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Saturday, March 22, 2014

CBDT Circular - Income Tax deduction from salaries during the Financial Year 2013-14 under Section 192 of the Income Tax Act, 1961.

  Income Tax deduction from salaries during the Financial Year 2013-14 under Section 192 of the Income Tax Act, 1961.



CIRCULAR NO : 08 /2013
F.No. 275/192/2013-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

 New Delhi, dated the 10th October, 2013


SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2013-14 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.

Reference is invited to Circular No.08/2012 dated 05.10.2012 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 2012-2013, 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 2013-2014 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 ACT, 2013:

 As per the Finance Act, 2013, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head "Salaries" for the financial year 2013-14 (i.e. Assessment Year 2014-15) at the following rates:

2.1 Rates of tax
 A. Normal Rates of tax:

SI  No
Total Income
Rate of tax
1
Where the total income does not exceed Rs.2,00,000/-.
Nil

2.
Where the total income exceeds
Rs.2,00,000 but does not exceed
 Rs.5,00,000/-
10 per cent of the amount by which the total income exceeds Rs.2,00,000/-
3
Where the total income exceeds
 Rs.5,00,000/- but does not exceed
 Rs.10,00,000/-.
Rs.30,000/- plus 20 per cent of the amount by which the total income exceeds Rs.5,00,000/-.
4
Where the total income exceeds
Rs.10,00,000/-.
Rs.1,30,000/- plus 30 Per cent of the amount by which the total income exceeds Rs.10,00,000/-

B. Rates of tax for every individual, resident in India, who is of the age of sixty years or
more but less than eighty years at any time during the financial year:  

 5.3.8 Any payment from a Provident Fund to which the Provident Funds Act, 1925, applies or from any other provident fund set up by the Central Government and notified by it in the Official Gazette is exempt under section 10(11).

5.3.9 Under section 10(13A) of the Act, any special allowance specifically granted to an assessee by his employer to meet expenditure incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee is exempt from Income-tax to the extent as may be prescribed, having regard to the area or place in which such accommodation is situated and other relevant considerations. According to Rule 2A of the Rules, the quantum of exemption allowable on account of grant of special allowance to meet expenditure on payment of rent shall be the least of the following:

(a) The actual amount of such allowance received by the assessee in respect of the
relevant period i. e. the period during which the accommodation was occupied
by the assesse during the financial year; or
(b) The actual expenditure incurred in payment of rent in excess of 1/10 of the
salary due for the relevant period; or
(i) Where such accommodation is situated in Bombay, Calcutta, Delhi or
Madras, 50% of the salary due to the employee for the relevant period; or
(ii) Where such accommodation is situated in any other places, 40% of the
salary due to the employee for the relevant period,

For this purpose, "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

 It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the assessee subject to the limits laid down in Rule 2A, qualifies for exemption from income-tax. Thus, house rent allowance granted to an employee who is residing in a house/flat owned by him is not exempt from income-tax. The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent before excluding the House Rent Allowance or any portion thereof from the total income of the employee.

Though incurring actual expenditure on payment of rent is a pre-requisite for claiming deduction under section 10(13A), it has been decided as an administrative measure that salaried employees drawing house rent allowance upto Rs.3000/- per month will be exempted from production of rent receipt. It may, however, be noted that this concession is only for the purpose of tax-deduction at source, and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.

Further if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for the employee to report PAN of the landlord to the employer. In case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee.

5.3.10 Section 10(14) provides for exemption of the following allowances :-

(i) Any special allowance or benefit granted to an employee to meet the expenses wholly, necessarily and exclusively incurred in the performance of his duties as prescribed under Rule 2BB subject to the extent to which such expenses are actually incurred for that purpose.
 (ii) Any allowance granted to an employee either to meet his personal expenses at the place of his posting or at the place he ordinarily resides or to compensate him for the increased cost of living, which may be prescribed and to the extent as may be prescribed.

However, the allowance referred to in (ii) above should not be in the nature of a personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to his place of posting or residence.

The CBDT has prescribed guidelines for the purpose of Section 10(14) (i) & 10 (14) (ii) vide notification No.SO 617(E) dated 7th July, 1995 (F.No.142/9/95-TPL)which has been amended vide notification SO No.403(E) dt 24.4.2000 (F.No.142/34/99-TPL). The transport allowance granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of duty is exempt to the extent of Rs.800 p. m. or Rs1600 p.m (for a blind person) vide notification S.O.No. 395(E) dated 13.5.98.

5.3.11 Under Section 10(15)(iv)(i) of the Act, interest payable by the Government on deposits made by an employee of the Central Government or a State Government or a public sector company out of his retirement benefits, in accordance with such scheme framed in this behalf by the Central Government and notified in the Official Gazette is exempt from income-tax. By notification No.F.2/14/89-NS-II dated 7.6.89, as amended by notification No.F.2/14/89-NS-II dated 12.10.89, the Central Government has notified a scheme called Deposit Scheme for Retiring Government Employees, 1989 for the purpose of the said clause.

5.3.12 Any scholarship granted to meet the cost of education is not to be included in total income as per provisions of section 10(16) of the Act.

5.3.13 Section 10(18) provides for exemption of any income by way of pension received by an individual who has been in the service of the Central Government or State Government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as may be specifically notified by the Central Government. Family pension received by any member of the family of such individual is also exempt [Notifications No.S.O.1948(E) dated 24.11.2000 and 81(E) dated 29.1.2001, which are enclosed as per Annexure VIII & IX]. “Family” for this purpose shall have the meaning assigned to it in Section 10(5) of the Act.

DDO may not deduct any tax in the case of recipients of such awards after satisfying himself about the veracity of the claim.

5.3.14 Under Section 17 of the Act, exemption from tax will also be available in respect of:-
 (a) the value of any medical treatment provided to an employee or any member of his family, in any hospital maintained by the employer;
(b) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or of any member of his family:

(i)                  in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;



Source: http://www.paoirla.org
http://www.paoirla.org/docs/TDS.pdf

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