the outstanding loan taken specifically
for this purpose. It is further clarified that the above sub-rule shall also
apply to loans outstanding as on 1st April, 2001, (if the new rule is applied
from that date) or 1st October, 2001 (if the new rule is applied from that
date).
VIII. Travelling, touring,
accommodation and other holiday expenses
- It is increasingly common for employees to be provided with vacation and
holiday facilities. The value of such perquisite shall be the expenditure
incurred by the employer. This would also apply to official tours extended as a
vacation and family members accompanying taxpayers on official tours. However
leave travel as per section 10(5) and enjoyment of holiday home facilities
available uniformly to all classes of employees would remain exempt.
IX. Free meals
- The provision of free meals varies widely from uniform canteen food, coupons
etc. to lavish hotel meals. The scheme of free meals as a staff welfare measure
had been recognised and was admissible upto Rs. 35 for each meal. The
new rule does not treat as perquisite free meals if the cost per meal does not
exceed Rs. 50. Where any amount is recovered from the
employer, such amount shall be reduced from the value of perquisite. Such free
or subsidised meal should, however, be provided at
office premises or through non-transferable vouchers meant for only meals
during working hours. These vouchers should be provided by employers
encashable only at an eatery, a restaurant or a cafe.
Tea or similar non-alcoholic beverages and snacks - in the form of light refreshments
during working hours are not charged as perquisite. Also, arrangements for
meals in remote areas as prescribed in para 5.1 and similar off-shore sites as
specified, shall be exempt. However, expenditure on provision of free meals by
the employer in excess of Rs. 50 should be treated as
perquisite, as reduced by recoveries made from the employee.
X. Gift, voucher or token in lieu of gift - It is customary in India, as it is in other parts
of the world, to provide presents directly or indirectly in the form of
vouchers or tokens to employees on social and religious occasions like Diwali, Christmas, New Year, the anniversary of the
organization etc. Such gifts upto Rs.
5,000 in the aggregate per annum would be exempt, beyond which it would be
taxed as a perquisite. However, gifts made in cash or convertible into cash,
like gift cheques etc. do not fall in the purview of
this sub-rule.
XI. Credit card and Club expenses - Credit card expenses of employees both business and
personal, are often borne by employers. Such credit card payments would
ordinarily be chargeable to tax as a perquisite. However, these expenses are
often incurred to entertain customers and clients for the purposes of business.
Therefore where such expenses on entertainment including meals are for purposes
of business and proper records for the same are maintained no perquisite would
arise.
Club expenses of employees borne by employers are
already charged as perquisite by virtue of section 17(2)(iv).
To formalize the issue, it has been specified that annual and periodical club
fees paid by the employer is chargeable as a perquisite. However to ensure that
basic facilities for the health and recreation of employees are not hit, health
clubs, sports facilities etc. provided uniformly to all classes of employees by
the employer at the employers premises are exempt. The initial
one time deposits or fees for corporate or institutional membership,
where the benefit does not remain with a particular employee after cessation of
employment, are exempt. Where such expenses on entertainment including meals
are for purposes of business and proper records for the same are maintained no
perquisite would arise.
For credit card and club expenses to be exempt for
business purposes, the following documentation needs to be maintained:
(a) complete
details in respect of such expenditure maintained by the employer including the
date of expenditure and the nature of expenditure;
(b) it is
certified by the employee that such expenditure was incurred wholly and
exclusively for the performance of official duty;
(c) the
supervising authority of the employee, wherever applicable, gives a certificate
for such expenditure to the effect that the same was incurred wholly and
exclusively for the performance of official duties;
(d) where an
employee incurs expenditure on entertainment and claims the same to have been
incurred wholly and exclusively in the performance of his duties, details of
such entertainment expenses including the nature and purpose of entertainment
and persons entertained.
XII. Use of assets - It is common practice for an asset owned by the employer to be used
by the assessee. This perquisite is to be charged at the rate of 10% of the
original cost of the asset as reduced by any charges paid for such use.
However, Computers and laptops are exempt. Further, the value of perquisite for
an asset used for income for more than ten years would be taken as Nil.
XIII. Transfer of assets - Often an employee or member of his household
benefits from the transfer of movable asset (not being shares or securities) at
no cost or at a cost less than its market value from the employer. The
difference between the original cost of the movable asset (not being shares or
securities) and the sum, if any, paid by the employee, shall be taken as the
value of perquisite. In case of a movable asset, which has already been put to
use, the original cost shall be reduced by a sum of 10% of such original cost
for every completed year of use of the asset. Owing to a higher degree of
obsolescence, in case of computers and electronic gadgets, however, the value
of perquisite shall be worked out by reducing 50% of the actual cost by the
reducing balance method for each completed year of use. Electronic
gadgets in this case means data storage and handling devices like
computer, digital diaries and printers. They do not include household appliance
(i.e. white goods) like washing machines, microwave ovens, mixers, hot
plates, ovens etc. In case of cars, similarly, the value of perquisite shall be
worked out by reducing 20% of its actual cost by the reducing balance method
for each completed year of use.
XIV. Prior
to Finance Act, 2000, stock options were taxed at two stages i.e., as
perquisite (on the amount representing the difference between the exercise
price and the fair market value on the date of exercise), and as capital gains.
With effect from 1-4-2001 (relevant to assessment year 2001-2002) onward, stock
options issued as per guidelines of the Central Government are to be taxed only
once, at the time of sale, as capital gains. In cases, where perquisite has
been assessed with reference to exercise of the option by the employee under
section 17(2), the fair market value at the time of exercise of the option
shall be the cost of acquisition of share for working out the capital gains.
The relevant guidelines of the Central Government have been issued vide
Notification No. 1021(E), dated 11-10-2001. Stock options not in conformity
with the above guidelines (non-qualified stock options) shall continue to be
taxed at both the stages.
XV. Residual clause - A benefit or amenity not included in the rules shall be valued at
the cost to the employer where the employer pays for the benefit or amenity.
Otherwise, it would be valued at the amount the employee could reasonably be
expected to pay to acquire such benefit or amenity from the market. However,
the benefit of conveyance to and from residence to place of work, periodicals
and journals required for discharge of work and expenses on telephones
including a mobile phone shall not be included in calculating perquisite value.
While this Rule shall come into force with effect from
the 1st day of April, 2001 it has been provided that the employee may, at his
option, compute the value of perquisites made available to him or any member of
his household for the period beginning on 1st day of April, 2001 and ending on
30th day of September, 2001 in accordance with the Rules, as they stood prior
to this amendment. It may, therefore, be desirable for the employer to obtain a
declaration from each employee as to the option he wants to follow for purposes
of tax deduction at source. However, it should be noted that the option to the
taxpayer of using the old or new rules for the period specified above shall be
applied uniformly in respect of all perquisites, in case of a particular
taxpayer. In other words, one cannot selectively value a particular perquisite
by the old rule and another one by the new rule. It is pertinent to mention
that benefits specifically exempt under section 10(13A), 10(5),
10(14), 17 etc. would continue to be exempt. These include benefits like
travel on tour and transfer, leave travel, daily
allowance to meet tour expenses as prescribed, medical facilities subject to
conditions. However, administrative circulars and instructions relating to
perquisites falling under the purview of Rule 3 issued before the adoption of
the new rules, shall stand superseded or modified, as the case may be.
