MIN : HRM-124/2012-13 DT. 02-02-2013 a SUB : SL-11 HO/HRM DEPRTMENT FILE M - 3 S- 304 Sub: Income Tax for the financial year ending 31.03.2013 corresponding to ssessment year 2013-14 ********* The Bank is under statutory obligation to deduct Income-Tax at source from the salaries paid to staff members and pension paid to pensioners, as per the provisions of Sec 192 of Income Tax ct 1961.The salient features of the Finance ct, 2012 are as follows:. Normal Rates of tax: RTES OF INCOME TX S No. Total Income Rates 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/-. 3 Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. 4 Where the total income exceeds Rs. 10, 00,000/-. 1 10 per cent of the amount by which the total income exceeds Rs. 2,00,000/- Rs. 30,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5, 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: S No. Total Income Rates of Tax 1 Where the total income does not exceed Rs. 2,50,000/-. 2 Where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000/-. 3 Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. 4 Where the total income exceeds Rs.10,00,000/-. Nil 10 per cent of the amount by which the total income exceeds Rs.2,50,000/- Rs. 25,000/- plus 20 per cent of the amount by which the total income exceeds Rs.5,00,000/-. Rs.1,25,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/- C. 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: S No. Total Income Rates of Tax 1 Where the total income does not exceed Rs. 5,00,000/-. 2 Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000/-. 3 Where the total income exceeds Rs.10,00,000/-. Nil 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/- Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-
n additional surcharge called Education Cess at 2% and higher education cess of 1% in all totalling 3% is leviable on the amount of income tax. Education Cess, and Secondary and Higher Education Cess are payable by both resident and non resident assessees. SLRY INCOME: Salary Income for tax purpose includes pay, wages, D, CC, HR and all other allowances including overtime allowance, arrears on salary revision, incentive, taxable portion of gratuity, pension, leave encashment, bonus, Bank's contribution to PF in excess of 12% of pay, perquisites in respect of furniture, accommodation, car, interest free or concessional loans etc. Interest credited to Provident Fund account of members in excess of 9.5% will be treated as taxable income. ( S PER THE RTE FIXED BY CENTRL GOVERNMENT FROM TIME TO TIME ). It may be noted that, since salary includes pensions, tax at source would have to be deducted from pension also, if otherwise called for. However, no tax is required to be deducted from the commuted portion of pension to the extent exempt under section 10 (10). Family Pension is chargeable to tax under head 'income from other sources' and not under the head 'salary'. Therefore, provisions of section 192 of the ct are not applicable. s per amended Rule 2BB(2) with effect from 01.08.1997, transport allowance granted to employees to meet the expenditure exclusively for the purpose of commuting between place of residence to place of duty will be exempt upto Rs.800/- per month & Rs. 1600/- for blind or orthopaedically handicapped for other than those claiming vehicle reimbursement. VLUTION OF THE PERQUISITES [Sec 17(2) 13 th mendment RED WITH RULE 3] Rule 3 of the Income Tax Rule 1962, provides for the valuation of the following perquisites value provided by the employer. a. Quarters perks (Value of ccommodation). b. Interest free/concessional loans extended to the employees. c. Motor Car d. Club Membership Fee e. Other Perquisites s per the provisions of Income Tax ct, tax is to be deducted by computing the perquisites and tax is deductible in respect of salary at the time of payment. 2
1. QURTERS PERKS: s per the amended rules the perquisite is to be valued as below: a. Unfurnished ccommodation: Population of the city as per 2001 census Exceeding 25 lakh Exceeding 10 lakh but not exceeding 25 lakh In other areas not covered above. Where the accommodation is owned by the Employer 15% of salary in respect of the period during which the accommodation is occupied by the employee less rent actually paid by the employee. 10% of salary in respect of the period during which the accommodation is occupied by the employee less rent actually paid by the employee 7.5% of salary in respect of the period during which the accommodation is occupied by the employee less rent actually paid by the employee Where the accommodation is taken on lease or rent by the Employer. mount of lease rent paid or payable or 15% of Salary whichever is lower less rent actually paid by the employee. - do - - do - b. Where the accommodation is furnished, the value of perquisite as determined above 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. c. Where on account of 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 with reference to the Table above for a period not exceeding 90 days and thereafter the value of perquisite shall be charged for both such accommodations in accordance with the Table. 2. PERQUISITES ON CCOUNT OF N INTEREST FREE LON OR LON ON CONCESSIONL RTE OF INTEREST: [RULE 3(7) (i) OF INCOME TX RULES 1962] The value of the benefit to the assessee (i.e., employee) resulting from the provision of interestfree or concessional loan for any purpose made available to the employee or any member of his household during the relevant previous year by the employer or any person on his behalf, shall be determined as the sum equal to the interest computed at the rate charged per annum by the State Bank of India for the general public, as on the 1 st day of relevant previous year in respect of loans for the same purpose advanced by it, on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by employee or any such member of his household. No value will be charged as perquisite if such loans are made available for medical treatment in respect of diseases in Rule 3. However the exemption shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme. 3
