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PUNJAB GRAMIN BANK
H.O: JALANDHAR ROAD
KAPURTHALA
01.02.2013
TO ALL OFFICES
Cir No. HRD/01/2013
INCOME TAX CIRCULAR NO. HRD/01/2013
DEDUCTION OF INCOME-TAX AT SOURCE FROM THE SALARIES OF
EMPLOYEES - FOR THE FINANCIAL YEAR 2012-2013
The Income Tax Act, 1961, imposes the responsibility of deducting tax at source at specified
rates from certain payments including salary and perquisites.
The relevant provisions of the Income Tax Act, 1961, in relation to deduction of Tax at
source on salary as amended by the Finance Act, 2012, are given hereunder for meticulous
compliance thereof.
[A] Definition of Salary [Sec. 17(1)]:
“Salary” includes wages, annuity, pension, gratuity, any fee, commission, perquisites or
profits in lieu of or in addition to any salary or wages, any advance of salary, leave
encashment, interest on Provident Fund over and above the interest rate fixed by the Central
Government through their notification from time to time.
Note: Dearness Allowance (D.A.), City Compensatory Allowance (C.C.A.) or any
other cash allowance given by the bank is taxable.
[B] The rules for valuation of perquisites are as under:
[B](1) Residential Accommodation
The value of perquisite of a residential accommodation provided by the Bank during
the previous year shall be determined on the basis of details provided in the table
below:
S.
Circumstances
No
.
(1)
(2)
(1) Where the accommodation
is provided by the Bank.
(a) where the
accommodation is owned
by the Bank.
Where the
accommodation is
unfurnished
(3)
Where the accommodation
is furnished
i)
The value of perquisite as
determined under col. (3) and
increased by 10% per annum of
the cost of furniture (including
television sets, radio sets,
refrigerators, other household
appliances, air conditioning
plant or equipment or other
similar appliances or gadgets)
or if such furniture is hired
from a third party, by the actual
hire charges payable for the
15% of ‘salary’ in
cities
having
population
exceeding 25 lakhs
as per 2001 census;
ii) 10% of ‘salary’ in
cities
having
population exceeding
10lakhs
but
not
exceeding 25 lakhs as
per 2001 census;
iii) 7.5% of ‘salary’ in
(4)
1
(b) where the
accommodation is taken on
lease or rent by the Bank.
other areas in respect
of the period during
which
the
said
accommodation was
occupied by the
employee during the
previous year as
reduced by the rent,
if any, actually paid
by the employee.
Actual amount of
lease rental paid or
payable by the Bank
or 15% of salary
whichever is lower as
reduced by the rent,
if any, actually paid
by the employee.
(2) Where the accommodation Not applicable.
is provided by the Bank in a
hotel (except where the
employee is provided such
accommodation
for
a
period not exceeding in
aggregate 15 days on his
transfer from one place to
another).
same as reduced by any charges
paid or payable for the same by
the employee during the
previous year.
The value of perquisite as
determined under col. (3) and
increased by 10% per annum of
the cost of furniture (including
television sets, radio sets,
refrigerators, other household
appliances, air conditioning
plant or equipment or other
similar appliances or gadgets)
or if such furniture is hired
from a third party, by the actual
hire charges payable for the
same as reduced by any charges
paid or payable for the same by
the employee during the
previous year.
24% of salary paid or payable
for the previous year or the
actual charges paid or payable
to such hotel, which is lower,
for the period during which
such
accommodation
is
provided as reduced by the rent,
if any, actually paid or payable
by the employee.

Salary for this purpose means Basic Pay and other pay which are taken for the
purpose of computing retirement benefit.

If on account of an employee’s transfer from one place to another the employee is
provided with accommodation at the new place of posting while retaining the
accommodation at the other place, the value of perquisite shall be determined with
reference to only one such

Accommodation which has the lower value as per the above table for a period up to
90 days. However, after the period of 90 days, the value of perquisite shall be
charged for both accommodations as prescribed.
[B] (2) Valuation of perquisite in respect of interest free loan or loan at concessional
rate of interest (Rule 3(7)(i))
Value of perquisites in respect of interest free or concessional loans made available by the
Bank to the employee or any member of his household shall be worked out taking interest
rates as on 1.4.2012 of similar loans granted by State Bank of India for the same purpose.
SBI rates on some loans are i) Housing Loan Upto Rs. 20 lacs – 10.75 % p.a , ii) Car
Loan – 12 % p.a iii) Personal Loan – 18.5% p.a. iv) two wheeler loan 18.25% p.a..
2
Interest is calculated on the maximum outstanding monthly balance as reduced by interest,
if any, actually paid by the employee or any member of his / her household.
‘Maximum outstanding monthly balance’ means the aggregate outstanding balance for
each loan as on the last day of each month’;
The perquisite would, however, be not charged to tax if:

Loan is made available for medical treatment in respect of diseases specified in rule
3A (the exemption is, however, not applicable to so much of the loan as has been
reimbursed to the employee under any medical insurance scheme).

The amount of original loan(s) does not exceed in the aggregate Rs. 20,000/‘Member of household’ includes spouse(s), children and their spouses, parents,
servants and dependants;
[B](3) Leave Travel Concession - Section 10(5) Read with Rule 2B
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) after 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.
Amount is exempt to the extent amount is actually spent on travel:
Where journey is by air
: Upto economy fare of Air India by
shortest route
Journey other than air (Direct rail : Not exceeding A/C first class Rail fare
connection)
by shortest route.
Where place of origin and destination or part thereof is not connected by Rail
Where a recognized public transport : 1st Class or deluxe fare by shortest route
system exist
Where no recognized public transport : An amount equivalent to the A/C 1st
system exist
Class Rail fare by shortest route for the
distance of journey

The exemption referred to above shall be available to an individual in respect of
two journeys performed in a block of four calendar years commencing from the
calendar year 1986, irrespective of the block in which the employee falls as per
his service conditions.

In the event of an employee being unable to avail the leave travel concession
during a block of 4 calendar years, it can be availed of by him in the first calendar
year of the next block of 4 calendar years after taking necessary approval of
Competent Authority and this would be ignored for deciding the taxability of
leave fare concession availed by him in the subsequent block.

3


For the purpose of this section, family means the spouse and children and also
includes parents, brothers and sisters or any of them, wholly or mainly dependent
on the employee.