Income not included in the head Salaries (Exemptions)
5.2 Any
income falling within any of the following clauses shall not be included in
computing the income from salaries for the purpose of section 192 of the Act :
(1) The value of any travel concession or assistance
received by or due to an employee from his employer or former employer for
himself and his family, in connection with his proceeding (a) on leave
to any place in India or (b) on retirement from service, or, after
termination of service to any place in India is exempt under clause (5)
of section 10 subject, however, to the conditions prescribed in rule 2B of the
Income-tax Rules, 1962. For the purpose of this clause, family in relation to
an individual means :
(i) The spouse and children of the
individual; and
(ii) The parents, brothers and sisters of
the individual or any of them, wholly or mainly dependent on the individual.
It may also be noted that the amount exempt under this
clause shall in no case exceed the amount of expenses actually incurred for the
purpose of such travel.
(2) Death-cum-retirement gratuity or any other
gratuity which is exempt to the extent specified from inclusion in computing
the total income under clause (10) of section 10.
(3) Any payment in commutation of pension received
under the Civil Pension (Commutation) Rules of the Central Government or under
any similar scheme applicable to the members of the civil services of the
Union, or holders of civil posts/posts connected with defence,
under the Union, or civil posts under a State, or to the members of the all
India Services/Defence Services, or to the employees
of a local authority or a Corporation established by a Central, State or
Provincial Act, is exempt under sub-clause (i)
of clause (10A) of section 10. As regards payments in commutation of
pension received under any scheme of any other employer, exemption will be
governed by the provisions of sub-clause (ii) of clause (10A) of
section 10.
(4) Any payment received by an employee of the Central
Government or a State Government, as cash-equivalent to the leave salary in
respect of the period of earned leave at his credit at the time of his
retirement on superannuation or otherwise, is exempt under sub-clause (i) of clause (10AA) of section 10. In the
case of other employees, this exemption will be determined with reference to
the leave to their credit at the time of retirement on superannuation, or
otherwise, subject to a maximum of ten months leave. This exemption will be
further limited to the maximum amount specified by the Government of India
Notification No. S.O. 1015(E) dated 27-11-1997 at Rs.
2,40,000.
(5) Under section 10(10B), the retrenchment
compensation received by a workman is exempt from income-tax subject to certain
limits. The maximum amount of retrenchment compensation exempt is the sum
calculated on the basis provided in section 25F(b) of the Industrial
Disputes Act, 1947 or any amount not less than Rs.
50,000 as the Central Government may by notification specify in the Official
Gazette, whichever is less. These limits shall not apply in the case where the
compensation is paid under any scheme which is approved in this behalf by the
Central Government, having regard to the need for extending special protection
to the workmen in the undertaking to which the scheme applies and other
relevant circumstances.
(6) Under section 10(10C), any payment received by an
employee of the following bodies at the time of his voluntary retirement or
termination of his service, in accordance with any scheme or schemes of voluntary
retirement or in the case of public sector company, a scheme of voluntary
separation, is exempted from income-tax to the extent that such a mount does
not exceed five lakh rupees :
(a) A public sector company;
(b) Any other company;
(c) An Authority established under a
Central, State or Provincial Act;
(d) A Local Authority;
(e) A Cooperative Society;
(f) A university established or
incorporated or under a Central, State or Provincial Act, or, an Institution
declared to be a University under section 3 of the University Grants Commission
Act, 1956;
(g) Any Indian Institute of Technology
within the meaning of clause (g) of section 3 of the
(h) Such Institute of Management as the
Central Government may by notification in the Official Gazette, specify in this
behalf.
It may also be noted that where this exemption has
been allowed to any employee for any assessment year, it shall not be allowed
to him for any other assessment year. The exemption of amount received under
VRS is extended to employees of the Central Government w.e.f.
assessment year 2002-2003 and State Government employees
w.e.f. assessment year 2001-2002.
(7) Any sum received under a Life Insurance Policy,
including the sum allotted by way of bonus on such policy other than any sum
received under sub-section (3) of section 80DDA.
(8) Any payment from a Provident Fund to which the
Provident Funds Act, 1925 (19 of 1925), applies (or from any other provident
fund set up by the Central Government and notified by it in this behalf in the
Official Gazette).
(9) Under section 10(13A) of the Income-tax Act, 1961,
any special allowance specifically granted to an assessee by his employer to
meet expenditure incurred on payment of rent (by whatever name called) in
respect of residential accommodation occupied by the assessee is exempted from
income-tax to the extent as may be prescribed, having regard to the area or
place in which such accommodation is situated and other relevant
considerations. According to rule 2A of the Income-tax Rules, 1962, the quantum
of exemption allowable on account of grant of special allowance to meet
expenditure on payment of rent shall be :
(a) The actual amount of such allowance
received by an employer in respect of the relevant period; or
(b) The actual expenditure incurred in
payment of rent in excess of 1/10 of the salary due for the relevant period; or
(c) Where such accommodation is situated
in
(d) Where such accommodation is situated
in any other place, 40% of the salary due to the employee for the relevant
period.
whichever is the least.
For this purpose, Salary includes dearness allowance,
if the terms of employment so provide, but excludes all other allowances and
perquisites.
It has to be noted that only the expenditure actually
incurred on payment of rent in respect of residential accommodation occupied by
the assessee subject to the limits laid down in Rule 2A, qualifies for
exemption from income-tax. Thus, house rent allowance granted to an employee
who is residing in a house/flat owned by him is not exempt from income-tax. The
disbursing authorities should satisfy themselves in this regard by insisting on
production of evidence of actual payment of rent before excluding the house
rent allowance or any portion thereof from the total income of the employee.
Though incurring actual expenditure on payment of rent
is a pre-requisite for claiming deduction under section 10(13A), it has been
decided as an administrative measure that salaried employees drawing house rent
allowance upto Rs. 3,000
per month will be exempted from production of rent receipt. It may, however, be
noted that this concession is only for the purpose of tax-deduction at source,
and, in the regular assessment of the employee, the Assessing Officer will be
free to make such enquiry as he deems fit for the purpose of satisfying himself
that the employee has incurred actual expenditure on payment of rent.
(10) Clause (14) of section 10 provides for
exemption of the following allowances :
(i) Any special allowance or benefit
granted to an employee to meet the expenses incurred in the performance of his
duties as prescribed under Rule 2BB subject to the extent to which such
expenses are actually incurred for that purpose.
(ii) Any allowance granted to an employee
either to meet his personal expenses at the place of his posting or at the
place he ordinarily resides or to compensate him for the increased cost of
living, which may be prescribed and to the extent as may be prescribed.
However, the allowance referred to in (ii)
above should not be in the nature of a personal allowance granted to the
assessee to remunerate or compensate him for performing duties of a special
nature relating to his office or employment unless such allowance is related to
his place of posting or residence.
The CBDT has prescribed guidelines for the purpose of
clauses (i) and (ii) of section 10(14)
vide Notification No. SO 617(E), dated 7th July, 1995 (F. No.
142/9/95-TPL) which has been amended vide Notification SO No. 403(E),
dated 24-4-2000 (F. No. 142/34/99-TPL). These Notifications may be referred to
in Annexures IV and V. The transport allowance granted to an employee to
meet his expenditure for the purpose of commuting between the place of his
residence and the place of duty is exempt to the extent of Rs.