No value will be charged as perquisite where the amount of loans are petty not exceeding in the aggregate Rs.20,000/-. The rates of interest charged by SBI to the general public as on 01.04.2012 (the corresponding staff loans are in the bracket) are given below: LON TYPE SBI INTEREST TO CUSTOMERS (%) Vehicle Loan -Two Wheelers (SVL) 17.50% Vehicle Loan - Four Wheelers(SVL) 11.75% Housing Loan - (SHL) 10.75% Festival Loans(F & IFS) 18.50% NSC Loans( our Schemes & B) 14.50% Demand Loan Xpress credit (Compuper Loan, 15.00% Flood Loan,CCL etc) Loan against KVPs/RBI Relief Bonds/surrender value 14.50% of Policies etc. ( TL to staff against PF) Loan against Mortgage of Immovable properties 15.00 % (TL to staff against house property) 3. MOTOR CR. The value of perquisite by way of use of motor car to an employee by an employer shall be determined in accordance with the following Table: Value of Perquisite per calendar month: Circumstances 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; (b) is used exclusively for the private or personal purposes of the employee or any member of his house hold and the running and maintenance expenses are met or reimbursed by the employer; (c) is used partly in the performance of duties and partly for private or personal purposes of his own or any member of his house hold and (i) the expenses on maintenance and running are met or reimbursed by the employer (ii) The expenses on running and maintenance for private or personal use are fully met by the assessee. Where cubic capacity of engine does not exceed 1.6 litres No value ctual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use, Rs.1800/- (Plus Rs.900, if chauffeur is also provided to run the motor car) Rs.600/- (Plus Rs.900, if chauffeur is also provided to run the motor car) 4 Where cubic capacity of engine exceeds 1.6 litres No value ctual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use, Rs.2400/- (Plus Rs.900, if chauffeur is also provided to run the motor car) Rs.900/- (Plus Rs.900, if chauffeur is also provided to run the motor car)
Note: Where the employer or the employee claims that the motor-car is used wholly and exclusively in the Performance of official duty, the following conditions should be satisfied. i. 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. ii. The employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the purpose of official duties. 4. VLUTION OF PERQUISITES IN RESPECT OF CLUB MEMBERSHIP FEE: a 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/her or by an member of his/her household shall be determined to be the actual amount of the 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: Provided that 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. b Nothing contained in this clause shall apply if such expenditure is incurred wholly and exclusively for business purposes and the following conditions fulfilled:- 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; 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. Nothing contained in this clause shall apply for use of health club, sports and similar facilities provided uniformly to all employees by the employer. Explanation: a. ccommodation includes a house, flat, farm house or part thereof, or accommodation in a hotel, motel, service apartment, guest house, caravan mobile home, ship or other floating structure. b. Entertainment includes hospitality of any kind and also, expenditure on business gifts other than free samples of the employers own product with the aim of advertising to the general public; c. Hotel includes licensed accommodation in the nature of motel, service apartment or guest house d. Member of household shall include spouse(s), children and their spouses, parents and servants & dependants; e. Remote area, for purposes of proviso to this sub-rule means an area that is located at lease 40 kilometers away from a town having a population not exceeding 20,000 based on latest published all-india census 5
f. Salary includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but does not include the following: dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned; employers contribution to the provident fund account of the employee; allowances which are exempted from payment of tax; the value of perquisites specified in clause (2) of section17 of the Income Tax act.; any payment or expenditure specifically excluded under proviso to sub-clause (iii) of clause(2) or proviso to clause (2) of section 17; lump-sum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay, leave encashment voluntary retrenchment benefits, commutation of pension and similar payment; g. Maximum outstanding monthly balance means the aggregate outstanding Balance for each loan as on the last day of each month h. ny entertainment allowances paid to non-government employees are taxable. i. If made in cash or convertible into money (like gift cheques), they are taxable as perquisites. If made in kind up to Rs. 5,000 in aggregate per annum would be exempt, beyond which it would be taxable. 