The exemption is not available for the third child if the third child is born on or
after 1st October, 1998. However, this restriction is not applicable in case of
multiple births after the birth of the 1st child.
Note: Fixed sum paid to employees by way of leave travel allowance on the basis of
self declaration made by employee would not be exempt.
[B](4) Provident Fund Dues [Section 10(12)] Tax treatment of Recognised Provident
Fund:
Tax treatment of contribution made by employer, employee and interest accrued
thereon is given in the table below:
Item
Employer’s contribution
Employee’s contribution
Interest on deposit
Tax Treatment
Contribution in excess of 12% of Basic Pay is taxable in
the hand of employees.
Employee can claim deduction under section 80C.
Exempt from tax upto rate of interest fixed by the Central
Government from time to time presently it is 9.5%.
Tax treatment of accumulated Balance of Provident Fund A/c of an Employee
The accumulated balance due and becoming payable to an employee participating in a
recognized provident fund shall be excluded while computing his total income:
i)
If, he has rendered continuous service with the employer for a period of five
years or more, or
ii)
If, though he has not rendered such continuous service, his service has been
terminated by reason of the employee's ill-health or by the contraction or
discontinuance of the employer's business or due to any other cause beyond
the control of the employee, or If, on the cessation of employment, the
employee obtains employment with any other employer, to the extent the
accumulated balance due and becoming payable to him is transferred to his
individual account in any recognized provident fund maintained by such other
employer.
Note:
Where the accumulated balance due and becoming payable to an employee
participating in a recognized provident fund maintained by his employer includes any,
amount transferred from his individual account in any other recognized provident
fund or funds maintained by his former employer or employers, then, in computing
continuous service for the purpose of sub- clause (i) or sub-clause (ii) above, the
period or periods for which he rendered services with former employer or employers
shall be included.
[B](5) The amount of any contribution to an approved superannuation fund by the employer
in respect of the employee, to the extent it exceeds one lakh rupees is taxable in the
hand of the employee.
4
[B](6) Perquisites of motor car:
VALUE OF PERQUISITE PER CALENDAR MONTH AS PER RULE 3(2)(A) OF
INCOME TAX RULES, 1962
Sl.
Circumstances
No.
(1)
(2)
Where cubic capacity
of engine does not
exceed 1.6 liters
(3)
Where cubic capacity
of engine exceeds 1.6
liters
(4)
(1)
Where the motor car is owned
or hired by the employer and
(a)
is used wholly and exclusively
in the performance of his
official duties;
No value: Provided that
the documents specified in
clause (B) of this sub-rule
are maintained by the
employer.
No value: Provided that
the documents specified
in clause (B) of this subrule are maintained by the
employer.
(b)
is used exclusively for the
private or personal purposes
of the employee or any
member of his household and
the running and maintenance
expenses
are
met
or
reimbursed by the employer;
Actual
expenditure
incurred by the employer
including remuneration, if
any, paid to the chauffeur
plus
the
amount
representing normal wear
and tear of the motor car
and less any amount
charged
from
the
employee for such use.
Actual
expenditure
incurred by the employer
including remuneration, if
any, paid to the chauffeur
plus
the
amount
representing normal wear
and tear of the motor car
and less any amount
charged
from
the
employee for such use.
(c)
is used partly in the
performance of duties and
partly for private or personal
purposes of his own or any
member of his household and
Rs. 1,800 (plus Rs. 900,
if chauffeur is also
provided)
Rs. 2,400 (plus Rs. 900, if
chauffeur is also provided
)
Rs. 600 (plus Rs. 900, if
chauffeur is also provided
)
Rs. 900 (plus Rs. 900, if
chauffeur is also provided
)
(i) the
expenses
on
maintenance and running
are met or reimbursed by
the employer,
(ii) the expenses on running
and maintenance for such
private or personal use are
fully
met
by
the
employee.
(2)
Where the employee owns a
motor car but the actual
running and maintenance
charges
(including
remuneration of the chauffeur,
if any) are met or reimbursed
to him by the employer and
(i) such reimbursement is
for the use of the vehicle
wholly and exclusively
for official purposes,
No value:
Provided that the
documents specified in
clause (B) of this sub-rule
are maintained by the
employer.
No value:
Provided
that
the
documents specified in
clause (B) of this sub-rule
are maintained by the
employer.
5
(ii)
(3)
such reimbursement is
for the use of the vehicle
partly
for
official
purposes and partly for
personal
or
private
purposes
of
the
employee
or
any
member
of
his
household.
Where the employee owns
any
other
automotive
conveyance but the actual
running and maintenance
charges are met or reimbursed
to him by the employer and
(i) such reimbursement is for
the use of the vehicle
wholly and exclusively for
official purposes,
(ii)such reimbursement is for
the use of the vehicle
partly
for
official
purposes and partly for
personal
or
private
purposes
of
the
employee.
Subject to the provisions
of clause(B)of this subrule, the actual amount of
expenditure incurred by
the employer as reduced
by the amounts specified
in Sl.No.(1)(c)(i) above
No value:
Provided that the
documents specified in
clause (B) of this sub-rule
are maintained by the
employer.
Subject to the provisions
of clause(B)of this subrule, the actual amount of
expenditure incurred by
the employer as reduced
by an amount of Rs.900.
Subject to the provisions
of clause(B)of this subrule, the actual payment
of expenditure incurred
by the employer as
reduced by the amounts
specified in Sl.No.(1) (c)
(i) above
}
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} Not applicable
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Provided that where one or more motor-cars are owned or hired by the employer and the
employee or any member of his household are allowed the use of such motor-car or all or any
of such motor-cars (otherwise than wholly and exclusively in the performance of his duties),
the value of perquisite shall be the amount calculated in respect of one car in accordance with
Sl. No. (1)(c)(i) of Table above as if the employee had been provided one motor-car for use
partly in the performance of his duties and partly for his private or personal purposes and the
amount calculated in respect of the other car or cars in accordance with Sl. No. (1)(b) of
Table above as if he had been provided with such car exclusively for his private or personal
purposes.
Documents specified as per Clause (B)
Where the employer or the employee claims that the motor-car is used wholly and
exclusively in the performance of official duty or that the actual expenses on the running and
maintenance of the motor-car owned by the employee for official purposes is more than the
amounts deductible in Sl. No. 2(ii) or 3(ii) of Table above, he may claim a higher amount
attributable to such official use and the value of perquisite in such a case shall be the actual
amount of charges met or reimbursed by the employer as reduced by such higher amount
attributable to official use of the vehicle provided that the following conditions are fulfilled:
(a) the employer has maintained complete details of journey undertaken for official
purpose which may include date of journey, destination, mileage, and the amount
of expenditure incurred thereon;
(b) the employer gives a certificate to the effect that the expenditure was incurred
wholly and exclusively for the performance of official duties.
6
Explanation: For the purposes of this sub-rule, the normal wear and tear of a motor-car shall
be taken at 10% per annum of the actual cost of the motor-car or cars.
[B](6)
The value of free food and non-alcoholic beverages provided by the employer,
to an employee shall be the amount of expenditure incurred by such employer.
Provided that nothing contained in this clause shall apply to free food and non-alcoholic
beverages provided by such employer during working hours at office or business
premises or through paid vouchers which are not transferable and usable only at eating
joints, to the extent the value thereof in either case does not exceed Rs. 50 per meal or
to tea or snacks provided during working hours or to free food and non-alcoholic
beverages during working hours provided in a remote area or an off-shore installation.
The amount so determined shall be reduced by the amount, if any, paid or recovered
from the employee for such benefit or amenity
[B](7) The value of any gift in kind, or voucher, or token in lieu of which such gift may
be received by the employee or by member of his household on ceremonial occasions or
otherwise from the employer, shall be determined as the sum equal to the amount of such gift.
However, where the value of such gift, voucher or token, as the case may be, is below Rs.
5,000/- in the aggregate during the previous year, the value of perquisite shall be taken as
nil. Gift made in cash or convertible into money (like gift cheques) are considered as
perquisites and valued on actual cost.
[B](8) The amount of expenses including membership fees and annual fees incurred by
the employee or any member of his household, which is charged to a credit card (including
any add-on-card), provided by the employer, or otherwise, paid for or reimbursed by such
employer shall be taken to be the value of perquisite chargeable to tax. However, there shall
be no value of such benefit where the expenses are incurred wholly and exclusively for
official purposes and the following conditions are fulfilled
(a) Complete details in respect of such expenditure are maintained by the employer
which may, inter alia, include the date of expenditure and the nature of
expenditure;
(b) The employer gives a certificate for such expenditure to the effect that the same
was incurred wholly and exclusively for the performance of official duties.
The amount so determined shall be reduced by the amount, if any paid or recovered
from the employee for such benefit or amenity.
[B](9) The value of benefit to the employee resulting from the payment or
reimbursement by the employer, of any expenditure incurred (including the amount of
annual or periodical fee) in a club by him or by any member of his household shall be
determined to be the actual amount of expenditure incurred or reimbursed by such employer
on that account. The amount so determined shall be reduced by the amount, if any paid or
recovered from the employee for such benefit or amenity.
However, where the employer has obtained corporate membership of the club and the facility
is enjoyed by the employee or any member of his household, the value of perquisite shall not
include the initial fee paid for acquiring such corporate membership.
Nothing contained in this clause shall apply if such expenditure is incurred wholly and
exclusively for business purposes and the following conditions are fulfilled:
7
(a) complete details in respect of such expenditure are maintained by the employer
which may, inter alia, include the date of expenditure, the nature of expenditure
and its business expediency;
(b) the employer gives a certificate for such expenditure to the effect that the same
was incurred wholly and exclusively for the performance of official duties;
(c) nothing contained in this clause shall apply for use of health club, sports and
similar facilities provided uniformly to all employees by the employer.
[B](10) Use of employer’s moveable assets [Rule 3(7)(vii)]
Benefit for use of moveable assets other than specified elsewhere in the circular,
belonging to employer or hired by him shall be determined @ 10% p.a. of the actual
cost of such asset or the amount of rent paid or payable by the employer as reduced by
the amount, if any, paid or recovered from the employee for such use.
Exceptions: Computer / laptop given to an employee for official / personal use.
[B](11) Transfer of employer’s moveable assets [Rule 3(7)(viii)]
The value of benefit is the actual cost of the asset and as reduced by wear and tear
and be, further, reduced by the amount, if any, paid or recovered from the employee.
Wear & Tear
For computer & electronic items wear & tear is 50% by reducing balance method.
For motor cars wear & tear is 20% by reducing balance method.
For other assets it is 10% of actual cost of such asset for each completed year
during which asset was put to use by employer.
[B](12) The value of any other benefit or amenity, service, right, or privilege provided by the
Bank shall be determined on the basis of cost to the Bank under an arm’s length transaction
as reduced by the employee’s contribution, if any.
Provided that nothing contained in this clause shall apply to expenses on telephones
including a mobile phone actually incurred on behalf of the employee by the employer.
[C] Exemptions (Sec. 10):
The following payments to the employees are exempt from the scope of taxable
salary to the extent provided under the law:
[C](1) Gratuity [Section 10(10)]
Gratuity received by an employee on his retirement or on his becoming incapacitated prior to
such retirement or on termination of his employment or by his legal heir(s) on his death, is
exempt from Income Tax subject to the following conditions:
In the case of received payment in terms of Payment of Gratuity Act, 1972
Gratuity received by an employee is exempted from tax to the extent of least of followings:
8
(i)
15 days salary based on the salary last drawn for every completed year of
service or part thereof in excess of 6 months.
(ii)
Rs. 10,00,000/-, or
(iii)
Gratuity actually received.
In the case of an employee received payment in terms of service conditions :
(i)
Half month's salary for each completed year of service, calculated on the
basis of average salary of 10 months immediately preceding the month, in
which any of the above referred events occur.
(ii)
Rs.10,00,000/- ,or
(iii)
Gratuity actually received.