800 per month vide Notification SO No. 395(E), dated 13-5-1998 (Annexure
VI).
(11) Under section 10(15)(iv)(i) of the Income-tax Act, interest payable by the
Government on deposits made by an employee of the Central Government or a State
Government or a public sector company from out of his retirement benefits, in
accordance with such scheme framed in this behalf by the Central Government and
notified in the Official Gazette is exempt from income-tax. By
Notification No. F. 2/14/89-NS-II, dated 7-6-1989, as amended by
Notification No. F. 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.
(12) Clause (18) of section 10 provides for
exemption of any income by way of pension received by an individual or family
pension received by any member of the family of an individual who has been in
the service of the Central Government or State Government and has been awarded Param Vir Chakra or Maha Vir Chakra or Vir Chakra or such other gallantry award as may be
specifically notified by the Central Government. Such notification has been
made vide Notifications No. SO 1948(E), dated
24-11-2000 and 81(E), dated 29-1-2001 which are enclosed as per Annexure
VII.
(13) Under section 17 of the Act, exemption from tax
will also be available in respect of :
(a) the value of
any medical treatment provided to an employee or any member of his family, in
any hospital maintained by the employer;
(b) any sum paid
by the employer in respect of any expenditure actually incurred by the employee
on his medical treatment or of any member of his family :
(i) in any
hospital maintained by the Government or any local authority or any other
hospital approved by the Government for the purposes of medical treatment of
its employees;
(ii) in respect of the prescribed diseases
or ailments, in any hospital approved by the Chief Commissioner having regard
to the prescribed guidelines :
Provided that, in a case falling in sub-clause (ii),
the employee shall attach with his return of income a certificate from the
hospital specifying the disease or ailment for which medical treatment was
required and the receipt for the amount paid to the hospital.
(c) premium paid by the employer in
respect of medical insurance taken for his employees (under any scheme approved
by the Central Government) or reimbursement of insurance premium to the
employees who take medical insurance for themselves or for their family members
(under any scheme approved by the Central Government);
(d) reimbursement, by the employer, of the
amount spent by an employee in obtaining medical treatment for himself or any
member of his family from any doctor, not exceeding in the aggregate Rs. 15,000 in an year.
(e) As regards medical treatment abroad,
the actual expenditure on stay and treatment abroad of the employee or any
member of his family, or, on stay abroad of one attendant who accompanies the
patient, in connection with such treatment, will be excluded from perquisites
to the extent permitted by the Reserve Bank of
Deductions under section 16 of the Act
5.3 Under
section 16 of the Income-tax Act, the standard deduction available is as under :
in the case of an assessee whose income from salary,
before allowing a deduction under this clause :
(a) does not
exceed one lakh fifty thousand rupees, a deduction of
a sum equal to thirty-three and one-third per cent of the salary or thirty
thousand rupees, whichever is less :
(b) exceeds one lakh fifty thousand rupees but does not exceed three lakh rupees, a deduction of a sum of twenty five thousand
rupees.
(c) exceeds three
lakh rupees but does not exceed five lakh rupees, a deduction of a sum of twenty thousand
rupees;
No standard deduction is available to an assessee
whose income from salary exceeds 5 lakh rupees.
Explanation.For the
purposes of this clause, where salary is due from, or paid or allowed by, more
than one employer, the deduction under this clause shall be computed with
reference to the aggregate salary due, paid or allowed
to the assessee and shall in no case exceed the amount specified under this
clause.
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, who is in
receipt of a salary from the Government, a sum equal to one-fifth of his salary
(exclusive of any allowance, benefit or other perquisite) or five thousand
rupees whichever is less. The deduction hitherto available to non-Government
employees has been withdrawn.
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 under the head Salaries.
Deductions under Chapter VI-A of the Act
5.4 The
following deductions under Chapter VI-A of the Act are available :
(1) As per section 80CCC, where an assessee being an
individual has in the previous year paid or deposited any amount out of his
income chargeable to tax to effect or keep in force a contract for any annuity
plan of Life Insurance Corporation of India or any other insurer for receiving
pension from the Fund referred to in clause (23AAB) of section 10, he
shall, in accordance with, and subject, the provisions of this section, be
allowed a deduction in the computation of his total income, of the whole of the
amount paid or deposited (excluding interest or bonus accrued or credited to
the assessees account, if any) as does not exceed the amount of ten thousand
rupees in the previous year.
Where any amount paid or deposited by the assessee has
been taken into account for the purposes of this section, a rebate with
reference to such amount shall not be allowed under section 88.
(2) Under section 80D, in the case of the following
categories of persons, a deduction can be allowed for a sum not exceeding Rs. 10,000 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in
force an insurance on the health of the categories of persons mentioned below
provided that such insurance shall be in accordance with the scheme framed in
this behalf by
(a) the General Insurance Corporation of
India formed under section 9 of the General Insurance Business
(Nationalisation) Act, 1972 and approved by the Central Government in this
behalf; or
(b) any other insurer and approved by the
Insurance Regulatory and Development Authority established under sub-section
(1) of section 3 of the Insurance Regulatory and Development Authority Act,
1999.
The categories of persons are :
(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.
However, the deduction can be allowed for a sum not
exceeding Rs. 15,000 per annum where the assessee or
his wife or husband, or dependent parents or any member of the family (in case
the assessee is a Hindu Undivided Family) is a senior citizen which means an
individual resident in India who is of the age of sixty-five years or more at
any time during the relevant previous year.
(3) Under section 80DD an assessee, who is a resident
in
(a) incurred any expenditure for the
medical treatment (including Nursing), training and rehabilitation of a
handicapped dependent; or
(b) paid or
deposited any amount under a Scheme framed in this behalf by the Life Insurance
Corporation or any other insurer or Unit Trust of India subject to the
conditions specified in sub-section (2) and approved by the Board in this
behalf for the maintenance of handicapped dependent
shall in accordance with and subject to the provisions of
this section be allowed a deduction of a sum of forty thousand rupees in the
previous year.
The handicapped dependent means a person who is a
relative of the individual or a member of HUF and is not dependent on any
person other than such individual or HUF for his support and maintenance and is
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 individuals 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, occulist 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. It would be sufficient if the employee furnishes a medical certificate
from a Government Hospital and a declaration in writing duly signed by the
claimant certifying the actual amount of expenditure on account of medical
treatment (including nursing) training and rehabilitation of the handicapped
dependent and receipt/acknowledgement for the amount paid or deposited in the
specified schemes of LIC or UTI. Therefore, DDOs may not insist on production
of vouchers/bills by the employees for having incurred expenditure on medical
treatment of their handicapped dependents for allowing the deduction under section
80DD for the purpose of computing tax deductible at source. (Ref. CBDT Circular
No. 775, dated 26-3-1999).