5. VLUTION OF OTHER PERQUSITES: For the perquisite value of benefit to the employees or any member of his household resulting from the provision by the employer of services of a Sweeper, Gardener, watchman, personal attendant/ supply of gas, electric energy or water for his household consumption/ the use by the employee or any member of his household of any movable assets belonging to the employer or hired by him / expenses including membership fees and annual fees incurred which is charged to a credit card provided by the Bank or other wise paid for or reimbursed by the Bank etc., please refer to Government of India Notification No.94/2009/F.No.142/25/2009-S O (TPL), dated 18.12.2009, available in the website law.incometaxindia.gov.in. LEVE FRE CONCESSION (SEC.10 (5) RED WITH RULE 2-B): Income Tax rules providing for exemption of reimbursement made under leave fare concession availed of by an employee for himself and his family for going to any place in India while in service or on retirement from or termination of service have been amended with effect from 1st October 1997. s per Income Tax (first mendment) Rules, 1998, the exemption of the amount reimbursed shall be subject to the following conditions and limit: i. Where the journey is performed on or after 01.10.97 by ir, an amount not exceeding the ir Economy class fare of the National Carrier by the shortest route to the place of destination. ii. iii. Where places of origin of journey and destination are connected by Rail and the journey is performed on or after 01.10.97 by any other mode of transport other than by ir, an amount not exceeding the ir-conditioned First Class Rail fare by the shortest route to the place of destination and Where the places of Origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after 01.10.97 between such places, the amount eligible for exemption shall be,. Where a recognized Public Transport system exists, an amount not exceeding the First Class or Deluxe Class fare, as the case may be, on such transport by the shortest route to the place of destination, and 6
B. Where no recognized Public Transport system exists, an amount equivalent to the irconditioned First Class rail fare, for the distance of the journey by the shortest route as if the journey had been performed by Rail. C. Exemption is not available if family members are travelling separately without employee who is not on leave. For the purpose of this clause, 'Family' in relation to an individual means: o o The Spouse and Children of the individual and The parents, brothers and sisters of the individual or any of them wholly or mainly dependent on the individual. It may be noted that under Sub rule (4) to Rule 2-B, after 01.10.98, the exemption is restricted to two surviving children of the individual. However this restriction shall not apply in respect of children born before 01.10.98 and also in case of multiple births after one child. The exemption referred to above shall be available to an employee in respect of two journeys undertaken in a block of four calendar years (The block for this purpose will be 01.01.2010-31.12.2013). ny amount reimbursed to an employee in excess of the laid down rules should be treated as the income of the employee and subject to deduction of tax at source. It may also be noted that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of Travel. s per the provision of the rules, exemption is not allowable in case of travel abroad. LEVE ENCSHMENT: During Service: The amount received by the staff member on surrendering and encashing their Privilege Leave during the period of service is taxable and should be added to the total income.( Sec 17(1)(va)) t the time of Retirement: The extent of exemption of Leave Encashment at the time of retirement on superannuation or otherwise would be the least of the following: i) Cash equivalent of leave salary in respect of the period of earned leave at the credit of the employee not exceeding 10 months calculated at ten months average salary (Basic+D+Other components ranking for PF) ii) Leave encashment actually received.(subject to a maximum of 8 months pay) iii) Rs. 3,00,000 Salary paid to the legal heirs of the deceased employee in respect of privilege leave standing to the credit of such employee at the time of his/her death is not taxable. LFC ENCSHMENT: If the employee has not incurred any expenditure in respect of LFC, exemption under Section 10(5) will not be allowed and hence any lump sum received by an employee on account of his opting to encash LFC, such amount is subject to tax. Hence, the amount so encashed is to be added to annual income of the employee. REIMBURSEMENT OF MEDICL/HOSPITLISTION EXPENSES (Sec 17): Under Section 17, exemption from Income Tax will also be available in respect of medical reimbursement as follows: a. The value of any medical treatment provided to an employee or any member of his family, in any hospital maintained by the employer. 7
b. (i) ll reimbursement by the Bank, of expenditure incurred by an employee on his medical treatment or treatment of any member of his family, 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. (ii) In respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner of Income Tax having regard to the prescribed guidelines: Provided that, in a case falling in sub-clause (ii) the employee shall attach with his return of Income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital. c. Premium paid by the Bank in respect of medical insurance taken for employees (under any scheme approved by the Central Government) or reimbursement of insurance premium to the employees who take medical insurance for themselves or for their family members (under any scheme approved by the Central Government). d. Reimbursement by the employer, of the amount spent by an employee in obtaining medical treatment for himself or any member of his family from any Doctor, not exceeding in the