Gratuity in excess of the least of the aforesaid limits is taxable in the hands of the
recipient. Therefore, the amount in excess of the aforesaid limits is includible in salary
for the purpose of tax deduction at source under section 192. However, relief can be
claimed under section 89.

Salary for this purpose means Basic Pay last drawn and Dearness Allowance, if the
terms of employment so provide, but does not include any bonus, commission, HRA,
overtime wages and any other allowance.
[C](2) Encashment of Privilege Leave on Retirement [Section 10 (10AA)]
Encashment of Privilege Leave is exempt from tax when received at the time of retirement
whether on superannuation or otherwise to the extent of least of the following:
(a) 10 months average salary (calculated on the basis of the average salary drawn by
the employee during the period of ten months immediately preceding his
retirement, whether on superannuation or otherwise)
(b) Rs.3,00,000/(c) Amount actually received
Other Important Points:

The entitlement to earned leave of an employee shall not exceed 30 days for every
year of actual service rendered by him as an employee. [Explanation to Section
10(10AA)(ii)].

Where any such payment or payments was or were received on
termination/cessation of an earlier employment in any one or more earlier financial
years also and the whole or any part of the amount of such payment or payments
was or were not included in the total income of the employee of such previous year
or years, the amount exempted from Income Tax under this clause shall not exceed
Rs. 3,00,000/- (Rs. Three lakh only) as reduced by the amount or, as the case may
be, the aggregate amount not included in the total income of any such earlier
financial year or years.

Salary for this purpose means Basic and others pay including dearness allowance as
per the terms of employment .All other allowances and perquisites are not to be
included for this purpose.
[C](3)
Commutation of Pension [Section 10(10A)(ii)]
9
If the gratuity is not received commuted value of half of Pension received by
employee is exempt.
If the gratuity is received commuted value of one third of Pension received by
employee is exempt.
[C](4)
House Rent Allowance: [Section 10(13A) Read With Rule 2A]
The House Rent Allowance, least of the following, received by an employee from the
employer to the extent of the limits, and subject to the conditions, is not to be
included in the taxable income;
(i)
The actual amount of House Rent Allowance received by the employee in
respect of the relevant period; or
(ii)
The actual expenditure incurred in payment of rent in excess of 1/10th of
salary due of the relevant period; or
(iii)
Where such accommodation is situated at Mumbai, Kolkata, Delhi or
Chennai, 50% of the salary due to the employee for the relevant period;
or
Where such accommodation is situated at any other place, 40% of the salary
due to the employee for the relevant period;
Other Important Points:

Salary for this purpose means Basic and other pay as per the terms of
employment. All other allowances and perquisites are not to be included for this
purpose.

Relevant period means the period during which the employee occupied the said
accommodation during the financial year.
It may be clarified here that house rent allowance received by an employee, for
staying in his own house or in a house in which he/she does not pay any rent is
fully taxable without any exemption.