(4) Under section 80DDB, where an assessee who is
resident in
(a) for himself
or a dependent relative, in case the assessee is an individual,
(b) for any
member of a Hindu Undivided Family in case the assessee is a Hindu Undivided
Family
The assessee shall be allowed a deduction of a sum of
forty thousand rupees in respect of that previous year in which such
expenditure was actually incurred. However, if the assessee or his dependent
relative or any member of the Hindu Undivided Family of the assessee, is a
senior citizen, deduction of a sum of Rs. 60,000
shall be allowed in respect of that previous year in which such expenditure was
actually incurred. Such deduction shall be reduced by the amount received, if
any, under an insurance from an insurer on the medical
treatment of the person referred to above. The listed diseases as per the
relevant Rule 11DD are specified neurological diseases, and 40% and above
disability caused by cancer, full-blown AIDS, Chronic Renal Failure, Nemophiha
and Thalassaemia :
Provided that no such deduction shall be allowed
unless the assessee furnishes a certificate in such form and from such
authority as may be prescribed. The form is Form 10-1, and the prescribed
authority is any doctor registered with the Indian Medical Association and
holding Post-graduate qualifications.
For the purposes of this section, dependant means a
person who is not dependant for his support or maintenance on any person other
than the assessee.
(5) Under section 80E of the Act a deduction will be
allowed in respect of repayment of loan taken for higher education, subject to
the following conditions :
(i) In computing the total income of an
assessee, being an individual, there shall be deducted, in accordance with and
subject to the provisions of this section, any amount paid by him in the
previous year, out of his income chargeable to tax, by way of repayment of
loan, taken by him from any financial institution or any approved charitable
institution for the purpose of pursuing his higher education, or interest on
such loan :
Provided that the
amount which may be so deducted shall not exceed forty thousand rupees.
(ii) The deduction specified above shall be
allowed in computing the total income in respect of the initial assessment year
and seven assessment years immediately succeeding the initial assessment year
or until the loan referred to above together with interest thereon is paid by
the assessee in full, whichever is earlier.
For this purpose
(a) approved charitable institution means
an institution established for charitable purposes and notified by the Central
Government under clause (2C) of section 10, or, an institution referred
to in clause (a) of sub-section (2) of section 80G.
(b) financial institution means a banking
company to which the Banking Regulation Act, 1949 (10 of 1949) applies
(including any bank or banking institution referred to in section 51 of that
Act); or any other financial institution which the Central Government may, by notification
in the Official Gazette, specify in this behalf;
(c) higher education means full-time
studies for any graduate or post-graduate course in engineering, medicine,
management, or, for post-graduate course in applied sciences or pure sciences,
including mathematics and statistics;
(d) initial assessment year means the
assessment year relevant to the previous year, in which the assessee starts
repaying the loan or interest thereon.
(6) No deduction should be allowed by the D.D.O. from
the salary income in respect of any donations made for charitable purposes. The
tax relief on such donations as admissible under section 80G of the Act, will
have to be claimed by the tax payer in the return of income. However, DDOs, on
due verification may allow donations to the following bodies to the extent of
50% of the contribution :
i. Jawaharlal Nehru Memorial Fund.
ii. The
Prime Ministers Drought Relief Fund.
iii. The
National Childrens Fund.
iv. The Indira Gandhi Memorial Trust.
v. The Rajiv Gandhi Foundation.
and to the following bodies to the extent of 100% of the
contribution :
i. National Defence Fund
or The Prime Ministers National Relief Fund.
ii. The
Prime Ministers Armenia Earthquake Relief Fund.
iii. The
iv. The
National Foundation for Communal Harmony.
v. Chief Ministers Earthquake Relief
Fund,
vi. National
Blood Transfusion Council.
vii. State
Blood Transfusion Council.
viii. Army
Central Welfare Fund.
ix. Indian
Naval Benevolent Fund.
x. Air
Force Central Welfare Fund.
xi. The
Andhra Pradesh Chief Ministers Cyclone Relief Fund - 1996.
xii. The
National Illness Assistance Fund.
xiii. The
Chief Ministers Relief Fund or Lieutenant Governors Relief Fund, in respect of
any State or Union Territory as the case may be, subject to certain conditions.
xiv. The
university or educational institution of national eminence approved by the
prescribed authority.
xv. The
National Sports Fund to be set up by Central Government.
xvi. The
National Cultural Fund Set up by the Central
Government.
xvii. The Fund
for Technology Development and Application set by the Central Government.
xviii. The
National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities.
(7) Under section 80GG of the Act, an assessee is
entitled to a deduction in respect of house rent paid by him for his own
residence. Such deduction is permissible subject to the following conditions :
(a) the assessee has not been in receipt
of any house rent allowance specifically granted to him which qualifies for
exemption under section 10(13A) of the Act;
(b) the assessee files the declaration in
Form No. 10BA. (Annexure VII).
(c) He will be entitled to a deduction in
respect of house rent paid by him in excess of 10 per cent of his total income,
subject to a ceiling of 25 per cent thereof or Rs.
2,000 per month, whichever is less, the total income for working out these
percentages will be computed before making any deduction under section 80GG.
(d) The assessee does not own :
(i) any residential accommodation himself
or by his spouse or minor child or where such assessee is a member of a Hindu
Undivided Family, by such family, at the place where he ordinarily resides or
performs duties of his office or carries on his business or profession; or
(ii) at any other place, any residential
accommodation being accommodation in the occupation of the assessee, the value
of which is to be determined under sub-clause (i)
of clause (a) or as the case may be, clause (b) of sub-section
(2) of section 23.
The Drawing and Disbursing Authorities should satisfy
themselves that all the conditions mentioned above are satisfied before such
deduction is allowed by them to the assessee. They should also satisfy
themselves in this regard by insisting on production of evidence of actual
payment of rent.
(8) Section 80L of the Income-tax Act allows deduction
of interest from certain specified investments including interest on bank
deposits and certain securities. The limit of Rs.
12,000 deductible on account of such interest hitherto available has been now
reduced to Rs. 9,000. The deduction of Rs. 3,000 for Government Securities separately available shall,
however, continue to be available.
(9) Section 80U allows deduction of forty thousand
rupees in computing the total income of a resident individual, who at the end
of the 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, occulist 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
section 80DD(4).
Tax Rebate
6. An
assessee, being an individual, will be entitled to tax rebates under Chapter
VIII of the Act as given below :
(1) Payment of insurance premium to effect or to keep
in force an insurance on the life of the individual,
the wife or husband or any child of the individual.
(2) Any payment made to effect or to keep in force a
contract for a deferred annuity, not being an annuity plan as is referred to in
item (8) herein below 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;
(3) Any sum deducted from the salary payable by, or,
on behalf of the Government to any individual, being a sum deducted in
accordance with the conditions of his service for the purpose of securing to
him a deferred annuity or making provision for his wife or children, insofar as
the sum deducted does not exceed 1/5th of the salary;
(4) Any contribution made :
(a) by an
individual to any provident fund to which the Provident Fund Act, 1925 applies;
(b) to any provident fund set up by the
Central Government, and notified by it in this behalf in the Official Gazette,
where such contribution is to an account standing in the name of an individual,
or a minor, or of whom he is a 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;
(5) 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, or of whom he is the
guardian.
(6) Any subscription :
(a) to any such
security of the Central Government or any such deposit scheme as the Central
Government may, by notification in the Official Gazette, specify in this
behalf;
(b) to any such
saving certificates as defined under section 2(c) of the Government
Saving Certificate Act, 1959 as the Government may, by notification in the
Official Gazette, specify in this behalf. Interest on NSC (VI Issue) and NSC
(VIII Issue) which is deemed investment also qualifies for the rebate.
