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GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES
DEDUCTION OF TAX AT SOURCE — INCOME–TAX DEDUCTION FROM SALARIES UNDER SECTION 192 OF THE INCOME–TAX ACT, 1961 DURING THE FINANCIAL YEAR 2011-2012
CIRCULAR NO. 05/2011
NEW DELHI, dated 16.08.2011
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INDEX
Para No.
Page Nos. 1. General 3
2. Finance Act, 2011 3
3. Section 192 of Income-tax Act 1961 5
4. Persons responsible for deducting tax and their duties 8
5. Estimation of income under the head “Salaries” 15
5.1 Income chargeable under the head “Salaries” 15
5.2 Incomes not included in the head “Salaries” (Exemptions) 20
5.3 Deductions u/s 16 of the Act (Standard Deduction) 25
5.4 Deductions under Chapter VI-A of the Act 25
6. Calculation of Income-tax to be deducted 34
7. Miscellaneous 35
Annexures
I. Examples 39
II. Form No. 12BA (as amended) 45
III. Revised procedure for furnishing qtly e-TDS/TCS
statement by deductors/collectors 47
IV. Person responcible for filling Form 24G in case
Of State Govt Departments/Central Govt Departments 49
V. Deptt. of Eco. Affairs Notification dated 22.12.2003 51
VI. Board's Notification dated 24.11.2000 52
VII. Board's Notification dated 29.1.2001 53
VIII. Form No. 10 B A 54
IX Board Notification dated 9.9.2010(Infrastructure Bond) 55
X. Board Notification dated 11.06.2010(Gratuity) 57
X. Board notification dated 31.05.2010 58
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CIRCULAR NO : 05 /2011 F.No. 275/192/2011-IT(B) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes .....
New Delhi, dated the
SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2011-2012 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.
...............
Reference is invited to Circular No.08/2010 dated 13.12.2010 whereby 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(hereinafter ‘the Act’), during the financial year 2010-2011, 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 2011-2012 and explains certain related provisions of the Income-tax Act. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department-
www.incometaxindia.gov.in.
2. FINANCE ACT,2011
As per the Finance Act, 2011, 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 2011-2012 (i.e. Assessment Year 2012-2013) at the following rates:
RATES OF INCOME-TAX
A. Normal Rates of tax:
1. Where the total income does not Nil
exceed Rs. 1,80,000/-.
2. Where the total income exceeds 10 per cent of the
Rs. 1,80,000 but does not exceed amount by which the Rs. 5,00,000/-. total income exceeds
Rs. 1,80,000/-
3. Where the total income exceeds Rs. 32,000/- plus 20
Rs. 5,00,000/- but does not exceed per cent of the amount Rs. 8,00,000/-. by which the total
income exceeds Rs. 5,00,000/-.
4. Where the total income exceeds Rs. 92,000/- plus 30
Rs. 8,00,000/-. per cent of the amount
by which the total income exceeds Rs. 8,00,000/-.
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B. Rates of tax for a woman, resident in India and below sixty years of
age at any time during the financial year:
1. Where the total income does not Nil
exceed Rs. 1,90,000/-.
2. Where the total income exceeds 10 per cent, of the
Rs. 1,90,000 but does not exceed amount by which the Rs. 5,00,000/-. total income exceeds
Rs. 1,90,000/-
3. Where the total income exceeds Rs. 31,000/- plus 20
Rs. 5,00,000/- but does not per cent of the exceed Rs. 8,00,000/-. amount by which the
total income exceeds Rs. 5,00,000/-.
4. Where the total income exceeds Rs. 91,000/- plus 30
Rs. 8,00,000/-. per cent of the
amount by which the total income exceeds Rs. 8,00,000/-.
C. Rates of tax for an individual, resident in India and of the age of sixty years or more but less than eighty years at any time during the financial year:
1. Where the total income does not Nil
exceed Rs. 2,50,000/-.
2. Where the total income exceeds 10 per cent, of the
Rs. 2,50,000 but does not exceed amount by which the Rs. 5,00,000/-. total income exceeds
Rs. 2,50,000/-
3. Where the total income exceeds Rs. 25,000/- plus 20
Rs. 5,00,000/- but does not per cent of the exceed Rs. 8,00,000/-. amount by which the
total income exceeds Rs. 5,00,000/-.
4. Where the total income exceeds Rs. 85,000/- plus 30
Rs. 8,00,000/-. per cent of the amount
By which the total income exceeds Rs. 8,00,000/-.