[C](5)
The Branch Manager should satisfy by insisting on production of evidence of
actual payment of rent, before excluding HRA or any portion thereof from total
income of employee.
Amount Received on Voluntary Retirement [Section 10(10C)]
An amount not exceeding Rs.5,00,000/- received or receivable by an employee at the
time of his voluntary retirement, or termination of service under a scheme of
voluntary separation is exempt.
However, where any relief has been allowed to an assessee under section 89 for any
assessment year in respect of any amount received or receivable on his voluntary
retirement or termination of service or voluntary separation, no exemption under this
clause shall be allowed to him in relation to such, or any other, assessment year.
[C](6)
Notified Exempted Allowances {Sec.10(14) and Rule 2BB}
Section 10(14)(i) – The following allowances are exempt to the extent expenses
actually incurred for that purpose. The same are listed below {Rule 2BB(1)}
10
i).
ii).
iii).
iv).
v).
Cost of travel and D.A on tour / transfer and cost of packing & transportation
of personal effects on such transfer.
Conveyance allowance for performance of duty provided free conveyance is
not provided.
Helper allowance, where such helper is engaged for the performance of duties.
Allowance for encouraging the academic, research and training pursuits in
educational and research institutes.
Allowance for purchase / maintenance of uniform for wear during the
performance of duties.
Section 10(14)(ii) – The following allowances are exempt irrespective of expenses
that are actually incurred for that purpose. The list of the relevant allowances are
given below {Rule 2BB(2)}
i).
ii).
iii).
iv).
v).
vi).
vii).
viii).
ix).
x).
xi).
Special Compensatory Allowance (Hilly areas) -Rs.300 to Rs.7000 p.m.
Special Compensatory Allowance (Border areas)-Rs.200 to Rs.1300 p.m.
Special Compensatory Allowance (Tribal areas)-Rs.200 p.m.
Children Education Allowance - Rs.100 p.m. per child upto two children
Children Hostel Allowance - Rs.300 p.m. per child upto two children.
Compensatory Field area allowance-Rs.2600 p.m.
Compensatory Modified Field area allowance-Rs.1000 p.m.
Transport allowance for journey between Residence & Office - Rs.800 p.m.
Transport allowance for journey between Residence & Office (physically
handicap) - Rs.1600 p.m.
Underground allowance-Rs.800 p.m.
Any other specified allowance as per Rule 2BB
[C](7) Section 10(15)(i)- Post Office Saving Bank interest exemption
Post office saving bank interest is exempt upto Rs.3,500/- (in an individual account)
and Rs.7,000/- in a joint account under section 10(15)(i) by virtue of notification
no.32/2011 dated 03.06.2011 read with notification no.GSR 607 dated 09.06.1989.
[D] Professional Tax [Deductible Under Section 16 (iii)]:
Any sum paid by the employee on account of tax on employment i.e. Professional Tax
is deductible from the taxable income.
[E](1) In a case where an employee joins the office during the year, it is mandatory for him
to fill Form 12B furnishing the details of income under section 192(2) from his
previous employer, if any.
[E](2) Inclusion of Other Incomes for Deducting Tax from Salary at Source at the
Option of the Employee (Rule 26B):
Where an employee is in receipt of any income chargeable 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"), he may submit in a statement, the particulars of such income
and the tax deducted from that income. On receipt of such intimation, the Bank shall take into
account such income and the tax deducted there from while arriving at the tax deductible
from the salaries. The employee can set off loss under head “income from house property”
from the salary income. Such set off can be affected by the Bank and can deduct tax at source
11
on such reduced income. The employee is required to furnish the statement duly verified to
the Bank. Verification in the following form shall be annexed to the statement.
FORM OF VERIFICATION
I, ___________________(NAME OF EMPLOYEE), DO DECLARE THAT WHAT IS STATED
ABOVE IS TRUE TO THE BEST OF MY INFORMATION AND BELIEF.
[E] (3)Income/Loss from house property declared by the employee
The guidelines for computing income/loss in case of let out and self-occupied house
property are given below for ready reference of the employees:
(a) For let-out House Property
Following deductions are allowed from let out house property:
(i)
Deduction is allowed equal to thirty percent of the annual value of the house
property.
(ii)
Where property has been acquired, constructed, repaired, renewed or
reconstructed with borrowed capital, the amount of any interest payable on
such capital. Here, it is pertinent to mention that there is no monetary ceiling
of deduction on account of interest on loan taken for above mentioned
purposes.
(b) For Self Occupied House Property
Following deductions are allowed from self-occupied house property:
(i)
Deduction up to Rs. 30,000/- is allowed in respect of interest on borrowed
capital if loan is taken before 01.04.1999 while computing income/loss under
the head “Income from house property” provided that residential house is a
self occupied house or lying vacant on the fact that employee is posted at
another station.
(ii)
Deduction on account of interest up to Rs. 1,50,000/- is available if such loan
has been taken on or after 01.04.1999 and construction /acquisition of such
residential house has been completed within 3 years from the end of financial
year in which loan was taken.
(iii)
For the purpose of repairs or renovation of an existing house, deduction upto
Rs. 30,000/- is allowed in respect of interest on borrowed capital.
(iv)
For claiming deduction the employee should furnish a certificate from the
person extending the loan to the effect that such interest is payable in respect
of the amount borrowed for acquisition /construction of the residential house
or as a refinance of the principal amount outstanding under an earlier loan
taken for such acquisition/construction.
(c) In case of a self occupied residential house/one vacant house due to the fact
that the employee is posted at another station
(amount in Rs.)
Annual value
Nil
12
Less: Interest paid on money borrowed subject to the limits
a) If the loan actually availed on or before 31.3.99 then the
actual interest paid but not exceeding Rs.30,000/b) If the loan actually availed on or after 1.4.99 then the
actual amount of interest paid but not exceeding
Rs.1,50,000
Income/Loss from house property.
Notes:
I. Date of availment of loan will be the date on which the loan is actually
disbursed.
II. It is possible that part of the loan is availed before 1.4.1999 and part of
the loan is availed on or after 1.4.1999. In such cases if the interest on the loan
availed on or after 1.4.1999 is more than Rs.30,000/-, then, this interest will be
allowed subject to a maximum of Rs.1,50,000/-. Otherwise the maximum amount
will be restricted to Rs.30,000/-.
III. The initial repayment installment will first go to adjust the loan availed
first i.e. before
1.4.1999.
IV. The above specified limit of Rs.30,000/- or Rs.1,50,000/- as the case
may, would also include 1/5th of interest charged on the house building loan
before such house was completed.
V. If capital is borrowed for reconstruction, repairs or renewals of a house
property then the maximum amount of deduction on account of interest is
Rs.30,000/-.
VI. The final deduction of tax is required to be made before 31st March of
each year. However, the employee can claim deduction for interest accrued and
due on housing loan till 31st March each year. Therefore, the Bank may make
estimate of the actual interest chargeable/which would accrue up to 31st March
each year on the basis of available Housing Loan balance and installments being
paid by the employee and the estimated interest for the whole year, should be
allowed as a deduction.
(d) Income/Loss from Property neither Occupied nor Let Out
Where the house property cannot be occupied by the employee due to the fact that he
has been posted at a different station and the property is not let out or put to any other
use, then, the annual value of such house property should be treated as NIL.
However, this treatment is available to only one house property owned by the
employee
In all other cases, like the employee having a vacant house property where he is
working or he has more than one house property at a place different from his place of
working, then, the annual value is taxable.
[F]
Deduction Allowable under Chapter VI-A of the Act
Deductions granted under section 80C to 80U
While computing salary for the purpose of tax deduction at source under section 192,
the person responsible for paying salary should give deductions under sections 80C,
80CCC, 80CCD, 80CCF, 80CCG, 80D, 80DD, 80E, 80G, 80GG, 80TTA and 80U.
13
Deduction under other sections of chapter VIA will have to be claimed by employees,
separately at the time of finalisation of assessment. Some important deductions for
employees, available under this chapter are discussed as under:
[F](1) Section 80C
Section 80C provides deduction in respect of specified qualifying amounts paid or
deposited by the employee in the financial year. As per Section 80CCE of the Act,
aggregate deductions under section 80C, 80CCC and 80CCD shall not exceed
Rs.1 lakh. Under Section 80C deduction is available from gross total income.
The Eligible savings/investments as per Provisions of Section 80C are given
below:
[F](1)(a) Payment of Insurance premium to effect or keeping in force an insurance on the
life of the individual, spouse or any child subject to a maximum of 10 per cent of
actual sum assured (sum assured does not include any premium agreed to be
returned or any benefit by way of bonus). However, the limit of 10% is applicable
only in the case of policies issued on or after April 1, 2012. In respect of policies
issued prior to April 1, 2012, the earlier limit of 20% of actual sum assured will
be applicable.
(a)(i) Discontinuation of insurance policy before 2 years Where a tax payer discontinues a policy of life insurance before premium for 2
years has been paid, no tax deduction is allowed in respect of any premium paid
on that policy in the year in which the policy is terminated. Further, the amount
of tax deduction allowed in respect of the premium paid in respect of the policy in
the year preceding that year shall be deemed to be the tax payable by the
employee of the year in which the policy is terminated.
In the case of any single premium policy, if such policy is surrendered within two
years of the date of commencement of insurance, the amount of deduction of
income tax allowed earlier shall be deemed to be the tax payable in the year of
surrender.
[F](1)(b) Payment in respect of contract of deferred annuity plan taken in the name on the
life of the individual, the spouse or any child of the individual, provided that such
contract does not contain a provision for the exercise by the insured of an option
to receive a cash payment in lieu of the payment of the annuity.
[F](1)(c) Contribution (not being repayment of loan) towards statutory provident fund and
recognized provident fund.
[F](1)(d) Contribution (not being repayment of loan) towards 15 year Public Provident Fund.
In the case of an individual, the account should be in his own name or in the name
of his/her spouse or any child.
[F](1)(e) Contribution towards an approved superannuation fund.
[F](1)(f)
Subscription to National Savings Scheme.
[F](1)(g) Subscription to National Savings Certificates, VIII issue i.e. those issues on which
interest is accumulated and reinvested and paid at the time of maturity only.
Accrued interest (which is deemed as reinvested) also qualifies for deduction for
first 5 years.
14
The cumulative rate of interest applicable to each year is given in the table below:
Amount of Interest (Rs.) accruing on certificates in denomination of Rs.100/The Year for which interest If
NSCs If
NSCs If
NSCs
accrues
purchased purchased purchased
between
between
on or after
01.03.03 - 01.12.11 - 01.04.12
30.11.11
31.03.12
First Year
8.16
8.58
8.78
Second Year
8.83
9.31
9.56
Third Year
9.55
10.11
10.40
Fourth Year
10.33
10.98
11.31
Fifth Year
11.17
11.92
12.30
Sixth Year
12.08
NA
NA
Note: The amount of interest accruing on a certificate of any other
denomination shall be proportionate to the amount specified in the Table
above.
[F](1)(h) Contribution for participating in the unit-linked insurance plan (ULIP) of Unit
Trust of India or unit-linked insurance plan of LIC Mutual Fund. In the case of an
individual, ULIP should be taken on his own life, life of the spouse or any child.
(i)Termination of unit linked insurance plan before 5 years
Where a member participating in the unit linked insurance plan terminates his
participation before making contribution for a period of five years, no tax
deduction is allowed in respect of contributions made in such year. Moreover, an
amount equal to an aggregate of tax deductions allowed in respect of
contributions to the plan in the past years shall be deemed as tax payable by the
employee of the previous year in which he terminates his participation in the plan.
[F](1)(i) Payment for notified annuity plan of LIC (i.e. New Jeevan Dhara, New Jeevan
Akshay, New Jeevan Dhara I, New Jeevan Akshay I, New Jeevan Akshay II, New
Jeevan Akshay III and New Jeevan Akshay VI), Annuity Plan of the ICICI Prudential
Life Insurance Company Limited and Tata AIG Easy Retire Annuity Plan of the Tata
AIG Life Insurance Company Limited etc.
[F](1)(j) Subscription towards notified units of Mutual Fund notified under section 10(23D)
or from administrator or specified company under any plan formulated in accordance
with Equity Linked Saving Scheme 1992, 1998 and 2005. The lock in period is three
years.
[F](1)(k) Contribution to notified pension fund set up by Mutual Fund referred to in clause
23D of section 10 or by administrator or the specified company, as the Central
Government may by notification in official gazette specify in this behalf.
[F](1)(l) Any sum paid (including accrued interest) as subscription to Home Loan Account
Scheme of the National Housing Bank or contribution to any notified pension fund
set up by the National Housing Bank.
[F](1)(m) Any sum paid as subscription to any scheme of
i. public sector company engaged in providing longterm finance for purchase or construction of residential houses in India
15
ii. 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.
[F](1)(n) Any sum paid as tuition fees (not including any payment towards development fees
or donation or payment of similar nature) whether at the time of admission or
thereafter to any university/college/ school or other educational institution situated in
India for full time education for any two children. It is also clarified that full time
education includes play school activities, pre nursery classes.
"Other educational institution" has not been defined. Consequently, it also
includes any educational institution in India (recognized or unrecognized)
offering a course of education whether or not leading to a degree or diploma.
[F](1)(o) Any payment towards the cost of purchase or construction of a residential property
(including repayment of loan taken from Government, bank, cooperative bank, LIC,
National Housing Bank, employee's employer where such employer is public
company/public sector company/university/cooperative society).
[F](1)(o)(I)The following payment made towards the cost of purchase/construction of a
new residential house property is qualified for the purpose of section
80C:
i)
any installment or part payment of the amount due under any selffinancing or other scheme of any development authority, housing board or
other authority engaged in the construction and sale of house property on
ownership basis; or
ii)
any installment or part payment of the amount due to any company or
cooperative society of which the employee is a shareholder or member
towards the cost of the house property allotted to him (it is not applicable
if the employee is not a shareholder or member of the
company/cooperative society which provides house to the employee); or
repayment of amount borrowed by the employee from –
iii)

the Central Government or any State Government, or

any bank, including a co-operative bank, or

the Life Insurance Corporation of India, or

the National Housing Bank, or

any public company formed and registered in India with the main
object of carrying on the business of providing long-term finance for
construction or purchase of houses in India for residential purposes
which is eligible for deduction under section 36(1)(viii), or

any company in which the public are substantially interested or any
co-operative society, where such company or co-operative society is
engaged in the business of financing the construction of houses, or

the employee's employer where such employer is an authority or a
board or a corporation or any other body established or constituted
under a Central or State Act, or