(7) Any sum paid as contribution in the case of an
individual, for himself, spouse or any child,
(a) for
participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of
India;
(b) for participation in any unit-linked
insurance plan of the LIC Mutual Fund notified by the Central Government under
clause (23D) of section 10.
(8) Any subscription made to effect or keep in force a
contract for such annuity plan of the Life Insurance Corporation as the Central
Government may by notification in the Official Gazette, specify;
(9) Any subscription not exceeding rupees ten
thousand, made to any units of any Mutual Fund, notified under clause (23D)
of section 10, by the Unit Trust of India established under the Unit Trust of
India Act, 1963, under any plan formulated in accordance with any scheme as the
Central Government, may, by notification in the Official Gazette, specify in
this behalf;
(10) Any contribution made by an individual to any
pension fund set up by any Mutual Fund notified under clause (23D) of
section 10, or, by the Unit Trust of India established under the Unit Trust of
India Act, 1963, as the Central Government may, by notification in the Official
Gazette, specify in this behalf;
(11) 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;
(12) Any subscription made to any such deposit scheme
(not being a scheme the interest on deposits whereunder qualifies for deduction
under section 80L), as the Central Government may, by notification in the
Official Gazette, specify of the purpose of being floated by (a) public
sector companies engaged in providing long-term finance for construction or
purchase of houses in India for residential purposes, or, (b) any
authority constituted in India by, or, under any law, enacted either for the
purpose of dealing with and satisfying the need for housing accommodation or
for the purpose of planning, development or improvement of cities, towns and
villages, or for both.
(13) 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 re-payment of loans borrowed
by an assessee from the Government, or any bank or Life Insurance Corporation,
or National Housing Bank, or certain other categories of institutions engaged
in the business of providing long term finance for construction or purchase of
houses in
(14) Subscription to equity shares or debentures
forming part of any eligible issue of capital approved by the Board on an
application made by a public company or as subscription to any eligible issue
of capital by any public finance institution in the prescribed form :
Provided that where a deduction is claimed and allowed
under this clause with reference to the cost of any equity shares or
debentures, the cost of such shares or debentures shall not be taken into
account for the purposes of sections 54EA and 54EB.
Explanation :
For the purpose of this clause
(i) eligible issue of capital means an
issue made by a public company formed and registered in India or a public
financial institution and the entire proceeds of the purposes of developing,
maintaining and operating an infrastructure facility or for generating, or for
generating and distributing, power or for providing telecommunication services
whether basic or cellular ;
(ii) infrastructure facility shall have the
meaning assigned to it in the Explanation to sub-section (4) of section
80(1A);
(iii) Public Company shall have the meaning
assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);
(iv) Public Financial Institution shall have the meaning assigned
to it in section 4A of the Companies Act, 1956.
(15) Subscription to any units of any mutual fund
referred to in clause (23D) of section 10 and approved by the Board on
an application made by such mutual fund in the prescribed form:
Provided that where a deduction is claimed and allowed
under this clause with reference to the cost of units the cost of such units
shall not be taken into account for the purposes of sections 54EA and 54EB :
Provided further that this clause shall apply if the
amount of subscription to such units is subscribed only in the eligible issue
of capital of any company.
Explanation:
For the purposes of this clause - eligible issue of capital means an issue
referred to in clause (i) of Explanation
to clause (xvi) in sub-section (2) of section 88.
(16) 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.
The maximum tax-rebate allowable will be Rs. 16,000 generally, and Rs.
17,500 in the case of authors, playwrights, artists, musicians, actors,
sportsmen and athletes. There will, therefore, be an overall limit for savings
which will qualify for tax-rebate. In the case of individuals, the limit on
investments made as above, excluding that mentioned in paras
14 & 15, will be Rs. 60,000 and in the case of
authors, sportsmen etc. Rs. 70,000.
Further, in the case of a taxpayer having a gross
salary of upto Rs. 1.00 lakh where atleast 90% of such
income is from salary income, the amount of rebate under section 88 in such
cases would be thirty per cent. This will, however, be effective from 1st
April. 2002 and will, therefore, apply in relation to the assessment year
2002-2003 and onwards.
(17) Under section 88B, and assessee, being an
individual resident in India, who is of the age of sixty five years or more at
any time during the previous years shall be entitled to a deduction from the
amount of income tax (as computed before allowing the deductions under Chapter
VIII) on his total income, with which he is chargeable for any assessment year,
of an amount equal to one hundred per cent of such income-tax or an amount of
fifteen thousand rupees, whichever is less.
(18) Under section 88C, as inserted by Finance Act,
2000, an assessee, being a woman resident in India, and below the age of
sixty-five years, at any time during the previous year, shall be entitled to a
deduction from the amount of income-tax (as computed before allowing the
deductions under Chapter VIII) her total income, with which she is chargeable
for any assessment year, of an amount equal to hundred per cent, of such income
tax or an amount of five thousand rupees, whichever is less.
(19) 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.
Calculation of income-tax to be deducted
7.1 Salary
income for the purpose of section 192 shall be estimated as follows
:
(a) First compute the gross salary as
mentioned in para 5.1 excluding all the incomes mentioned in para 5.2;
(b) Allow deductions mentioned in para 5.3
from the figure arrived at (a) above.
(c) Allow deductions mentioned in para 5.4
from the figure arrived at (b) above ensuring that aggregate of the
deductions mentioned in para 5.4 does not exceed the figure of (b) and
if it exceeds, it should be restricted to that amount. This will be the amount
of income under the head Salaries on which income-tax would be required to be
deducted. This income should be rounded off to the nearest multiple of ten
rupees.
7.2
Income-tax on the estimated income from salary as shown in para 7.1 shall be
calculated at the rates given in para 2.
7.3 The
amount of tax rebates computed under para 6 shall be deducted from the
income-tax calculated according to para 7.2. However, it is to be ensured that
the tax rebates given as per para 6 is limited to the income-tax calculated as
per para 7.2. Further, tax payable so arrived at shall be increased by
surcharge at the rate of two per cent to arrive at the total tax payable.
7.4 It is
also to be noted that deductions under Chapter VIA of the Act as mentioned in
para 5.4 and the tax rebates as mentioned in para 6 are allowed only if the
investments or the payments have been made out of the income chargeable to tax
during the financial year 2001-2002.
7.5 The
amount of tax as arrived at para 7.3 should be deducted every month in equal
instalments. The net amount of tax deductible should be rounded off to the
nearest rupee.
Miscellaneous :
8.1 These
instructions are not exhaustive and are issued only with a view to helping the
employers to understand the various provisions relating to deduction of tax
from salaries. Wherever there is any doubt, reference may be made to the
provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962 and the
Finance Act, 2001.
8.2 In case
any assistance is required, the Assessing Officer/the local Public Relation
Officer of the Income-tax Department may be contacted.
8.3 These
instructions may please be brought to the notice of all Disbursing Officers and
Undertakings including those under the control of the Central/State
Governments.
8.4 Copies
of this Circular are available with the Director of Income-tax (Research,
Statistics and Publications and Public Relations), 6th Floor, Mayur Bhavan, Indira
Chowk, New Delhi-110 001.