aggregate Rs.15, 000/- in a year. e. s regards medical treatment abroad, the actual expenditure incurred on medical treatment, including the expenditure on stay abroad of the patient and one attendant, in cases where an attendant is permitted by the Reserve Bank of India to accompany the patient, will be exempted from tax. However, the expenditure on travel abroad will be exempted from tax only in the case of employees whose gross total income as computed under the Income Tax ct without including the amount reimbursed in connection with travel abroad does not exceed Rupees Two lakhs and subject to such further conditions as the Central Board of Direct Taxes may prescribe. HR EXEMPTION Sec10 (13): Under Section 10(13) of the Income Tax ct, 1961, any special allowance specifically granted to an employee by his employer to meet expenditure incurred on payment of rent (in other words, House rent allowance) in respect of residential accommodation occupied by the employee is exempted from Income Tax and according to Rule 2 of IT Rules 1962, the amount eligible for exemption will be the least of (a), (b), (c) and (d) given below: (a) The actual amount of such allowance received by an employee in respect of the relevant period; or (b) The actual expenditure incurred in payment of rent in excess of 1/10 of the salary due for the relevant period; or (c) Where such accommodation is situated in Bombay, Calcutta, Delhi or Madras, 50% of the salary due to the employee for the relevant period; or (d) Where such accommodation is situated in any other place, 40% of the salary due to the employee for the relevant period; For this purpose, salary includes dearness allowance as it enters into the commutation of superannuation benefits, but excludes all other allowances and perquisites. The term `salary includes `Dearness Pay' also in the case of Government Servants (Circular No.90 dt.26 06 1972 of I.T.R. 85 (st) 34) 8
It has to be noted that only the expenditure actually incurred on payment of rent in respect of residential accommodation occupied by the employee subject to the limits laid down in rule 2 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 exempted 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 (13 ), it has been decided as an administrative measure that all employees drawing House Rent llowance upto Rs.3000/-p.m. will be exempted from the requirement of production of rent receipt. In such cases, the salary disbursing officer should obtain a declaration from the employees concerned that they have actually paid house rent before allowing HR exemption under Sec.10 (13) of the ct. 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 ssessing Officer will be free to make such inquiry as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent. LIST OF OTHER LLOWNCES EXEMPTED FROM TX (Sec 10(14) : s per Section 10(14) certain allowances upto the extent given below are exempted: Sl.No Name of llowance Maximum mount 01 llowance for meeting the cost of travel on tour on transfer, including amount paid for packing and transportation of personal effects on transfer. 02 llowances paid to meet the ordinary daily charges incurred on tour or for the period of journey in connection with transfer on account of absence from normal place of duty. 03. Special compensatory allowances like composite Hill Compensatory llowance or High ltitude llowance or Uncongenial Climate llowance or Snowbound rea llowance or valanche allowance. 04. Special Compensatory allowances like Border rea allowance, Remote rea allowance and Disturbed rea allowance payable in areas specified for the purpose. To the extent it is utilized for the purpose for which it is granted. To the extent it is utilized for the purpose for which it is granted. Rs.800/- p.m. in areas in Category I. Rs.7000/- p.m. in areas in Category II. Rs.300/- p.m. in areas in Category III. Rs.1, 300/- p.m. in areas in Category: Rs.1, 100/- p.m. in areas in B Category: Rs.1, 050/- p.m. in areas in C categotry: Rs.750/- p.m. In areas in D Category. Rs.300/- p.m. in areas in E categotry : Rs.200/- p.m. in areas in F Category 05. Tribal rea llowance Rs.200/-p.m.for specified places only. 06. Children Education llowance Rs.100/-p.m.per child upto a maximum of 2 children. 07. llowance granted to meet Hostel Expenditure of children. Rs.300/-p.m.per child upto a maximum of 2 children. 9
08. Conveyance llowance Rs.800/-p.m. 09. Transport llowance granted to an employee who is blind or orthopaedic ally handicapped with disability of lower extremities, to meet his expenditure for the purpose of commuting between the places of his residence and duty. 10 llowance granted to meet expenditure on a helper engaged for performance of the duties 11. llowance granted for encouraging academic research and other professional pursuits Rs.1,600/-p.m. To the extent it is utilised for the purpose for which it is granted. To the extent it is utilised for the purpose for which it is granted. 