16


iv)
the employee's employer where such employer is a public company or
public sector company, or a university established by law or a college
affiliated to such university or local authority or co-operative society;
Stamp duty, registration fee and other expenses for the purpose of
transfer of such house property to the employee.
[F](1)(o)(II) The following payments made towards the cost of purchase/construction of
a new residential house property are not qualified for the purpose of section 80C:
(i)
the admission fee, cost of the share and initial deposit which a
shareholder of a company or a member of a co-operative society has to
pay for becoming such shareholder or member; or
(ii)
the cost of any addition or alteration to, or renovation or repair of, the
house property which is carried out after the issue of the completion
certificate in respect of the house property by the authority competent to
issue such certificate or after the house property (or any part thereof) has
either been occupied by the employee or any other person on his behalf or
been let out; or
(iii)
any expenditure in respect of which deduction is allowable under the
provisions of section 24.
[F](1)(o)(III) Transfer of house property before 5 years Where the house property, in respect of which a deduction has been allowed, is
transferred by tax payer at any time before the expiry of 5 years from the end of
the financial year in which possession of such property is obtained by him, no tax
deduction under these provisions shall be allowable in respect of the previous year
in which the transfer is made and the aggregate amount of tax deductions allowed
in the earlier years shall be deemed as tax payable by the employee of the
previous year in which such transfer takes place.
[F](1)(p) Amount invested in approved debentures or equity shares of a public company
engaged in infrastructure including power sector or units of a mutual fund proceeds of
which are utilized for the developing, maintaining etc. of a new infrastructure facility.
[F](1)(q)Amount deposited in a fixed deposit for 5 years or more with a scheduled bank in
accordance with a scheme framed and notified by the Central Government
[F](1)(r) Subscription to any notified bonds of National Agricultural Bank Rural
Development (NABARD).
[F](1)(s)Investment in (i) Five year time deposit in an account under the Post Office Time
Deposit Rules 1981 and (ii) Senior Citizens Saving Scheme Rules, 2004.
NOTE: The Incumbent Incharge 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
deduction. It may also be mentioned here that the deposits / subscriptions /
payments towards the items qualifying for the deduction from Gross Total Income
should be made out of the employees’ income chargeable to tax.
[F](2) Deduction In Respect Of Contribution to certain Pension Funds (Section 80
CCC):
17
Where an employee (an individual) has in the financial 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 approved
by IRDA for receiving pension from fund referred to in clause (23AAB) of section
10, he shall, in accordance with, and subject to the provisions of this section, be
allowed a deduction in the computation of his total income for the amount paid or
deposited (excluding interest or bonus accrued or credited to the employee’s account,
if any) not exceeding Rs. One Lakh in the previous year.
Other points - One should keep in view the following points (i)
Where the employee or his nominee surrenders the annuity before maturity
date of such annuity, the surrender value shall be taxable in the hands of the
employee or his nominee, as the case may be, in the year of the receipt.
(ii)
The amount received by the employee or his nominee as pension will be
taxable, in the hands of the employee or the nominee, as the case may be in the
year of the receipt.
(iii)
Deduction (with reference to the amount paid under section 80CCC) will not
be available under section 80C to persons to whom deduction under this
section has been allowed.
[F](3) DEDUCTION UNDER SECTION 80CCD IN RESPECT OF CONTRIBUTION
TO PENSION SCHEME OF CENTRAL GOVERNMENT.
i).
Employee Contribution: A deduction not exceeding ten per cent of his salary
is allowed in the previous year in computing the taxable income in respect of
amount paid or deposited in his account in a pension scheme notified by the
Central Government.
ii).
Employer Contribution: The amount contributed not exceeding ten per cent
of the salary by the employer to the account of the employee shall be allowed
a deduction in the computation of his total income.
iii).
The amount standing to the credit of the employee in the pension account, for
which a deduction has already been allowed to him and accretions to such
account shall be taxed as income in the year in which such amounts are
received by the employee or his nominee on closure of account or his opting
out of the said scheme or on receipt of pension from the annuity plan. If,
however, the amount of pension received from the pension account is used
for purchasing an annuity plan in the same year, then, it will be exempt
from tax.
iv).
No rebate shall be allowed under section 88 or deduction under section 80C, if
the deduction has already been allowed in respect of any amount paid or
deposited by the employee in the aforesaid pension scheme.
Explanation.—For the purposes of this section, “salary” includes dearness allowance,
if the terms of employment so provide, but excludes all other allowances and
perquisites.
[F](4) Deduction for subscription to long - term infrastructure bonds (Section 80-CCG)
18
Finance Act, 2012 has inserted a new section 80CCG with effect from AY 2013-14. A
deduction is allowed to the resident individual, if his gross total income does not
exceed Rs.10 lacs.
A deduction is allowed @50% of amount invested in equity shares subject maximum
of Rs.25,000/-. This deduction is claimed only in one year and accordingly, no
deduction will be allowed in subsequent years.
The above deduction is available to the new retail investor who has acquired listed
equity shares in accordance with the notified Rajeev Gandhi Equity Saving Scheme
(RGESS) . The scheme has a lock in period of 3 years from the date of acquisition.
After claiming the above deduction, if employee fails to satisfy the conditions as
specified in the scheme, the deduction originally allowed shall be deemed to be the
income of the year in which default is committed.
[F](5) Deduction for Premium Paid - Medical Insurance (Section 80-D)
Section 80D provides deduction for medi claim premium paid of Rs.20,000/- in the
case of senior citizen and of Rs.15,000/- other than senior citizen. An additional
deduction of up to Rs.15,000 will be allowed to an individual assesse on any payment
made to effect or keep in force an insurance on the health of his parent or parents,
whether dependent on him or not. In case either parent of assesse, who has been
medically insured, is a senior citizen, then the deduction would be allowed up to
Rs.20,000. Further, no deduction under this section will be available in case the
mediclaim premium is paid in cash.
A deduction upto Rs.5,000/- is allowable on account of preventive “Health Checkup” of self, spouse, parents or dependent children within the overall limits under this
section. Moreover payment on account of preventive health check up can be made by
any mode including cash.
The summarized position of deduction depending upon the policy of insurance u/s
80D is as under:
Individual, his or her spouse, his or Additional deduction for
her dependent children
parents of the taxpayer
whether dependent or not
Other
than With any Senior Other
than With any
senior citizen
citizen
senior citizen
Senior
citizen
15000
---15000
5000
--15000
-15000
-15000
-15000
5000
15000
5000
15000
5000
[F](5)
Total
15000
20000
30000
35000
40000
Deduction in respect of maintenance including medical treatment of a
dependant who is a person with disability (Section 80DD)
Where an employee who is a resident in India during the year:
19
(a)
has incurred an expenditure for the medical treatment (including nursing),
training and rehabilitation of a dependent (being a person with disability) :or
(b) has paid or deposited under any scheme framed in this behalf by the Life
Insurance Corporation or any other insurer, or the administrator or specified
company and approved by the Board in this behalf, for maintenance of dependent
(being a person with disability)
The employee shall be allowed a fixed deduction of Rs.50,000/- whenever the
conditions specified above are satisfied, A higher deduction of Rs.1,00,000/- shall be
allowed, where such dependent is a person with severe disability.
Under condition (b) the scheme provides for payment of an annuity or a lump sum
amount for the benefit of dependent, being a person with disability, in the event of the
death of the individual or the member of the Hindu undivided family in whose name
subscription to the scheme has been made. The employee nominates either the
dependent being a person with disability or any other person or a trust to receive the
payment on his behalf, for the benefit of such dependent.
For the above purpose, a "dependent being a person with disability" is a person who
satisfies the following points –
(i)
in the case of an individual, dependent means the spouse, children, parents,
brothers and sisters of the individual or any of them;
(ii)
such person is wholly or mainly dependent upon such individual or HUF for
support and maintenance; .
(iii)
such person has not claimed any deduction under section 80U in computing
his total income for the Assessment Year relating to the previous year;