Annexure I
For Assessment year 2002-03
Example - 1
Calculation of Income-tax in the case of an employee
having gross salary income.
|
(i) |
up to Rs. 1,00,000. |
|
|
|
|
(ii) |
More than Rs. 1,00,000 but
less than Rs. 5,00,000 and |
|
|
|
|
(iii) |
Exceeding Rs. 5,00,000 |
|
|
|
|
|
Particulars |
(Rupees) |
(Rupees) |
(Rupees) |
|
|
|
(i) |
(ii) |
(iii) |
|
|
Gross Salary Income |
1,00,000 |
5,00,000 |
6,00,000 |
|
|
(including allowances) |
|
|
|
|
|
Contribution to G.P.F. |
10,000 |
20,000 |
30,000 |
Computation
of total income and tax payable thereon
|
|
|
(Rupees) |
(Rupees) |
(Rupees) |
|
1. |
Gross Salary |
1,00,000 |
5,00,000 |
6,00,000 |
|
2. |
Less Standard deduction |
|
|
|
|
|
u/s 16 (i) |
30,000 |
20,000 |
Nil |
|
|
|
|
. |
|
|
|
Taxable Income |
70,000 |
4,80,000 |
6,00,000 |
|
|
|
|
|
|
|
|
Tax thereon |
3,000 |
1,18,000 |
1,54,000 |
|
|
Less tax
rebate u/s 88 |
3,000 |
4,000 |
6,000 |
|
|
Income-tax payable |
Nil |
1,14,000 |
1,48,000 |
|
|
Add: Surcharge
@ 2% |
|
2,280 |
2,960 |
|
|
|
|
. |
|
|
|
Total Tax Payable |
|
1,16,280 |
1,50,960 |
For Assessment year 2002-03
Example 2
Calculation of Income-tax in the case of assessee
having handicapped dependent.
|
|
Particulars |
(Rupees) |
|
1. |
Gross Salary |
3,20,000 |
|
2. |
Amount spent on treatment of dependent who is
handicapped |
7,000 |
|
3. |
Amount paid to LIC with regard to
annuity for the |
|
|
|
maintenance of handicapped dependent |
40,000 |
|
4. |
G.P.F. contribution |
25,000 |
|
5. |
LIP paid |
10,000 |
Computation of tax
|
1. |
Gross Salary |
|
3,20,000 |
|
2. |
Less Standard
deduction |
|
20,000 |
|
|
|
|
|
|
|
|
|
3,00,000 |
|
|
(Less: Deduction u/s 80DD(1) |
|
40,000 |
|
|
(Restricted to Rs. 40,000
only) |
|
|
|
|
|
|
|
|
|
Taxable Income |
|
2,60,000 |
|
|
|
|
|
|
|
Income-tax thereon |
|
52,000 |
|
|
Rebate u/s 88 |
|
|
|
|
GPF |
25,000 |
|
|
|
LIP |
10,000 |
|
|
|
|
|
|
|
|
Total |
35,000 |
|
|
|
|
|
|
|
|
Rebate @ 20% on Rs. 35,000 |
|
7,000 |
|
|
|
|
|
|
|
Tax payable |
|
45,000 |
|
|
Add:
Surcharge @ 2% |
|
900 |
|
|
|
|
|
|
|
Total Tax payable |
|
45,900 |
|
|
|
|
|
For Assessment year 2002-03
Example 3
2. Calculation of Income-tax in the case of an
employee where Medical Treatment expenditure was borne by the employer.
|
|
Particulars |
(Rupees) |
|
1. |
Gross Salary |
3,00,000 |
|
2. |
Medical reimbursement by employer on the treatment
of self and dependent family member |
30,000 |
|
3. |
Contribution to GPF |
20,000 |
|
4. |
LIP |
20,000 |
|
5. |
Repayment of |
25,000 |
|
6. |
Investment in infrastructure Bond u/s 88 (xvi) |
20,000 |
Computation of Tax
|
Gross Salary |
|
3,00,000 |
|
Add : Perquisite in respect of reimbursement of Medical |
|
15,000 |
|
Expenses in excess of Rs. 15,000 in view of Sec. 17(2)(v) |
|
|
|
|
|
3,15,000 |
|
Less: Standard
deduction |
|
20,000 |
|
|
|
|
|
Taxable Income |
|
2,95,000 |
|
|
|
|
|
Tax thereon |
|
62,500 |
|
Rebate u/s 88 |
|
|
|
GPF |
20,000 |
|
|
LIC |
20,000 |
|
|
Repayment of |
20,000 |
|
|
Advance (Maximum) |
|
|
|
Investment in Infrastructural |
|
|
|
Bonds u/s 88 (xvi) |
20,000 |
|
|
|
|
|
|
Total |
80,000 |
|
|
|
|
|
|
|
|
16,000 |
|
|
|
|
|
|
|
46,500 |
|
|
|
930 |
|
|
|
|
|
|
|
47,430 |
For
Assessment year 2002-03
Example - 4
Illustrating calculation of House Rent Allowance u/s
10 (13A) in respect of residential accommodation situated in
|
|
Particulars |
(Rupees) |
|
1. |
Salary |
49,500 |
|
2. |
Dearness Allowance |
43,680 |
|
3. |
House Rent allowance |
9,600 |
|
4. |
C.C.A. |
1,200 |
|
5. |
House rent paid |
18,000 |
|
6. |
General Provident Fund |
24,000 |
|
7. |
Life Insurance Premium |
2,500 |
|
8. |
Cumulative Time Deposit |
2,400 |
|
9. |
Contribution to Mutual Fund |
12,000 |
Computation of total income
and tax payable thereon
|
1. |
Salary + D.A. + C.C.A. |
|
94,380 |
|
|
House rent allowance |
|
9,600 |
|
|
|
|
|
|
2. |
Total Salary Income |
|
1,03,980 |
|
3. |
Less: House
Rent allowance exempt u/s 10(13A) : Least of |
|
|
|
(a) |
Actual amount of HRA received = 9,600 |
|
|
|
(b) |
Expenditure of rent in excess of 10% of
salary |
|
|
|
|
(including D.A. as presumed that D.A. is
taken |
|
|
|
|
for retirement benefit (18,0009,318 = 8,682) |
|
8,682 |
|
|
|
|
|
|
(c) |
50% of Salary (+Basic) - Rs.