12. llowance granted to meet expenditure on the purchase or maintenance of uniform for wear on duty. To the extent it is utilised for the purpose for which it is granted. PROFESSION TX: From the Financial year 1989-90 onwards as per Section 16(iii), the Profession Tax recovered from the salary of an employee during that Financial Year can be allowed as a deduction, from the salary while computing the tax to be deducted at source from salaries. LOSS ON HOUSE PROPERTY: Under the substituted Sub-section (2B) of Section 192, the employer is allowed to take into account loss incurred by the employee under the head "Income from House property while calculating and deducting Tax at source from employee's salary if particulars of loss under the said head is furnished by the employee to the employer in the prescribed Form as per format in nnexure III. Employees are requested to work out the loss on House property in a separate sheet and submit the same along with the prescribed form mentioned in nnexure III Rule 26B. I) Self occupied Residential Property (Sec23 (2), 23(3) & 23(4) If the staff member resides in his/her own house, the annual value of the property is to be taken as NIL and deductions in respect of Municipal, Sewerage taxes if any and repair charges are not permitted. He/She is eligible for deduction only in respect of the interest portion on borrowed capital, i.e., Housing Loan. This loss on house property has to be claimed by the employee by giving a declaration in the prescribed format in triplicate. The amount of deduction allowed is (i) If the house property was acquired or constructed with borrowed capital before 1.4.1999, upto a sum of Rs.30,000/- (ii) If the property is acquired or constructed with borrowed capital on or after 01.04.1999 and such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed, then interest portion subject to a maximum of Rs.1,50,000/-. 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. 10
II) Let-Out Property (sec.24) If the staff member lets out his property, the following deductions are permissible from the annual value of the property. a) Municipal & Sewerage taxes actually paid. b) 30% of balance rental amount for repairs and collection charges.(i.e. Rent Municipal taxes paid) c) Interest Paid/Payable on Borrowed Capital. DEDUCTIONS TO BE LLOWED IN COMPUTING TXBLE INCOME: STNDRD DEDUCTION: No Standard Deduction is allowable from financial year 2005-06 as amended by the Finance ct 2005. DEDUCTION UNDER SECTION 80 C: With effect from 01.04.2006, (i.e. from assessment year 2006 07 onwards) deduction is allowable from the Gross Total Income, to the extent of the whole amount paid or deposited in the following items in the Current year, not exceeding a sum of Rs.1,00,000/-. a. Premium paid on insurance policies on the Life of the tax payer, his/her spouse or child, premium paid for deferred annuity on the life of the tax payer, his/her spouse or child. b. ny contribution to Public Provident Fund ccount standing in the name of the employee or his spouse or child. c. ny contribution to Employees' Provident Fund administered by the Regional Provident Fund Commissioner or to any other Provident Fund recognized by the Chief Commissioner or the Commissioner. Contribution to any fund shall not include any sums in repayment of loan d. Subscription to any security of the Central Government or any such deposit scheme as may be notified. e. Contribution by an Employee to an approved superannuation fund. f. Subscription to 6 years National Savings Certificates. Interest on NSC, which is deemed as investment also, qualifies under this section (refer nnexure-1). g. Contribution under the unit-linked insurance plan of the Unit Trust of India where the plan is in the name of the tax payer, his/her spouse or child. h. Contribution to any units of Mutual Fund referred to in clause 23D of Section 10, by the tax payer, his/her spouse or child. i. Subscription to Home Loan ccount Scheme of the National Housing Bank as may be notified. j. Subscriptions to the (i) National Savings Scheme 1992, (ii) Deferred nnuity Plan of LIC, i.e., Jeevan Dhara, Jeevan kshay, (iii) Notified Equity Linked Savings Scheme, (iv) Contributions to the UTI Retirement Plan in the name of Tax payer. k. Subscription to notified deposit scheme of i. a public sector company which is engaged in providing long term finance for construction or purchase of residential houses in India or 11
ii. any authority constituted in India 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. l. ny sums paid by an employee for the purpose of purchase or construction of a residential house property; the income from which is chargeable to tax under the head "Income from House Property" (or which would, if it has not been used for employee s own residence, have been chargeable to tax under that head) where such payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board, etc., the deduction will also be allowable in respect of repayment of loans borrowed by an employee from the Government, or any Bank or Life Insurance Corporation, or National Housing Bank, or certain other categories of institutions engaged in the business of providing long term finance for construction or purchase of houses in India. ny repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public/public sector company or a University, established by law or a college affiliated to such University, or a local authority. The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. Payment towards the cost of house property, however will not include, admission fee or cost of share or initial deposit or 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 by competent authority, or after the occupation of the house by the employee or after it has been let out. Payments towards any expenditure in respect of which the deduction is allowable under the provisions of Section 24 of the Income Tax ct will also not be included in payments towards the cost of purchase or construction of a house property. Where the house property in respect of which deduction has been allowed under these provisions is transferred by the tax payer at any time before the expiry of five years from the end of the financial year in which possession of such property is obtained by him or he received back, by way of refund or otherwise any sum specified in Section 80 C (2)(xviii), no deduction under these provisions shall be allowed