(iv)
"disability" shall have the meaning assigned to it in section 2(i) of the
Persons with Disabilities (Equal Opportunities, Protection of Rights and Full
Participation) Act, 1995
(v)
"person with disability" means a person having any "disability" stated above
and not less than 40 per cent.
For claiming the deduction, the employee shall have to furnish a copy of the
certificate issued by the medical authority in prescribed form Form No.10-I A
(Annexure-I). The certificate has to be submitted along with the return of income.
Where condition of disability requires reassessment, a fresh certificate from the
medical authority shall have to be obtained after the expiry of the period mentioned
on the original certificate in order to continue to claim the deduction.
If dependent predeceases the taxpayer - If the dependent with disability
predeceases the individual or the member of the Hindu undivided family referred to
above, an amount equal to the amount paid or deposited as stated above shall be
deemed to be the income of the employee of the previous year in which such amount
is received by the employee and shall accordingly be chargeable to tax as the income
of that previous year.
Person with disability - The taxpayer is suffering from not less than 40 per cent of
any disability given below i. blindness;
ii. low vision;
iii. leprosy-cured;
iv. hearing impairment;
20
v. locomotive disability;
vi. mental retardation;
vii. mental illness.
Blindness - "Blindness" refers to a condition where a person suffers from any of the
following conditions, namely:i.
ii.
iii.
total absence of sight; or
visual acuity not exceeding 6/60 or 20/200 (snellen) in the better eye with
correcting lenses; or
limitation of the field of vision subtending an angle of 20 degree or worse.
Low vision - "Person with low vision" means a person with impairment of visual
functioning even after treatment or standard refractive correction but who uses or is
potentially capable of using vision for the planning or execution of a task with
appropriate assistive device.
Leprosy cured person - "Leprosy cured person" means any person who has been
cured of leprosy but is suffering from i.
loss of sensation in hands or feet as well as loss of sensation and paresis in
the eye and eye-lid but with no manifest deformity;
ii.
manifest deformity and paresis but having sufficient mobility in their hands
and feet to enable them to engage in normal economic activity;
iii.
extreme physical deformity as well as advanced age which prevents him
from undertaking any gainful occupation.
Hearing impairment - "Hearing impairment" means loss of sixty decibels or more in
the better ear in the conversational range of frequencies.
Locomotive disability - "Locomotive disability" means disability of the bones, joints
or muscles leading to substantial restriction of the movement of the limbs or any form
of cerebral palsy.
Mental illness - "Mental illness" any mental disorder other than mental retardation.
“Person with severe disability” means—
(i) a person with eighty per cent or more of one or more disabilities, as referred to
in sub-section (4) of section 56 of the Persons with Disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of
1996); or
(ii) a person with severe disability referred to in clause (o) of section 2 of the
National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental
Retardation and Multiple Disabilities Act, 1999 (44 of 1999);
"Medical authority" for this purpose means any hospital or institution specified by
notification by the appropriate Government for the purpose of the Persons with
Disabilities (Equal Opportunities, Protections of Rights and Full Participation) Act,
1995.
As per CBDT circular 775 dated 26.03.1999, it was clarified that 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 dependant and receipt/acknowledgment for the
amount paid or deposited in the specified schemes of LIC or UTI. Therefore, DDOs
may not insist upon production of vouchers/bills by the employees for having
21
incurred, expenditure on medical treatment of their handicapped dependants for
allowing the deduction under section 80DD for the purpose of computing tax
deductible at source. This clarification is applicable for the purpose of tax deduction
at source from salaries under section 192 of the Income-tax Act, 1961.
[F](6) SECTION 80DDB- DEDUCTION IN RESPECT OF MEDICAL TREATMENT
FOR SPECIFIED DISEASES.
a) The employee shall be allowed a deduction of Rs.40,000/- or actually incurred,
whichever is lower, on any expenditure for the medical treatment of specified
diseases or ailment as prescribed in Rule 11DD during the previous year.
However in case of dependent being a senior citizen, deduction of Rs.60,000/- or
amount actually incurred, whichever is lower will be available.
b)
Deduction under this section shall be reduced by the amount received, if any,
under insurance from an insurer, or reimbursed by an employer.
c) For the purposes of section 80DDB, the following shall be the eligible diseases or
ailments:
(i)
(ii)
(iii)
(iv)
(v)
Neurological Diseases where the disability level has been certified to be of
40% and above,—
(a) Dementia ;
(b) Dystonia Musculorum Deformans ;
(c) Motor Neuron Disease ;
(d) Ataxia ;
(e) Chorea ;
(f) Hemiballismus ;
(g) Aphasia ;
(h) Parkinsons Disease ;
Malignant Cancers ;
Full Blown Acquired Immuno-Deficiency Syndrome (AIDS) ;
Chronic Renal failure ;
Hematological disorders :
(i) Hemophilia ;
(ii) Thalassaemia.
d) The certificate in respect of the aforesaid diseases or ailments shall be issued by
the following specialists working in a Government hospital—
(i)
for diseases or ailments mentioned in clause (i) above - a Neurologist having
a Doctorate of Medicine (D.M.) degree in Neurology or any equivalent
degree, which is recognised by the Medical Council of India;
(ii)
for diseases or ailments mentioned in clause (ii) above - an Oncologist
having a Doctorate of Medicine (D.M.) degree in Oncology or any equivalent
degree which is recognised by the Medical Council of India;
(iii)
for diseases or ailments mentioned in clause (iv) above - a Nephrologist
having a Doctorate of Medicine (D.M.) degree in Nephrology or a Urologist
having a Master of Chirurgiae (M.Ch.) degree in Urology or any equivalent
degree, which is recognised by the Medical Council of India;
22
(iv)
for diseases or ailments mentioned in clause (v) above - a specialist having a
Doctorate of Medicine (D.M.) degree in Hematology or any equivalent
degree, which is recognized by the Medical Council of India :
However, where in respect of any aforesaid diseases or ailments specified, no
specialist has been specified or where the specialist specified is not posted in the
Government hospital in which the patient is receiving the treatment, such
certificate, with prior approval of the Head of that hospital, may be issued by any
other specialist working full-time in that hospital and having a post-graduate degree
in General or Internal Medicine, which is recognized by the Medical Council of
India.
(e) The certificate from the prescribed authority to be furnished along with the return of
income shall be in Form No. 10-I.
[F] (7) Deduction in Respect of Interest on Loan Taken For Higher Education –(Section
80E)
In computing the total income of an employee, there shall be allowed a deduction
under section 80E of the Income Tax Act in respect of interest on loan taken for
higher education of himself or his relative subject for fulfilling the following
provisions. Loan taken for all fields including vocational studies after completion of
S.S.E. comes under the scope of this section.
For the purpose of this section, relative means spouse & children of individual
and student for whom the tax payer is the legal guardian.
Conditions - The following conditions should be satisfied-
The taxpayer is an individual.
-
The loan has been taken for the purpose of pursuing his higher education or for
the purpose of higher education of his relatives.
-
The aforesaid loan was taken from any bank, an approved charitable institution or
a financial institution notified by the Government.
-
During the previous year, the taxpayer has paid interest on such loan.
-
Such interest is paid out of his income chargeable to tax.
If the above conditions are satisfied, the entire amount paid by way of interest is
deductible under section 80E. However, the noted deduction is allowed in computing
the taxable income of the initial assessment year (i.e. the assessment year relevant to
the previous year in which the employee starts paying the interest on the loan) and 7
immediately succeeding assessment years (or until the above interest is paid in full,
whichever is earlier).
No deduction will be available under section 80E in respect of repayment of the
principal amount.
[F](8) Donations (Section 80G)
No deduction should be allowed from the salary income in respect of any donation made for
charitable purposes. The tax relief on such donations will have to be claimed by the tax payer
in the return of income. However, in cases where employee makes donations to the Prime
Minister’s National Relief Fund, the Chief Minister’s Relief Fund or the Lieutenant
23
Governor’s Relief Fund through the employer, the deduction may be given to employee for
making donation while calculating tax deductible under section 192.
[F](9) Deduction under section 80GG in respect of rent paid
An employee is allowed a deduction in respect of expenditure towards payment of rent for
any furnished or unfurnished accommodation occupied by him for the purpose of his own
residence if the following conditions are satisfied:

He should be self employed and /or a salaried employee who is not in receipt of
House Rent Allowance (H.R.A.) at any time during the previous year.

He, his spouse or minor child, or the Hindu undivided family of which he is a
member, does not own any residential house at the place where he resides, performs
the duties of his office, or employment or carries on his business or profession; and
owns a residential house at any other place, the concession in respect of self-occupied
property under section 23(2)(a) or 23(4)(a) is not claimed by him in respect of such
house.

He should file a declaration in Form No.10BA (Annexure II) regarding the
expenditure incurred by him towards payment of rent.
Amount of deduction
- The amount deductible under this section is the least of the following amounts:
(I)
(II)
(III)
Rs. 2,000 per month
25% of total income before allowing deduction for any expenditure under this
section.; or
the excess of actual rent paid over 10% of total income before allowing
deduction for any expenditure under this section.
Other important points

Deduction would be available even if rent is paid by the employee to the Bank,
provided all the conditions of this section are satisfied.

The person paying salary should, therefore, satisfy himself that all the conditions
mentioned above are satisfied. He should also satisfy himself in this regard by
insisting on production of evidence on actual payment of rent.
Action Points
-
The deduction will be allowed only if Form 10 BA is filled up.
-
The declaration in this Form contemplates payment of rent for the accommodation
occupied for residential purposes only. Documents evidencing such payment may be
preserved, since they may be demanded by the Assessing Officer for verification of the
truth of the declaration.
-
It may also be noted that if rent is paid in respect of any accommodation used for
purposes other than that of the residence of the employee, the deduction will not be
admissible.
24
[F](9) Deduction In Respect of interest on deposits in savings account (Section 80 TTA)
Where the income of the employee includes any income by way of interest on
deposits (not being time deposit) in a saving account with a banking company, Co operative society or a post office, a deduction of such interest shall be allowed to the
maximum extent of Rs. 10,000/-.
[F](10) Deduction In Respect of Physically Handicapped Persons (including blindness)
(Section 80 U)
The claim under this Section can be allowed in case of those employees, who are
having a permanent physical disability including blindness, of more than certain
percentage or subject to mental retardation referred to in Rule11D of the Income Tax
Rules. The amount of deduction to be allowed is Rs.50,000/-. Higher deduction of
Rs. 1,00,000/- is allowed in respect of a person with severe disability (disability over
80%). For claiming this deduction, the disability should be certified by a physician, a
surgeon, an oculist or a psychiatrist, as the case may be, working in a Government
Hospital.
In cases where the condition of disability requires re-assessment of its extent after a
period stated in the aforesaid certificate, no deduction under this section should be
allowed for any subsequent period unless a new certificate is obtained from the
medical authority and furnished along with the return of income.
NOTE: The Government Hospital shall have the same meaning as explained in section
80DD above.
[G] Calculation of Income Tax to be deducted:
Tax liability should be calculated as under:
Step 1: First compute the gross salary taking into consideration the perquisites &
exemptions.
Step 2: Allow deductions of Professional tax paid (if any).
Step 3: Add any other income declared by the employee chargeable under any other head of
income other than “Salaries” (not being a loss under any such head other than loss
under the head “Income from house property) received by the employee for the
same financial year.
Step 4: Allow deduction prescribed under chapter VI-A ensuring that aggregate of the
deductions does not exceed gross taxable income.
Step 5: The amount so computed under step 4 should be rounded off to the nearest multiple
of ten rupees.
Step 6: Income tax on amount of Step 5 shall be calculated keeping in view the age and
gender of the employee as per the slab applicable in each case. (Tax should be
rounded off to the nearest multiple of rupee).
Step 7: The amount of tax payable arrived under step 6 should be increased by educational
cess and secondary and higher education cess (total tax payable should be rounded
off to the nearest multiple of ten rupees)
Step 8: Reduce TDS deducted by any other person/ institute for the same financial
year, where the proof of deduction of tax is furnished by the individual. Before
reducing the TDS, ensure that the income on which TDS has been deducted by
any other person/institute has been included in step 3.
25
Step 9: The amount so arrived under step 8 should be deducted every month in equal
installments. Any excess or deficit arising out of any previous deduction can be
adjusted by increasing or decreasing the amount of subsequent deduction during the
same financial year.
[H] Some Other Reliefs
[H](1) Relief under Section 89
If an employee receives any portion of his salary in arrears or in advance, he can
claim relief in terms of section 89 read with rule 21A by furnishing such particulars in
Form No. 10E (Annexure III) duly verified by him. The relief is also available in
respect of family pension received in arrears.
Computation of relief when salary/family pension has been received in arrears or
in advance [Rule 21A(2)]
The relief on salary received in arrears or in advance (hereinafter to be referred as "the
additional salary") is computed in the manner laid down in Rule 21A(2) as under:
a) Calculate the tax payable on the total income, including the additional salary of the
relevant previous year in which the same is received.
b) Calculate the tax payable on the total income, excluding the additional salary of
the relevant previous year in which the same is received.
c)
Find out the difference between the tax at (a) and (b).
d) Compute the tax on the total income after excluding the additional salary in the
previous year to which such salary relates.
e) Compute the tax on the total income after including the additional salary in the
previous year to which such salary relates.
f) Find out the difference between the tax at (d) and (e).
g) The excess of tax computed at (c) over the tax computed at (f) is the amount of
relief admissible under section 89(1). No relief is, however, admissible if the tax
computed at (c) is less than the tax computed at (f). In such a case, the employee
need not apply for relief.
[I]
Taxable Salary and Gross Income Tax thereon
For resident senior citizen (who is 60 years or more at any time during the
previous year but less than 80 years on the last day of the previous year)
Total Income
Income tax rates
Upto Rs. 2,50,000/Above Rs.2,50,000/- to
Rs. 5,00,000/Above Rs.5,00,000/- to
Rs. 10,00,000/-
Nil
10% of (total income
minus Rs.2,50,000/- )
Rs. 25,000/- +20% of (total
income minus
Rs.5,00,000/-)
Rs.1,25,000/- +30% of
(total income minus
Rs.10,00,000/-)
Above Rs.10,00,000/-
Education
Cess
Nil
2% of
income tax
2% of
income tax
Secondary& Higher
Education Cess
Nil
1% of income tax
2% of
income tax
1% of income tax
1% of income tax
26
For resident super senior citizen (who is 80 years or more at any time during the
previous year)
Total Income
Income tax rates
Upto Rs. 5,00,000/Above Rs.5,00,000/- to
Rs. 10,00,000/Above Rs.10,00,000/-
Nil
20% of (total income minus
Rs.5,00,000/-)
Rs.1,00,000/- +30% of
(total income minus
Rs.8,00,000/-)
Education
Cess
Nil
2% of
income tax
2% of
income tax
Secondary& Higher
Education Cess
Nil
1% of income tax
1% of income tax
For individuals (including woman) other than resident senior citizens and resident
super senior resident
Total Income
Income tax rates
Education
Cess
Secondary & Higher
Education Cess
Upto Rs.2,00,000/Above Rs. 2,00,000/- to
Rs. 5,00,000/Above Rs.5,00,000/- to
Rs.10,00,000/Above Rs.10,00,000/-
Nil
10% of (total income minus
Rs.2,00,000/-)
Rs. 30,000/-+20% of (total
income minus Rs.5,00,000/-)
Rs. 1,30,000/- +30% of (total
income minus Rs.10,00,000/-)
Nil
2% of
income tax
2% of
income tax
2% of
income tax
Nil
1% of income tax
1% of income tax
1% of income tax
Method of Calculation:
It should be ensured that income-tax is deducted from the estimated income of the
employee under the head “Salaries” at the time of payment in the same proportion as the total
income tax deductible for the financial year 2012-13 bears to the total taxable income of the
year.
Compulsory PAN
Section 206AA of the Income-tax Act, 1961, makes furnishing of PAN by the employee
compulsory in case of payments liable to TDS. If employee fails to furnish his/her PAN,
Tax will be deducted at a higher of the following rates
i.)at the rate specified in the relevant provision of this Act; or
ii.)at the rate or rates in force; or
iii.)at the rate of twenty per cent.
In case of salaries there can be following situations:
a) Where the income of the employee computed for TDS u/s 192 is below taxable
limit.
b) Where the income of the employee computed for TDS u/s 192 is above taxable
limit.
In first situation, as the tax is not liable to be deducted no tax will be deducted. In the
second case, if PAN is not furnished by the employee, tax will be calculated at the
average rate of income-tax based on rates in force. If the tax so calculated is below 20%,
deduction of tax will
27
be made at the rate of 20% and in case the average rate exceeds 20%, tax is to deducted at
the average rate. Education [email protected] 2% and Secondary and Higher Education [email protected]
1% is not to be deducted, in case the TDS is deducted at 20% u/s 206AA of the
Income-tax Act.
[J]
Other Important Points
Pensioners
Pension has been defined as salary and is liable to TDS subject to above said
additions, exemptions and disallowances. The pension-disbursing branch has all the
right and obligation of the Bank and tax should be deducted as in the case of salary
payment after allowing all the deductions and exemptions as provided.
In case of PNB’s retiring employee, the salary and other taxable payments should be
added to the pension drawn during the financial year and tax should be deducted at
source. If the employee opts to draw pension from another office, then, full details of
salary and other taxable income should be advised to that office for deciding TDS to
be deducted from pension. However, all tax dues on the date of retirement must be
deducted from the salary and other retirement benefits.
Time Limit for Depositing of TDS, Issuing TDS Certificates and Filing of Annual
/ Quarterly Return under section 192 (Salary):
The branches are required to deposit the TDS, issue TDS Certificate and file return as
per table given below:
Time of deposit Certificate of
Returns of tax deduction
of tax
Tax deduction Particulars Form
Time Limit
No.
Within 15 days
Salary Tax should be Issue certificate Qtly. Return 24Q
deposited
within
7
in
Form
No.
16
from the end of
Sec.
st
days
from
the
end
and
12BA
by
31
quarter i.e. 15th
192
th
th
of the month in
which
tax
is
deducted except for
the month of March
when tax is to be
deposited
by
th
30 April
of
immediately next
financial year.
day of May
immediately
following
the
financial year in
which
tax
deducted.
July,15 Oct, 15
Jan. (45 days in the
case of the last
quarter i.e. 15th
May
of
the
immediately
following
the
