Income Tax on Salaries – Assessment Year 2015-16 – Financial Year 2014-15 Circular No. 17/2014

CIRCULAR NO : 17/2014

F.No. 275/192/2014-IT(B)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

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North Block, New Delhi

Dated 10th December, 2014

SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2014-15 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.

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SOME ILLUSTRATIONS Income Tax Calculation

FORMAT for Submission of Income Details & proof of savings by CPCB

FORM for claiming HRA exemption where HRA is upto Rs. 3000/- p.m. [Form for submission of Income Details issued by DGQA (MoD)]

Reference is invited to Circular No.08/2013 dated 25.10.2013 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 2013-14, 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 2014-15 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department- www.incometaxindia.gov.in.

2.
RATES OF INCOME-TAX AS PER FINANCE (No. 2) ACT, 2014: Click
to View

3.
SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”: Click
to View

4.
PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: Click
to View

5.
COMPUTATION OF INCOME UNDER THE HEAD “SALARIES” View

5.1
INCOME CHARGEABLE UNDER THE HEAD “SALARIES”: View

5.2
DEFINITION OF “SALARY”, “PERQUISITE” AND “PROFIT IN LIEU OF SALARY” (SECTION 17): View

5.3
INCOMES NOT INCLUDED UNDER THE HEAD “SALARIES” (EXEMPTIONS) View

5.4
DEDUCTIONS U/S 16 OF THE ACT FROM THE INCOME FROM SALARIES View

ANNEXURE 1 –
SOME ILLUSTRATIONS – For Assessment Year 2015-16

6. REBATE OF RS 2000 FOR INDIVIDUALS HAVING TOTAL INCOME UPTO RS 

5 LAKH [SECTION 87A]

Finance Act 2013 provided relief in the form of rebate to individual taxpayers, resident in India, who are in lower income bracket, i. e. having total income not exceeding Rs 5,00,000/-. The amount of rebate is Rs 2000/- or the amount of tax payable, whichever is lower. This rebate is available for A.Y. 2014-15 and subsequent assessment years.

7 TDS ON PAYMENT OF ACCUMULATED BALANCE UNDER RECOGNISED PROVIDENT FUND AND CONTRIBUTION FROM APPROVED SUPERANNUATION FUND:

7.1 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 therefrom the deduction specified in Rule 10 of Part A of the Fourth Schedule to the Act.

The accumulated balance is treated as income chargeable under the head ―Salaries

7.2 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. TDS should be at the average rate of tax at which, the employee was liable to be taxed during the preceding three years or during the period, if that period is less than three years, when he was member of the fund.

The deductor shall remain liable to deduct tax on any sum paid on account of returned contributions (including interest, if any) even if a fund or part of a fund ceases to be an approved Superannuation fund.

8. DDOS TO SATISFY THEMSELVES ABOUT 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.

9. CALCULATION OF INCOME-TAX TO BE DEDUCTED:

9.1 Salary income for the purpose of section 192 shall be computed as follow:-

(a) First compute the gross salary as mentioned in para 5.1 including all the incomes mentioned in para 5.2 and excluding the income mentioned in para 5.3.

(b) Allow deductions mentioned in para 5.4 from the figure arrived at (a) above and compute the amount to arrive at Net salary of the employee

(c) Add income from all other heads- House property‘, Profits & gains of Business or Profession‘, Capital gains‘ and ‗Income from other Sources‘ to arrive at the Gross Total Income as shown in the form of simple statement mentioned para 3.5. However it may be remembered that no loss under any such head is allowable by DDO other than loss under the Head ―Income from House property.

(d) Allow deductions mentioned in para 5.5 from the figure arrived at (c) above ensuring that the relevant conditions are satisfied. The aggregate of the deductions subject to the threshold limits mentioned in para 5.5 shall not exceed the amount at (b) above and if it exceeds, it should be restricted to that amount.

This will be the amount of total income of the employee on which income tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees.

9.2 Income-tax on such income shall be calculated at the rates given in para 2.1 of this Circular keeping in view the age of the employee and subject to the provisions of sec. 206AA, as discussed in para 4.8. Rebate as per Section 87A upto Rs 2000/- to eligible persons (see para 6) may be given. Surcharge shall be calculated in cases where applicable (see para 2.2).

9.3 The amount of tax payable so arrived at shall be increased by education cess as applicable (2% for primary and 1% for secondary education) to arrive at the total tax payable.

9.4 The amount of tax as arrived at para 9.3 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 deductions during the same financial year.

10. MISCELLANEOUS:

10.1 These instructions are not exhaustive and are issued only with a view to guide the employers to understand the various provisions relating to deduction of tax from salaries. Wherever there is any doubt, reference may be made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962, the Finance (No. 2) Act 2014, the relevant circulars / notifications, etc.

10.2 In case any assistance is required, the Assessing Officer/the Local Public Relation Officer of the Income-tax Department may be contacted.

10.3 These instructions may be brought to the notice of all Disbursing Officers and Undertakings including those under the control of the Central/ State Governments.

10.4 Copies of this Circular are available with the Director of Income-tax (Public Relations, Printing & Publications and Official Language), 6th Floor, Mayur Bhavan, Connaught Place, New Delhi-110 001 and at the following websites:

www.finmin.nic.in & www.incometaxindia.gov.in

(Sandeep Singh) 

Under Secretary to the Govt. of India