46,590 |
|
95,298 |
|
|
Less :
Standard deduction u/s 16(i) @ 33.33% |
|
|
|
|
or 30,000 whichever is less |
|
30,000 |
|
|
|
|
|
|
|
Total Income (rounded off) |
|
65,300 |
|
|
|
|
|
|
|
Tax on Total Income |
|
2,060 |
|
|
|
|
|
|
|
Rebate u/s 88 |
|
|
|
|
GPF |
24,000 |
|
|
|
LIP |
2,500 |
|
|
|
CTD |
2,400 |
|
|
|
Contribution to Mutual Fund |
10,000 |
|
|
|
|
|
|
|
|
U/s 88(xiiib)
38,900 @ 20% |
7,780 |
|
|
|
Tax on Total Income |
|
2,060 |
|
|
Less Tax
rebate restricted to Rs. |
|
2,060 |
|
|
|
|
|
|
|
Tax payable |
|
Nil |
For Assessment year 2002-03
Example - 5
Illustrating valuation of
perquisite and calculation of tax in the case of an employee of a private
company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two
months. Employee owns a car (cubic capacity of engine exceeds 1.61) used partly
for personal and partly for official work and actual running and maintenance
charges including chauffeurs salary are reimbursed by employer, but no
documents are maintained regarding details of journeys.
|
|
Particulars |
(Rupees) |
|
1. |
Salary |
1,08,000 |
|
2. |
Bonus |
12,000 |
|
3. |
Free gas, electricity, water etc. (actual bills paid
by Company) |
6,000 |
|
4. |
(a) Furnished flat provided to the employee
for which actual rent paid by the Company per annum |
78,000 |
|
|
(b) Hotel rent paid by employer (for two
months) |
30,000 |
|
|
(c) Rent recovered from the employee |
5,000 |
|
5. |
Car expenses reimbursed |
40,200 |
|
6. |
Furniture at cost |
50,000 |
|
7. |
Subscription of Mutual Fund u/s 88 (xvii) |
12,000 |
|
8. |
Life Insurance Premium |
3,000 |
|
9. |
Subscription to NSC VIII Issue |
18,000 |
|
10. |
Contribution to Recognised
PF |
24,000 |
|
11. |
Contribution to infrastructure bonds u/s 88 (xvi) |
15,000 |
Computation of total income
and tax payable thereon
|
1. |
Salary |
|
1,08,000 |
|
|
2. |
Bonus |
|
12,000 |
|
|
3. |
Total Salary for valuation of perquisite @ 10,000
p.m. |
|
1,20,000 |
|
|
4. |
Valuation of perquisites: |
|
|
|
|
(a) |
Perquisite for flat |
|
|
|
|
|
Less of
(10% of salary for ten months) = |
|
|
|
|
|
Rs. 10,000 actual rent paid = Rs.
65,000) |
10,000 |
|
|
|
(b) |
Perquisite for hotel |
|
|
|
|
|
Less of
(24% of salary of 2 months = Rs. 4,800, |
|
|
|
|
|
actual payment = Rs.
30,000) |
4,800 |
|
|
|
(c) |
Perquisite for furniture @ 10% |
5,000 |
|
|
|
|
Less: Rent
recovered from employee |
5,000 |
|
|
|
(d) |
Add perquisite
of free gas, electricity, water |
6,000 |
|
|
|
(e) |
Add perquisite
for car expenses reimbursement |
|
|
|
|
|
(40,200 12(1600 + 600) |
13,800 |
|
|
|
|
Gross total Income |
|
1,54,600 |
|
|
|
Less Standard
deduction u/s 16(i) |
|
25,000 |
|
|
|
Total income |
|
|
1,29,600 |
|
|
Tax on Total Income |
|
14,920 |
|
|
|
Tax Rebate u/s 88 |
|
|
|
|
|
Provident Fund |
24,000 |
|
|
|
|
Subscription to NSC VIII Issue |
18,000 |
|
|
|
|
LIP |
3,000 |
|
|
|
|
Subscription to Mutual Fund |
|
|
|
|
|
approved by the Board |
12,000 |
|
|
|
|
Contribution to Infrastructural Bond |
15,000 |
|
|
|
|
|
|
|
|
|
|
|
72,000 |
|
|
|
|
|
|
|
|
|
|
Tax Rebate @ 20% |
14,400 |
|
|
|
|
Tax on Total Income |
|
14,920 |
|
|
|
Tax rebate (restricted) |
|
14,400 |
|
|
|
Tax Payable |
|
520 |
|
|
|
Surcharge @ 2% |
|
10 |
|
|
|
|
|
|
|
|
|
Tax Payable |
|
530 |
|
For Assessment year 2002-03
Example 6
Illustrating valuation of
perquisite and calculation of tax in the case of an employee of a private
company posted at
|
|
Particulars |
(Rupees) |
|
1. |
Salary |
1,18,000 |
|
2. |
Dearness allowance |
36,000 |
|
3. |
House Rent Allowance |
12,000 |
|
4. |
Special Duties allowance |
2,400 |
|
5. |
Provident Fund |
20,000 |
|
6. |
L.I.P |
10,000 |
|
7. |
Deposit in NSC VIII Issue |
20,000 |
|
8. |
Rent paid by the employee for house hired by him |
24,000 |
|
9. |
Repayment of House Building Loan taken by the
employee from LIC |
12,000 |
|
10. |
Subscription to eligible issue of capital of a |
5,000 |
|
11. |
Subscription to units of mutual fund u/s 88(xvii) |
15,000 |
Computation of total income
and tax payable thereon
|
1. |
Gross Salary |
|
|
1,68,400 |
|
|
Less House
rent allowance exempt u/s 10(13A) |
|
|
|
|
(a) |
Actual amount of HRA received |
|
12,000 |
|
|
(b) |
Expenditure on rent in excess of 10% of |
|
|
|
|
|
salary (including D.A.) as personal D.A. |
|
|
|
|
|
is included for retirement benefits) |
|
8,600 |
|
|
(c) |
50% of salary (including D.A.) |
|
77,000 |
(-) 8,600 |
|
|
|
|
|
|
|
|
Total Salary Income |
|
|
1,59,800 |
|
|
Less:
Standard deduction |
|
|
25,000 |
|
|
|
|
|
|
|
|
Total Taxable Income |
|
|
1,34,800 |
|
|
|
|
|
|
|
|
Tax on total income |
|
|
15,960 |
|
|
Tax rebate u/s 88 |
|
|
|
|
(i) |
Provident Fund |
20,000 |
|
|
|
(ii) |
LIP |
10,000 |
|
|
|
(iii) |
NSC VIII Issue |
20,000 |
|
|
|
(iv) |
Repayment of HBA |
12,000 |
|
|
|
(v) |
Subscription to eligible issue of capital of a |
5,000 |
|
|
|
(vi) |
Subscription of units of mutual fund (u/s 88(xvii) |
15,000 |
|
|
|
|
|
|
|
|
|
|
82,000 limited to |
80,000 |
@20% |
15,960 |
|
|
|
|
|
(restricted) |
|
|
Net Tax Payable |
|
|
Nil |
For
Assessment year 2002-03
Example 7
Income-tax calculation in the
case of an employee who claims loss under the head Income from house property.