in respect of such sums paid in such previous year in which the transfer is made and the aggregate amount of deduction of income tax so allowed in the earlier years shall be added to the tax on the total income of the employee with which he is chargeable for such assessment year. In respect of repayment of loan taken for the purchase or construction of a new residential house property, the construction of which does not get completed by the end of the financial year 2012-13, no deduction in respect of these items shall be admissible to the employees. The monthly instalments towards additional housing loan availed for the purpose of addition/alteration/improvements/repairs will not qualify for deduction. m. Tuition fees paid for education of children: ny sum paid, by an individual as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature) at the time of admission or thereafter, to any University, College, School, or other Educational Institution in India for the purpose of full time education of any two children of the employee. n. Subscription made to units of any mutual fund, pension fund setup by any mutual fund, notified u/s 10(23 D) o. ny sum deposited in a notified scheme of term deposit for a fixed period of not less than 5 years with a scheduled Bank is also eligible for deduction but within the overall ceiling limit of Rs.1,00,000 under Sec 80C. p. Subscription to notified bonds issued by the National Bank for griculture and Development. 12
q. Deposit in an account under Senior Citizens Savings Scheme Rules 2004 and as 5 year time deposit in an account under Post Office Time Deposit rules 1981. (With effect from 01.04.08). r. ny subscription by an employee to the Pension Fund which is an approved Superannuation Fund is eligible for deduction under 80C (2) (vii). DEDUCTIONS UNDER SEC. 80 CCC: With effect from 01.04.2006, this section provides for deduction from Gross Total Income, of an amount not exceeding Rs.1,00,000/-, in respect of Contribution to certain pension funds set up by Life Insurance Corporation of India or any other Insurance Companies subject to conditions that; a. the assessee is an individual b. the amount should be paid out of his income chargeable to tax during the financial year 01.04.2012 to 31.03.2013. c. any amount paid or deposited by the employee for the purpose of deduction under this Section, a deduction with reference to such amount shall not be allowed under Section 80C. However, if any amount is standing to the credit of the employee in the fund referred above and deduction has been allowed as stated above and the employee or his nominee receives this amount together with the interest or bonus accrued or credited to this account due to the reason of: (i) (ii) Due to surrender annuity plan whether in whole or part Pension received from the annuity plan then the amount so received during the Financial Years shall be the income to the employee or his nominee for that Financial Year and accordingly will be charged to tax DEDUCTION UNDER SECTION 80 CCD This section provides for deduction from Gross Total Income, of an amount not exceeding Rs.1,00,000/-, in respect of Contribution to certain Pension Schemes notified by Central Government subject to the conditions that; a. the assesse is an individual b. The amount should be paid out of his income chargeable to tax during the financial year 01.04.2012 to 31.03.2013. c. Not excluding 10% of Salary and in any other case not excluding 10% of gross Total Income. d. ny amount paid or deposited by the employee for the purpose of deduction under this Section, a deduction with reference to such amount shall not be allowed under Section 80C. However, if any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above and the employee or his nominee receives this amount together with the amount accrued thereon, due to the reason of i. Closure or opting out of the pension scheme or ii. Pension received from the annuity plan purchased and taken on such closure or opting out 13
then the amount so received during the FYs shall be the income of the employee or his nominee for that Financial Year and accordingly will be charged to tax. DEDUCTIONS UNDER SEC. 80 CCF: SCHEME WITHDRWN not applicable for this financial year 2012-2013 DEDUCTIONS UNDER SEC 80 CCG: scheme named "Rajiv Gandhi Equity Savings Scheme (RGESS)" is being notified for the purpose of this deduction. Newly inserted Section 80CCG provides deduction w.e.f. assessment year 2013-14 in respect of investment made under notified equity saving scheme. The deduction under this section is available if following conditions are satisfied: The assessee is a resident individual whose total Income should not exceed Rs.10.00 lakhs, and should be a new retail investor. The investment is locked for a period of 3 years. nd the assessee satisfies any other condition as may be prescribed. mount of deduction -The amount of deduction is at 50% of amount invested in equity shares. However, the amount of deduction under this provision cannot exceed Rs. 25,000. If any deduction is claimed by a taxpayer under this section in any year, he shall not be entitled to any deduction under this section for any subsequent year. Withdrawal of deduction - If the assessee, after claiming the aforesaid deduction, fails to satisfy the above conditions, the deduction originally allowed shall be deemed to be the income of the assessee of the year in which default is committed. The deduction u/s 80CCG will be in addition to the existing overall limit of deduction for savings up to Rs.1,00,000/- u/s 80C, 80CCC & 80CCD. DEDUCTIONS UNDER SEC. 80D: Under Section 80(D), a deduction can be allowed for a sum, not exceeding