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D. In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year:
1. Where the total income does Nil
not exceed Rs. 5,00,000/-
2. Where the total income exceeds 20 per cent of the amount by
Rs. 5,00,000/- but does not which the total income exceeds exceed Rs. 8,00,000/- Rs. 5,00,000/-
3. Where the total income exceeds Rs. 60,000/- plus 30 per cent of the
Rs. 8,00,000/- amount by which the total income
exceeds Rs. 8,00,000/-
Surcharge on Income tax:
There will be no surcharge on income tax payments by individual taxpayers during FY 2011-12 (AY 2012-13).
Education Cess on Income tax:
The amount of income-tax shall be increased by Education Cess on Income Tax at the rate of two percent of the income-tax.
Additional surcharge on Income Tax (Secondary and Higher Education Cess on Income-tax):
From Financial Year 2007-08 onwards, an additional surcharge is chargeable at the rate of one percent of income-tax (not including the Education Cess on income tax).
Education Cess, and Secondary and Higher Education Cess are payable by both resident and non-resident assessees.
3.SECTION 192 OF THE INCOME-TAX ACT,1961: BROAD SCHEME
OF TAX DEDUCTION AT SOURCE FROM "SALARIES".
Method of Tax Calculation:
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 2011-2012. The income-tax is required to be calculated on the basis of the rates given above subject to provisions of sec 206AA of the Income-tax Act and shall be deducted at the time of each payment. No tax will, however, be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs. 1,80,000/- or Rs.1,90,000/- or Rs. 2,50,000/- or Rs. 5,00,000/-, as the case may be, depending upon the gender and age of the employee.(Some typical examples of computation of tax are given at Annexure-I).
Payment of Tax on Non-monetary Perquisites by Employer:
3.2 An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at his option, make
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payment of the tax on such perquisites himself without making any TDS from the salary of the employee. The employer will have to pay such tax at the time when such tax was otherwise deductible i.e. at the time of payment of income chargeable under the head “salaries” to the employee.
Computation of Average Income Tax:
3.3 For the purpose of making the payment of tax mentioned in para 3.2 above, tax is to be determined at the average of income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head "salaries", including the value of perquisites for which tax has been paid by the employer himself.
ILLUSTRATION:
Suppose that the income chargeable under the head “salaries” of a male employee below sixty years of age for the year inclusive of all perquisites is Rs.4,50,000/-, out of which, Rs.50,000/- is on account of non-monetary perquisites and the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.
STEPS:
Income Chargeable under the head “Salaries” inclusive of all perquisites: Rs. 4,50,000
Tax on Total Salaries(including Cess): Rs. 27,810
Average Rate of Tax [(27,810/4,50,000) X 100]: 6.18%
Tax payable on Rs.50,000/= (6.18% of 50,000): Rs. 3,090
Amount required to be deposited each month: Rs. 260(257.5)
(3090/12)
The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee.
Salary From More Than One Employer:
3.4 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 "Salaries" due or received from the former/other employer and also tax deducted at source there from, in writing and duly verified by him and by the former/other employer. The present/ chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).
Relief When Salary Paid in Arrear or Advance:
3.5 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
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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 the same 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 purposes of the Act.
With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i) of clause (10C) of section 10 (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year
3.6 (i) Sub-section (2B) of section 192 enables a taxpayer to furnish particulars of income under any head other than "Salaries" ( not being a loss under any such head other than the loss under the head “ income from house property”) received by the assesse for the same financial year and of any tax deducted at source thereon. Form no. 12C, which was earlier prescribed for furnishing such particulars, has since been omitted from the Income Tax Rules by the IT (24th amendment) Rules, 2003, w.e.f. 01.10.2003. However, the particulars may now be furnished in a simple statement, which is properly verified by the taxpayer in the manner as prescribed under Rule 26B(2 ) of the Income Tax Rules,1962 and shall be annexed to the simple statement. The form of verification is reproduced as under
FORM OF VERIFICATION
I, ...................... (name of the assesse), do declare that what is stated above is true to the best of my information and belief.
(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 deducted at source, if any, on such income and the loss, if any, under the head "Income from House Property" into account for the purpose of computing tax deductible in terms of section 192(2B) of the Income-tax Act. However, 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 any loss (negative income) only under the head “income from House Property” and no other head for working out the amount of total tax to be deducted.` While taking into account the loss from House Property, the DDO shall ensure that the assessee files the declaration referred to above and encloses therewith a computation of such loss from House Property. Following details shall be obtained and kept by the
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employer in respect of loss claimed under the head “ income from house property” separately for each house property:
(A) Computation of income under the head “ income from house property” specifying
a) Gross annual rent/value b) Municipal Taxes paid, if any c) Deduction claimed for interest paid, if any d) Other deductions claimed
(B) Address of the property ( C) Amount of loan, if any; and (D) Name and address of the lender (loan provider)
(iii) 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 form no. 12BA (Annexure-II). Form no. 12BA alongwith form no. 16, as issued by the employer, are required to be produced on demand before the Assessing Officer in terms of Section 139C of the Income Tax Act.
Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property
3.7(i) For the purpose of computing income / loss under the head `Income from House Property' in respect of a self-occupied residential house, a normal deduction of Rs.30,000/- is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs.1,50,000/- is available if such loan has been taken on or after 1.4.1999 for constructing or acquiring the residential house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest upto Rs.1,50,000/-,the employee should furnish a certificate from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the residential house or for conversion of a part or whole of the capital borrowed, which remains to be repaid as a new loan.
3.7(ii)The essential conditions for availing higher deduction of interest of Rs.1,50,000/- in respect of a self-occupied residential house are that the amount of capital must have been borrowed on or after 01.4.1999 and the acquisition or construction of residential house must have been completed within three years from the end of the financial year in which capital was borrowed. There is no stipulation regarding the date of commencement of construction. Consequently, the construction of the residential house could have commenced before 01.4.1999 but, as long as its construction/ acquisition is completed within three years, from the end of the financial year in which capital was borrowed the higher deduction would be available in respect of the capital borrowed after 1.4.1999. It may also be noted that there is no stipulation regarding the construction/ acquisition of the residential
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unit being entirely financed by capital borrowed on or after 01.4.1999.The loan taken prior to 01.4.1999 will carry deduction of interest up to Rs.30,000/ only. However, in any case the total amount of deduction of interest on borrowed capital will not exceed Rs.1,50,000/- in a year.
Adjustment for Excess or Shortfall of Deduction:
3.8 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 for that employee within that financial year itself.
TDS on Payment of Accumulated Balance Under Recognised Provident Fund and contribution from Approved Superannuation Fund:
3.9 The trustees of a Recognized Provident Fund, or any person authorized 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 there from the deduction specified in rule 10 of Part A of the Fourth Schedule to the Act.
3.10 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.
Salary Paid in Foreign Currency:
3.11 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.
4.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 6 should be deducted from the salary u/s 192 of the Act. Deduction of Tax at Lower Rate:
4.3. Section 197 enables the tax-payer to make an application in form No.13 to the Assessing Officer(TDS), and, if the Assessing Officer(TDS) 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 furnished by the employee, the employer should deduct income tax on the salary payable at the normal rates: (Circular No. 147 dated 28.10.1974.)
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Deposit of Tax Deducted:
4.4. Rule 30 of Income Tax Rules, 1962, as amended by S.O. 1261(E), Notification dated 31.05.2010, prescribes mode of payment of tax deducted to the account of Central Government as detailed below:
4.4.1. (a) The Tax deducted at source in accordance with the provisions of Chapter XVII-B of the Income tax Act, 1961 by an office of the Government shall be paid to the credit of the Central Government ‐
(i) on the same day where the tax is paid without production of an income
tax challan; and (ii) on or before seven days from the end of the month in which the deduction is made or income‐tax is due under sub‐section (1A) of section 192, where tax is paid accompanied by an income‐tax challan.
(b). The Tax deducted at source in accordance with the provisions of Chapter XVII-B of the Income tax Act, 1961 by deductors other than an office of the Government shall be paid to the credit of the Central Government ‐
(i) on or before 30th day of April where the income or amount is credited or
paid in the month of March; and (ii) in any other case, on or before seven days from the end of the month in which the deduction is made; or income‐tax is due under sub‐section (1A) of section 192.
(c ) Notwithstanding anything contained in (b) above, in special cases, the Assessing Officer may, with the prior approval of the Joint Commissioner, permit quarterly payment of the tax deducted under section 192 or section 194A or section 194D or section 194H for the quarters of the financial year specified to in column (2) of the Table below by the date referred to in column (3) of the said Table:‐
TABLE
Sl. No.
Quarter of the financial year ended on
Date for quarterly payment
(1) (2) (3)
1 30th June 7th July 2 30th September 7th October 3 31st December 7th January 4 31st March 30th April
Mode of Payment of TDS
4.4.2. In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan, the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by whatever name called to whom the deductor reports the tax so deducted and who is responsible for crediting such sum to the credit of the Central Government, shall‐
(a) submit a statement in Form No. 24G within ten days from the end of the month to the agency authorised by the Director General of Income‐tax