The following contents of the Central Board of Direct Taxes' Circular No. 29/2017 dated 5th December, 2017, is reproduced in this article.
2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2017
2.1 Rates of tax
2.2 Surcharge of Income tax
2.3.1 Education Cess on Income tax
2.3.2 Secondary and Higher Education Cess on Income tax
3 BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM SALARIES
3.1 Method of Tax Calculation
3.2 Payment of Tax on Non monetary Perquisites by Employer
3.2.1 Computation of Average Income Tax
3.3 Salary From More Than One Employer
3.4 Relief When Salary Paid in Arrear or Advance
3.5 Information regarding Income under any Other head
3.6 Computation of Income under the head “Income from house property’
3.7 Adjustment for Excess or Shortfall of Deduction
3.8 Salary Paid in Foreign Currency
1. Reference is invited to Circular No. 01/2017 dated 02.01.2017 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 2016-17, 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 2017-18 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, 2017:
As per the Finance Act, 2017, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head "Salaries" for the financial year 2017-18 (i.e. Assessment Year 2018-19) at the following rates:
2.1 Rates of tax
A. Normal Rates of tax:
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:
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:
2.2 Surcharge on Income tax:
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section 111A or section 112 of the Act, shall, in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act, will be as under:
(a) having a total income exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten percent of such income-tax and
(b) having a total income exceeding one crore rupees, at the rate of fifteen percent of such income-tax:
Provided that in the case of persons mentioned above having total income exceeding;-
(a) Fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees;
(b) one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
2.3.1 Education Cess on Income tax:
The amount of income-tax including the surcharge if any, shall be increased by Education Cess on Income Tax at the rate of two percent of the income-tax.
2.3.2 Secondary and Higher Education Cess on Income-tax:
An additional education cess is chargeable at the rate of one percent of income-tax including the surcharge, if any, but not including the Education Cess on income tax as in 2.3.1.
3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM "SALARIES":
3.1 Method of Tax Calculation:
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 2017-18. The income-tax is required to be calculated on the basis of the rates given above, subject to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at the time of each payment. No tax, however, will 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. 2,50,000/- or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical illustrations of computation of tax are given at Annexure-I).
3.2 Payment of Tax on Perquisites by Employer:
An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at its option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. However, the employer will have to pay the 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.
3.2.1 Computation of Average Income Tax:
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.
The income chargeable under the head “salaries” of an 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.
The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee.
3.3 Salary From More Than One Employer:
Section 192(2) 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 therefrom, 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).
3.4 Relief When Salary Paid in Arrear or Advance:
3.4.1 Under section 192(2A) 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 under Section 89(1) 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.
Here “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 to be a university for the purpose of that Act.
3.4.2 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 section 10(10C)(i) (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 section 10(10C) in respect of such, or any other, assessment year.
3.5 Information regarding Income under any other head:
(i) Section 192(2B) 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 taxpayer for the same financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under:
I, …………………. (name of the assessee), do declare that what is stated above is true to the best of my information and belief.
It is reiterated that the DDO can take into account any loss only under the head “Income from house property”. Loss under any other head cannot be considered by the DDO for calculating the amount of tax to be deducted.
It may be noted that loss under the head “Income from house property” can be set off only up to Rs. 2.00 lakh with the income under any other head of income in view of the amendment to section 71 of the Act vide Finance Act, 2017. Hence, loss under the head “Income from house property” in excess of Rs. 2.00 lakh is to be ignored for calculating the amount of tax deduction.
3.6 Computation of income under the head “Income from house property”:
While taking into account the loss from House Property, the DDO shall ensure that the employee 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 employer in respect of loss claimed under the head “ Income from house property” separately for each house property:
a) Gross annual rent/value
b) Municipal Taxes paid, if any
c) Deduction claimed for interest paid, if any
d) Other deductions claimed
e) Address of the property
The DDO shall also ensure furnishing of the evidence or particulars in Form No. 12BB in respect of deduction of interest as specified in Rule 26C read with section 192 (2D).
3.6.1 Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:
Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-
(i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
(ii) the quantum of deduction allowed as per table below:
In case of Serial No. 3 above
(a) The acquisition or construction of the house should be completed within 5 years from the end of the FY in which the capital was borrowed. Hence, it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
(b) Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.
(c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.
3.7 Adjustment for Excess or Shortfall of Deduction:
The provisions of Section 192(3) 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.
3.8 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 “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source (see Rule 26).
REST OF THE FOLLOWING CONTENTS CAN BE CHECKED AT THE CIRCULAR - LINK
4. PERSONS RESPONSIBLE FOR DEDUCTION OF TAX AND THEIR DUTIES
4.1 Stipulation of section 204 of the Act
4.2 Tax determined to be deducted from Salary u/s 192
4.3 Deduction of Tax at Lower Rate
4.4 Deposit of Tax Deducted
4.4.1 Due dates for payment of TDS
4.4.2 Mode of payment of TDS
4.5 Interest, Fee, Penalty & Prosecution for Failure to Deposit Tax Deducted
4.6 Furnishing of Certificate for Tax Deducted (Section 203)
4.7 Mandatory Quoting of PAN and TAN
4.8 Compulsory Requirement to furnish PAN by employee (Section 206AA)
4.9 Statement of Deduction of tax under of section 200 (3) [Quarterly Statement of TDS]
4.10 TDS on Income from Pension
4.11 Matters pertaining to the TDS made in case of Non Resident
5. COMPUTATION OF INCOME UNDER THE HEAD “SALARIES”
5.1 Income chargeable under the head “Salaries”:
5.2 Definition of “Salary”, “perquisite” and “profit in lieu of salary” (Section 17)
5.3 Income not included under the Head “Salaries” (Exemptions)
5.4 Deduction u/s 16 of the Act form the Income from Salaries
5.5 Deductions under Chapter VI-A of the Act
6. REBATE OF RS. 2500 FOR INDIVIDUAL HAVING TOTAL INCOME UPTO RS. 3.5 LAKH (SECTION 87A)
7. TDS ON PAYMENT OF ACCUMULATED BALANCE UNDER RECOGNISED PROVIDENT FUND AND CONTRIBUTION FROM APPROVED SUPERANNUATION FUND.
8. DDOS TO SATISFY THEMSELVES OF THE GENUINENESS OF CLAIM
9. CALCULATION OF INCOME-TAX TO BE DEDUCTED
I. SOME ILLUSTRATIONS
II. FORM NO 12BA
IIa. FORM NO 12BB
III. REVISED PROCEDURE FOR FURNISHING QTLY E-TDS/TCS STATEMENT BY DEDUCTORS/COLLECTORS
IV. THE PROCEDURE OF FURNISHING FORM 24G
V. PERSON RESPONSIBLE FOR FILING FORM 24G IN CASE OF STATE GOVT DEPARTMENTS/CENTRAL GOVT DEPARTMENTS
VI. PROCEDURE OF PREPARATION OF QUARTERLY STATEMENT OF DEDUCTION OF TAX u/s 200 (3)
VII. DEPTT. OF ECO. AFFAIRS NOTIFICATION DATED 22.12.2013
VIII. BOARD’S NOTIFICATION DATED 24.11.2000
IX. BOARD’S NOTIFICATION DATED 29.01.2001
X. FORM NO. 10 BA