Rs.15,000/- per annum, to the extent payment is made by any mode of payment other than cash out of a person s income chargeable to tax to keep in force an Insurance under `MEDICLIM of General Insurance Corporation or any other Insurance Company provided the Insurance is on the health of the employee or on the health of the spouse, children of the employee. With effect from 01.04.2008, an additional deduction upto Rs.15000 will be allowed on payment made to effect or keep in force insurance on the health of his/her parent or parents. The earlier condition of dependant with respect to parents is dispensed with. The existing deduction upto Rs.15000/- in respect of payment made to effect or keep in force an insurance on the health of the assessee or his family is continued in the substituted Section 80D. If either of the parents or any member of the family, being an individual, who has been medically insured is a senior citizen (i.e. aged 65 years or more), the deduction would be upto 20000/-. DEDUCTIONS LLOWED UNDER SECTION 80 DD: Under substituted Section 80 DD, if the assessee has out of his income chargeable to tax, a. incurred expenditure on medical treatment (including nursing), training and rehabilitation of a handicapped dependent relative suffering from permanent physical disability including blindness or mental retardation, utism, Cerebral Palsy and Multiple Disabilities and 14
b. deposited / paid the amount under any scheme framed in this behalf by LIC / UTI/other insurance companies, then in either of the above cases or in both, the maximum amount of deduction is restricted to Rs.50,000/-. However, where such dependant is a person with severe disability, an amount of Rs.1,00,000 shall be allowed as deduction subject to the specified conditions. The deduction under (b) above shall be allowed only if the following conditions are fulfilled:- (i) the scheme referred to in (b) above provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual in whose name subscription to the scheme has been made; (ii) the employee nominates either the dependant, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependant, being a person with disability. However, if the dependant, being a person with disability, predeceases the employee, an amount equal to the amount paid or deposited under sub-para (b) 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. The deduction will be available to the employees without any restriction with regard to the total income. The nature of the permanent physical disability of the dependent relative has to be certified in accordance with IT Department circular No.702 dt.03 04 1995 by a physician, surgeon, oculist, or a psychiatrist, as the case may be, working in a Government hospital including a departmental dispensary or a hospital maintained by a local authority as per explanation given in Section 80DD. The salary disbursing uthority should, therefore, call, for such particulars/certificates/ information from the employee, as they deem necessary to verify the genuineness of the claim before they allow this deduction. Employees claiming exemption u/s 80 DD for the first time must apply to I.T. Department for their approval. DEDUCTIONS UNDER SEC 80E: Deduction in respect of interest paid on loan taken for higher education (not repayment of loan) will be allowed if the employee has paid any amount in the previous year out of his income chargeable to tax, by way of interest on loan taken by him for self or for his spouse/children from any financial institution for the purpose of pursuing higher education. (Higher education is defined to mean any course of studies pursued after passing the Senior Secondary Examination or its equivalent from any school, Board, University recognised by the Central/State Government or any local authorities to do so). Deduction will be allowed @ 100% of the interest paid on loan and is allowable from gross total income of the initial assessment year and for 7 successive assessment years or until the interest on such loan is paid by the assessee in full, whichever is earlier. DONTIONS TO CHRITBLE INSTITUTIONS/PRIME MINISTER S DROUGHT RELIEF FUND ETC. UNDER SECTION 80 G: Section 80G provides for deductions on account of donation made to various funds, charitable organizations etc. Generally no deduction should be allowed from the salary income in respect of any donations made for charitable purposes. The tax relief on such donations as 15
admissible under section 80G of the ct, will have to be claimed by the tax payer in the return of income. However in cases where employees make donations to the Prime Minister s National Relief Fund, the Chief Minister s Relief Fund or the Lieutenant Governor s Relief Fund (for which 100% deduction allowed on the donation amount effected) through their respective employers, the claim in respect of such donations will be admissible under section 80G on the basis of the certificate issued by the Employer in this behalf. (lso please refer our Circular PRNL 68/2001-02 Dt.14.12.2001 (page 14). DEDUCTIONS LLOWED TO PHYSICLLY CHLLENGED UNDER SECTION 80 U: ccording to the section 80U, an employee suffering from a permanent physical disability (including blindness), utism, Cerebral Palsy and Multiple Disabilities specified in Rule 11 D of Income Tax Rules 1962 which has the effect of reducing considerably such individual s capacity for normal work or engaging in a gainful employment or occupation, can be allowed a deduction of Rs.50,000/- from his taxable income. The deduction under this section can be allowed by the employer only on the basis of a certificate from an authorised physician or surgeon or psychiatrist, authorising the employer to