financial year in
which tax was
deducted.
While making of 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 reported in
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 challan
no. ITNS 281. TDS must be deposited electronically by way of internet banking
facility.
[K]
TDS CERTIFICATE:
As per provision of Section 203 the branches/ offices should ensure that the “TDS
certificate” [Form No. 16 (Annexure IV(a)] is furnished to the payee (employee/
28
pensioner) within two month from the end of the Financial year. For instance, TDS
certificate for the year ended 31st March, 2013 must be furnished by 31st May 2013.
Such certificate (Form no 16) is also required to be issued to the pensioner if branches
are deducting tax at source at the time of payment of pension.
As per Section 192, the responsibility for providing correct and complete particulars
of perquisites given to an employee is placed upon the person responsible for
deducting tax at source.
Information of the nature and the value of perquisites is to be provided in Form no.
12BA (Annexure IV(b)) in case of “Salary” is above Rs. 2,00,000/-. In other cases it
would be provided in Form 16 itself.
In a case where an employee joins the office during the year, it is mandatory for
him to fill Form 12B furnishing the details of income under section 192(2) from
his previous employer, if any.
[L]
Filing of e-TDS Return [Sec 200(3)]:
In respect of Tax Deducted at Source it is mandatory to file Quarterly TDS Return in
electronic form.
Form No.27A is to be furnished in paper form by deductor along with the e-TDS
Return. Form 27A is a summary of e-TDS Returns which contains control totals of
‘amount paid’ and ‘Income Tax deducted at source’. Control totals of ‘amount paid’
and ‘Income Tax deducted at source’ mentioned in Form No.27A should match with
the corresponding control totals in e-TDS Return.
The Return in computer media shall be submitted to agency authorized by Director
General of Income Tax (Systems) i.e. NSDL according to prescribed data structure
provided by the Income Tax Department.
(This data structure can be downloaded from http://www.tin.nsdl.com/
www.incometaxindia.gov.in )
The following points should be noted –
[M]
-
Quarterly return cannot be submitted before deposit of TDS and before deposit of
interest (for late deposit) under section 201.
-
A deductee should intimate his PAN to the deductor. Failure to do so may attract
penalty of Rs. 10,000/-.
-
The deductor should correctly quote PAN of deductees in quarterly returns/TDS
certificates (if intimated by the deductees). Otherwise penalty of Rs. 10,000/- can
be imposed on the deductor.
Consequences of failure to deduct or pay tax, furnish return etc.
We would like to emphasize that it is the personal responsibility of Incumbent
Incharge and the concerned staff to deduct tax correctly and to pay the same to the
Central Government and furnishing return etc. within the time prescribed under the
Act. Failure to do so is an offence punishable under various sections of Income Tax
Act.
(i)
Failure to deduct and/or pay tax
29
If a person responsible for deduction of tax out of salary fails to deduct the
appropriate tax (either wholly or partly) or, after making the due deductions, fails to
deposit it with the Government, he is deemed to be an employee in default in respect
of such tax unless such tax has been directly paid by the recipient himself. The
liability of such person shall be as follows:
-
Liable for tax - He is liable to make payment of tax which he has deducted from
salary of the employees.
-
Liable for interest - Section 201 provides that such a defaulter is liable to pay
simple interest;
(i)
at one per cent. for every month or part of a month on the amount of
such tax from the date on which such tax was deductible to the date on which
such tax is deducted; and
(ii)
at one and one-half per cent. for every month or part of a month on
the amount of such tax from the date on which such tax was deducted to the
date on which such tax is actually paid, and such interest shall be paid before
furnishing the statement in accordance with the provisions of sub-section (3)
of section 200”.
As per section 201(3), No order shall be made deeming a person to be an assessee in
default for failure to deduct the whole or any part of the tax from a person resident in
India, at any time after the expiry of—
(i)
two years from the end of the financial year in which the statement is
filed in a case where the statement referred to in section 200 has been filed;
(ii)
four years from the end of the financial year in which payment is made
or credit is given, in any other case:
Provided that such order for a financial year commencing on or before the 1st day of
April, 2007 may be passed at any time on or before the 31st day of March, 2011.
Fee for default in furnishing quarterly TDS returns [section 234E] –If the
branches/ offices fails to submit quarterly TDS / TCS returns within prescribed time,
they shall be
liable to pay, by way of fee, a sum of Rs.200/- per day during which the failure
continues. This fee will be in addition to other consequences of the said default.
However, the fee shall not exceed the amount tax deductible / collectible.
After July 1, 2012, it will not be possible to submit quarterly TDS /TCS returns
with the delay without payment of said fee.
Penalty for failure to deduct tax at source under section 271C - If any person fails
to deduct the whole or any part of the tax as required by or under the provisions of
Chapter XVII-B (Deduction at Source), then, such person shall be liable to pay, by
way of penalty, a sum equal to the amount of tax which such person failed to deduct
or pay.
Any penalty imposable under section 271C shall be imposed by the Joint
Commissioner.
30
Penalty for failure to submit / furnishing incorrect information in quarterly
TDS/TCS return [section 271H]
In respect of TDS / TCS returns to be submitted on or after July 1, 2012, a deductor
has to pay minimum penalty of Rs.10,000/- and maximum of Rs.1,00,000/- in
addition to fee payable under section 234E. This penalty will be applicable in the
following cases:
a) If a person fails to submit quarterly TDS /TCS returns on or before due date.
b) If a person furnishes incorrect information in quarterly TDS/TCS returns.
However, no penalty shall be levied for delay in furnishing of quarterly TDS/ TCS
returns, if such return is submitted within one year of the due date after payment of
tax deducted / collected alongwith applicable interest and fee. This relaxation is not
available in the case of incorrect furnishing of quarterly TDS / TCS returns.
Penalty u/s 272BB for failure to comply with the provisions of section 203A in
respect of quoting of tax deduction / collection account number
If a person fails to comply with the provisions of section 203A, he shall, on an order
passed by the Assessing Officer, pay, by way of penalty, a sum of Rs.10,000/-.
If a person who is required to quote his “tax deduction / collection account number”
or, as
the case may be, “tax deduction account number” in the challans or certificates
or
statements or other documents referred to in section 203A (2) quotes a number
which is false, and which he either knows or believes to be false or does not believe to
be true, the
Assessing Officer may direct that such person shall pay, by way of
penalty, a sum of
Rs.10,000/-.
Liable for prosecution – Such person is liable for punishment under section 276B
unless he proves that there was reasonable cause for default.
If a person fails to pay to the credit of the Central Government the tax deducted at
source by him, he will be punishable with rigorous imprisonment for a term not less
than 3 months but which may extend to seven years with fine.
(ii) Mandatory quoting of PAN and TAN (Sec203A)
It is obligatory for all persons responsible for deducting tax at source to obtain and
quote TAN in all challan /TDS certificates, statement and other documents. Failure to
comply with these provisions will attract penalty of Rs.10,000/ under section 272BB.
Similarly, as per Section 139(5B) it is obligatory for the person deducting tax at
source to quote PAN of the person from whose income tax has been deducted in the
statement, certificate and all other returns under the Income Tax Act.
The e-TDS returns for salary i.e. Form 24Q with less than 100% of PAN data are not
being accepted by the Income Tax department. It is therefore advised to quote correct
PAN details of all deductees in the e-TDS return to avoid penal consequences.
Penalty of Rs. 10,000/- is leviable for non-furnishing/false furnishing the PAN under
section 272B.
31
iii)
Failure to comply with provision of section 203A regarding tax deduction
account
number If a person fails to apply for tax deduction account number (TAN) or after allotment
of such number fails to quote such number in challan forms for payment of tax under
section 200, certificate under section 203 and returns under section 206, then he shall
be liable for penalty of a sum which may extend to Rs.10,000/-.
The person on whom penalty is proposed to be imposed should be given an
opportunity of being heard. No penalty is, however, liable if the person proves that
there was reasonable cause for the default.
Under Section 192(2C) the obligation is cast on the Bank for furnishing statement
showing the value of perquisites provided to employees. Any false information,
fabricating documentation or suppression of requisite information will entail penal
consequences thereof provided under the law.
(iv) Failure to issue certificate If any person fails to furnish certificate of tax deducted at source, under section
203, he shall be liable for penalty under section 272A. Such penalty shall be Rs.100
for every day during which the failure continues. However, the amount of penalty for
failure in relation to return under section 203 and section 206 shall not exceed the
amount of tax deductible.
In view of the stringent penalty and prosecution provisions contained under the
Income Tax Act, it is imperative that the tax is deducted correctly by the Bank
and paid to the Central Government, strictly in accordance with the provisions
of law.
The Incumbents Incharge should personally ensure strict compliance of the provisions
of the Income Tax Act, failing which, they will be held personally responsible for the
consequences arising out of non-compliance of these instructions.
[N] Tax Deduction Account Number and Permanent Account Number
Every office should have already got a Tax-Deduction Account Number allotted to it from
the respective Income Tax Officer, TDS circle/ ward. We reiterate here that if any
office/branch including newly opened branch/office has not, till date, got the Tax
Deduction Account No. allotted, then, it should immediately make an application in
Form No. 49B (Specimen- Annexure- V) and get the number allotted.
Many offices require the Bank’s Permanent Account Number and the Bank’s Assessment
Range. The relevant details are as under:
Permanent Account
JALANDHAR
Number:
AAALP0309F,
Assessment
Range-
WARD
2(IV)
The above guidelines are only indicative and not exhaustive. For any further
clarification, Income Tax Act, 1961 as amended till date may be referred. Alternatively,
the site of Income Tax Deptt. i.e. www.incometaxindia.gov.in may be visited or matter
be referred to HO Finance Division (Phone 011-23716795).
PLEASE BRING THE CONTENTS OF THIS CIRCULAR TO THE NOTICE OF
ALL THE STAFF MEMBERS AT YOUR BRANCH/OFFICE.
GENERAL MANAGER
32
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