INCOME-TAX DEDUCTION FROM SALARIES - CBDT issues detailed circular
CBDT has issued the usual detailed circular about TDS for salaried class and responsibilities of the DDO. Highlights from the Circular.
RATES OF INCOME-TAX - Normal Rates of tax:
1 | Total Income | Tax |
|---|---|---|
2 | Up to 1,00,000 ( 1,35,000 for women) | Nil |
3 | 1,00,001 to 1,50,000 | 10% of the income above 1,00,000 |
4 | 1,50,001 to 2,50,000 | 5000 + 20% of the income above 1,50,000 |
5 | Above 2,50,000 | 25,000 + 30% of the income above 2,50,000 |
Method of Tax Calculation: Average tax payable has to be deducted by DDO on every payment
Payment of Tax on Non-monetary Perquisites by Employer: Employer may, at his option, make payment of the tax on perquisites himself without making any TDS from the salary of the employee.
Furnishing of Declaration by Taxpayer in Form 12C: Form 12 C has been omitted but tax payers can still furnish information about other income to the DDO. This should not be a loss except in the case of Income from House Property.
Salary Paid in Foreign Currency: 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: “persons responsible for paying" means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof.
Deduction of Tax at Lower Rate: The employee can apply to the DDO to deduct tax at a lower rate or not to deduct at all.
Deposit of Tax Deducted: Tax deducted has to be deposited with the government within a week of the following month.
Penalty for Failure to Deposit Tax Deducted:
simple interest at twelve per cent per annum
penalty of a sum equal to the amount of tax not deducted by him.
rigorous imprisonment for a term which shall be between 3 months and 7 years, and with fine.
Furnishing of Certificate for Tax Deducted: The employee has to be issued a certificate of deduction in Form 16 or 16AA
Annual Return of TDS: It is now mandatory for all offices of the Government and all companies to file the annual return of TDS on computer media only. Failure to file the return will attract penalty of Rs. 100 per day.
TDS on Income from Pension: Banks are equally liable to deduct tax on pensions.
New Procedure for TDS Returns and Quarterly Statements with effect from 1st of April, 2005: The person deducting the tax (employer in case of salary income), is required to file Quarterly Statements for the periods ending on 30th June, 30th September, 31st December and 31st March of each financial year, duly verified, to the Director General of Income Tax (Systems) or M/s National Securities Depository Ltd (NSDL). These statements are required to be filed on or before the 15th July, the 15th October, the 15th January in respect of the first three quarters of the financial year and on or before the 15th June following the last quarter of the financial year.
Incomes not included in the Head "Salaries"(Exemptions)
(1) LTC (Leave Travel Concession)
(2) Death-cum-retirement gratuity
(3) commutation of pension
(4) leave salary at the time of retirement
(5) retrenchment compensation
(6) VRS benefits up to Rs. 5 Lakhs
(7) Certain Insurance benefits
(8) Provident Fund
(9) HRA subject to certain limits and conditions. No need of rent receipt if HRA is less than Rs.3000/-
(10) Certain special allowances
(11) Interest on Deposit Scheme for Retiring Government Employees, 1989
(12) Pension of gallantry awardees like Param Vir Chakra
(13) The following medical expenditure
1. medical treatment in a hospital maintained by employer
2. reimbursement of actual fees paid to hospitals
3. Treatment for certain diseases in hospitals approved by the Chief Commissioner
4. premium paid by employer for medical insurance
5. re imbursement of medical expenditure up to Rs. 15,000.
(14) Deductions
a. Entertainment allowance up to Rs. 5,000 - only for government servants.
b. Professional Tax
No standard Deduction - The standard deduction of Rs. 30,000 (or Rs. 20,000) allowed earlier is now withdrawn.
Other deductions
(1) 80 C up to Rs. 1 Lakh.
c. insurance premium
d. deferred annuity
e. Provident Fund
f. NSC
g. ULIP
h. Equity Linked Saving Scheme
i. pension fund set up by any Mutual Fund
j. deposits to National Housing Bank and other Public Sector companies
k. payment for purchase or construction of a residential house property including repayment of loans
l. Tuition fees paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee
m. Certain subscriptions to shares and debentures.
(2) 80 D - Health Insurance up to Rs. 10,000.
DDO not to allow deduction for donations to charitable institutions though 50% deductions can be allowed for certain donations and 100% for certain other donations.
DDOs to satisfy themselves of the genuineness of claim: The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/ subscriptions / payments made by the employees, by calling for such particulars/ information as they deem necessary before allowing the aforesaid deductions. In case the DDO is not satisfied about the genuineness of the employee's claim regarding any deposit/subscription/payment made by the employee, he should not allow the same, and the employee would be free to claim the deduction/ rebate on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the Assessing Officer.
CBDT CIRCULAR NO.: 9/ 2005, dated 30-11-2005