set off the deduction under Sec.80 U of the Income Tax ct. Employees who seek exemption under this section for the first time must apply to the I.T. Department and get their approval. For the purposes of deduction under section 80DD & 80U, where the condition of disability is temporary and requires reassessment after a specified period, the certificate shall be valid for the period starting from the assessment year relevant to the previous year during which the certificate was issued and ending with the assessment year relevant to the previous year during which the validity of the certificate expires. It may however be noted that under Section 80DD and Section 80U, in respect of persons with severe disability (i.e., where the disability is more than 80%) the maximum deduction allowable is Rs.1,00.000/-. copy of the medical certificate issued by a competent authority may be obtained from them for determining the quantum of deduction to be granted while arriving at the tax to be deducted at source. On the basis of the medical certificates in respect of the persons with disability, the deduction of Rs.1,00,000/- is to be granted for those with severe disability (i.e. where the disability is more than 80%) and in respect of others, the deduction allowable will be Rs.50,000/-. With regard to the disbursement of pension to various constituents who may either be ex-indian Bank employees or otherwise, the Bank has an obligation to issue tax deduction certificate in Form No.16 (in accordance with the IT Dept., Circular No.761 dated 13.1.1998 reported in 229 ITR Statute 72). Salary disbursing uthorities should satisfy themselves about the actual deposits/ subscriptions/ payment made by the employees, by calling for such particulars/ information, as they deem necessary before allowing the aforesaid deduction. In case the Salary Disbursing uthority 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 should be free to claim the deduction on such amount by filing his return of income and furnishing the necessary proof etc., therewith, to the satisfaction of the ssessing Officer. It may also be mentioned here that the deposits/ subscriptions/ payments towards the items qualifying for the deduction should be made out of the employees income chargeable to tax. 16
COMPUTTION OF TX ON RRERS FOR ERLIER/PREVIOUS YERS (RELIEF UNDER SEC 89(1): The scope of deduction of Tax at Source from salaries was modified by the Finance ct, 1987. ccording to Section 192 (2) of Income Tax ct read with Rule 21 () of the Income Tax Rules, the employer is empowered to allow relief under Section 89(1) of the Income Tax ct whenever Salary/any payment in the nature of profit in lieu of salary is paid in arrears or in advance (the bank is under obligation under section 89 to deduct tax by taking the relief under consideration). The employees should furnish the following particulars to enable the employer to allow such relief under Section 89(1). a. The employee should furnish the application in Form No. 10E along with nnexure 1 in Duplicate after filling all the columns and the form appropriately verified by the employee. The verification should be signed by the employee. Please note that any person making a false statement is liable to be prosecuted under Section 277 of the Income Tax ct. b. From the Financial year ending 1992-93 the filing of Income Tax Return is compulsory for those who are within the Taxable Income category. Such of those employees should produce copy of their acknowledgement of Income Tax Return Form No.3 or Form No.2 as the case may be for each year for which Relief under Section 89(1) is sought in support of their claim. c. Those employees, who are not coming under category (b) above, should furnish copy of their Form 16 for each year for which relief under Section 89(1) is sought in support of their claim. d. In case the salary disbursing authority is not satisfied about the genuineness of the employee s claim under Section 89(1), he should not allow the same, and the employee should be free to claim the relief under Section 89(1) by filing his return of Income to the satisfaction of the ssessing Officers. For attention of Branches: While such relief is being granted, the amount of relief granted under Section 89 is to be specifically indicated in Form No.24Q in nnexure II in column No.344. Similarly, while issuing the certificate of tax deduction in Form No,16, relief under Section 89 will have to be indicated in Column 16 and the form requires attachment of details. The details furnished in Form No.10E will have to be furnished in the certificate in Form No.16. CLCULTION OF INCOME TX: s per provision under Section 192 of IT ct, Tax should be deducted at source on the salary payments if the annual estimated income under this head exceeds the maximum amount not liable to tax. The obligation to deduct the tax lies on the employer or the person responsible for payment of salary. For this purpose, the employer should make an estimate of the total emoluments payable to the employee during the financial year and the net salary income of each employee is arrived at after allowing the applicable deductions such as HR, deductions under Sections 80 C, 80CCC, 80CCG, 80 D, 80 DD, 80 G and 80 U and income tax to be calculated for the financial year 2012-2013 at the rates given in the first page of this circular. n additional surcharge called Education Cess 2% and higher education cess of 1% totalling to 3% on the amount of tax is to be added. The amount so arrived is the tax payable by the employee, which is required to be deducted from the monthly salary in equal instalments. Examples are given in the annexure which are only illustrative. 17