|
|
Particulars |
(Rupees) |
|
1. |
Gross Salary |
4,00,000 |
|
2. |
Housing Loan repaid (principal) |
30,000 |
|
3. |
Interest payable on housing loan |
|
|
|
(Loan taken after 1-4-1999) |
2,00,000 |
|
4. |
Donation paid to National Childrens
Fund |
5,000 |
|
5. |
N.S.C. purchased |
10,000 |
|
6. |
G.P.F. |
20,000 |
Computation of Taxable Income
and Tax thereon
|
1. |
Salary Income |
|
|
|
|
Gross Salary |
|
4,00,000 |
|
|
Less:
Standard deduction |
|
20,000 |
|
|
|
|
|
|
|
Taxable Salary |
|
3,80,000 |
|
2. |
Income from house property |
|
|
|
|
Annual value |
Nil |
|
|
|
Interest payable on loan u/s 24 |
2,00,000 |
|
|
|
Loss from house property (maximum allowable) |
|
1,50,000 |
|
|
|
|
|
|
|
Gross Total Income |
|
2,30,000 |
|
|
Less:
Deduction u/s 80G |
|
|
|
|
50% of Rs. 5,000 |
|
2,500 |
|
|
|
|
|
|
|
Net Taxable Income |
|
2,27,500 |
|
|
|
|
|
|
|
Tax thereon |
|
42,250 |
|
|
Less: Rebate
u/s 88 |
|
|
|
|
G.P.F. |
20,000 |
|
|
|
N.S.C. |
10,000 |
|
|
|
Housing loan repaid |
20,000 |
|
|
|
|
|
|
|
|
Total |
50,000 |
|
|
|
|
|
|
|
|
Rebate @ 20% of Rs. 50,000 |
|
10,000 |
|
|
Tax payable |
|
32,250 |
|
|
Add:
Surcharge @ 2% |
|
645 |
|
|
|
|
|
|
|
Total Tax payable |
|
32,895 |
For assessment year 2002-03
Example - 8
Income-tax Calculation in the case of an employee who
claims loss under the head Income from house property loan taken before
1-4-1999
|
|
Particulars |
(Rupees) |
|
1. |
Gross Salary |
4,00,000 |
|
2. |
Housing Loan repaid (Principal) |
30,000 |
|
3. |
Interest payable on Housing Loan (loan taken after
1-4-1999) |
2,00,000 |
|
4. |
Donation paid to National Childrens
Fund |
5,000 |
|
5. |
N.S.C. purchased |
10,000 |
|
6. |
G.P.F. |
20,000 |
Computation of Taxable Income
and Tax thereon
|
1. |
Salary Income |
|
|
4,00,000 |
|
|
Gross Salary |
|
|
|
|
|
Less:
Standard deduction |
|
|
20,000 |
|
|
|
|
|
|
|
|
Taxable Salary |
|
|
3,80,000 |
|
2. |
Income from House Property |
|
|
|
|
|
Annual value |
|
Nil |
|
|
|
Interest payable on loan u/s 24 |
|
2,00,000 |
|
|
|
Loss from House property (maximum |
|
|
|
|
|
allowable for loans taken before 1-4-1999) |
|
|
30,000 |
|
|
Gross total income |
|
|
3,50,000 |
|
|
Less :
Deduction u/s 80G 50% of Rs. 5,000 |
|
|
2,500 |
|
|
Net Taxable Income |
|
|
3,47,500 |
|
|
|
|
|
|
|
|
Tax thereon |
|
|
78,250 |
|
|
|
|
|
|
|
|
Less:
Rebate u/s 88 |
|
|
|
|
|
G.P.F. |
20,000 |
|
|
|
|
N.S.C. |
10,000 |
|
|
|
|
Housing Loan repaid (maximum) |
20,000 |
|
|
|
|
|
|
|
|
|
|
Total |
50,000 |
|
|
|
|
|
|
|
|
|
|
Rebate @ 20% of Rs. 50,000 |
|
|
10,000 |
|
|
Tax payable |
|
|
68,250 |
|
|
Add:
Surcharge @ 2% |
|
|
1,365 |
|
|
|
|
|
|
|
|
Total tax payable |
|
|
69,615 |
|
|
|
|
|
|
For assessment year 2002-03
Example - 9
Income-tax calculation in
the case of a women assessee who is less than age of 65 years.
|
Particulars |
(Rupees) |
|
Gross Salary |
1,20,000 |
|
G.P.F. |
10,000 |
|
N.S.C. purchased |
10,000 |
Computation of Taxable Income
and Tax thereon
|
Gross Salary |
|
1,20,000 |
|
Less Standard
deduction u/s 16(i) |
|
30,000 |
|
|
|
|
|
Taxable Income |
|
90,000 |
|
|
|
|
|
Tax thereon |
|
7,000 |
|
Less:
Rebate u/s 88C (Being women) |
|
5,000 |
|
Less:
Rebate u/s 88 |
|
|
|
G.P.F. |
10,000 |
|
|
N.S.C. |
10,000 |
|
|
|
|
|
|
Total |
20,000 |
|
|
|
|
|
|
Rebate u/s 88 @ 20% of Rs.
20,000 = |
|
|
|
Rs. 4,000 restricted to Rs.
2000 |
|
2,000 |
|
|
|
|
|
Tax payable |
|
Nil |
Note : In
the case of a women assessee who is of 65 years age or more, she will be
entitled to rebate only u/s 88B of the Act meant for Senior citizens and not
u/s 88C of the Act.
Annexure II
Form for sending particulars
of income u/s 192(2B) for the year ending 31st March, 2001
1. Name and address of the employee
2. Permanent Account Number
3. Residential status
4. Particulars of income under any head
of income other than salaries (not being a loss under any such head other than
the loss under the head Income from house property) received in the financial
year
|
(i) |
Income from house property |
.................................. |
|
|
(in case of loss, enclose computation thereof) |
|
|
(ii) |
Profits and gains of business or profession |
.................................. |
|
(iii) |
Capital gains |
.................................. |
|
(iv) |
Income from other sources |
.................................. |
|
(a) |
Dividends |
|
|
(b) |
Interest |
|
|
(c) |
Other incomes (specify) |
|
|
|
Total |
................................. |
.
5. Aggregate of sub-items (i) to (iv) of item 4
6. Tax deducted at source (enclose
certificates) issued under section 203
|
Place : .................................. |
|
|
|
Date : .................................. |
. |
......................................................... |
|
|
|
Signature of the employee |
Verification
I, ..................................., do hereby
declare that what is stated above is true to the best of my knowledge and
belief.
Verified today, the...................day
of..............2001.
|
Place : .................................. |
|
|
|
Date : .................................. |
. |
......................................................... |
|
|
|
Signature of the employee |
Annexure III-A
Form No. 12BA :
Statement showing particulars of perquisites, other fringe benefits or
amenities and profits in lieu of salary with value thereof - See [2001] 118
Taxman 257 (St.)
Annexure III-B
Form No. 16 : Certificate
under section 203 of the Income-tax Act, 1961 for tax deducted as source from
income chargeable under the head Salaries - See [1991] 55 Taxman 21
(St.)
Annexure IV
Rule 2BB : Amendment
in rule 2BB - Income-tax (Eighth Amendment) Rules, 1995 - See [1995]
81 Taxman 18 (St.)
Annexure V
Table of sub-rule (2) of Rule 2BB : Income-tax (Third Amendment) Rules, 2000 - See
[2000] 109 Taxman 421 (St.)
Annexure VI
Rule 2BB : Amendment
in rule 2BB - Income-tax (Seventh Amendment) Rules, 1998 - See
[1998] 98 Taxman 31 (St.)
Annexure VII-A
Notification SO 1048(E), dated 24-11-2000 : See [2000]
113 Taxman 52 (St.)
Annexure VII-B
Notification SO 81(E), dated 29-1-2001 : See [2001]
115 Taxman 183 (St.)
Annexure VIII
Form No. 10BA :
Declaration to be filed by the assessee claiming deduction under section
80GG - Income-tax (Nineteenth Amendment) Rules, 1998 - See [1998]
100 Taxman 110 (St.).
[`1]*See CIT v. Mahendra Mills [2000] 243 ITR 56/109 Taxman 226 (SC)