How to Calculate TDS on Salary FY 2013-14 _ AY 2014-15

2/8/2015 HowtocalculateTDSonSalaryFY201314/AY201415

http://taxguru.in/incometax/tdssalaryfinancialyear201314ay201415.html 1/73

taxguru.in http://taxguru.in/incometax/tdssalaryfinancialyear201314ay201415.html

HowtocalculateTDSonSalaryFY201314/AY201415

ProvisionsofTDSonSalaryasapplicableonIncomefromSalaryforFinancialyear201314/Assessmentyear201415.ThisincludeshowtocalculateTDSonSalaryforFinancialyear201314andtaxabilityofvariouscomponentsofSalary,EligibledeductionforSalariedEmployees,TDSDueDateandTDSreturn

anddeductionprovisions.

GovernmentofIndiaMinistryofFinance

DepartmentofRevenueCentralBoardofDirectTaxes

CIRCULARNO.8/2013,Dated:Dated:October10,2013

Subject:IncomeTaxDeductionfromsalariesduringthefinancialyear201314undersection192oftheincometaxact,1961

ReferenceisinvitedtoCircularNo.08/2012dated05.10.2012wherebytheratesofdeductionofincometaxfrom the payment of income under the head Salaries under Section 192 of the Incometax Act, 1961(hereinaftertheAct),duringthefinancialyear20122013,wereintimated.ThepresentCircularcontainstheratesofdeduction ofincometaxfromthepayment ofincomechargeableunderthe headSalariesduringthefinancialyear20132014andexplainscertainrelatedprovisionsoftheActandIncometaxRules,1962(hereinaftertheRules).TherelevantActs,Rules,FormsandNotificationsareavailableatthewebsiteoftheIncomeTaxDepartmentwww.incometaxindia.gov.in.

2.RATESOFINCOMETAXASPERFINANCEACT.2013:

Asper the FinanceAct, 2013, incometax is required to be deductedunderSection 192 of theAct fromincomechargeableundertheheadSalariesforthefinancialyear201314(i.e.AssessmentYear201415)atthefollowingrates:

2.1Ratesoftax

A.NormalRatesoftax:

SlNo

TotalIncome Rateoftax

1 WherethetotalincomedoesnotexceedRs.2,00,000/.

Nil

2 WherethetotalincomeexceedsRs.2,00,000butdoesnotexceedRs.5,00,000/

10percentoftheamountbywhichthetotalincomeexceedsRs.2,00,000/

3 WherethetotalincomeexceedsRs.5,00,000/butdoesnotexceedRs.10,00,000/.

Rs.30,000/plus20percentoftheamountbywhichthetotalincomeexceedsRs.5,00,000/.

4 WherethetotalincomeexceedsRs. Rs.1,30,000/plus30Percentoftheamountby

http://taxguru.in/income-tax/tds-salary-financial-year-201314-ay-201415.htmlhttp://taxguru.in/



10,00,000/. whichthetotalincomeexceedsRs.10,00,000/

B.RatesoftaxforeveryIndividual,residentinIndia,whoisoftheageofsixtyyearsormorebutlessthaneightyyearsatanytimeduringthefinancialyear:

SlNo TotalIncome Rateoftax

1 WherethetotalincomedoesnotexceedRs.

2,50,000/

Nil

2 WherethetotalincomeexceedsRs.2,50,000

butdoesnotexceedRs.5,00,000/


3 WherethetotalincomeexceedsRs.5,00,000/butdoesnotexceedRs.

10,00,000/

Rs.25,000/plus20percentoftheamountbywhichthetotalincomeexceedsRs.

5,00,000/.

4 WherethetotalincomeexceedsRs.10,00,000/

Rs.1,25,000/plus30percentoftheamountbywhichthetotalincomeexceedsRs.

10,00,000/

C.IncaseofeveryindividualbeingaresidentinIndia,whoisoftheageofeightyyearsormoreatanytimeduringthefinancialyear:

SlNo TotalIncome Rateoftax

1 WherethetotalincomedoesnotexceedRs.

5,00,000/

Nil

2 WherethetotalincomeexceedsRs.5,00,000butdoesnotexceedRs.

10,00,000/


4 WherethetotalincomeexceedsRs.10,00,000/

Rs.1,00,000/plus30percentoftheamountbywhichthetotalincomeexceedsRs.



10,00,000/

2.2SurchargeonIncometax:

Theamountofincometaxshall beincreasedbyasurcharge@10%ofthe Incometaxonpaymentstoanindividual taxpayer,if the total incomeof theindividual exceedsRs1 croreduringFY201314 (AY201415).However the amount ofSurcharge shall not exceed the amount by which the individuals totalincomeexceedsRs1croreandifsurcharge soarrivedat,exceedssuchamount(assesseestotalincomeminusonecrore)thenitwillberestrictedtotheamountoftotalincomeminusRupeesonecrore.

2.3.1EducationCessonIncometax:

Theamountofincometaxincludingthesurchargeifany,shallbeincreasedbyEducationCessonIncomeTaxattherateoftwopercentoftheincometax.

2.3.2SecondaryandHigherEducationCessonIncometax:

Anadditionalcessischargeableattherateofonepercentofincometaxincludingthesurchargeifany,butnotincludingtheEducationCessonincometaxasin2.3.1.

3.SECTION192OFTHEINCOMETAXACT,1961:BROADSCHEMEOFTAXDEDUCTIONATSOURCEFROMSALARIES:

3.1MethodofTaxCalculation:

EverypersonwhoisresponsibleforpayinganyincomechargeableundertheheadSalariesshalldeductincometaxontheestimatedincomeoftheassesseeundertheheadSalariesforthefinancialyear201314. The incometax is required to be calculated on the basis of the rates givenabove, subject to theprovisionsrelatedtorequirementtofurnishPANaspersec206AAoftheAct,andshallbedeductedatthetimeofeachpayment.Notax,however,willberequiredtobedeductedatsourceinanycaseunlesstheestimatedsalaryincomeincludingthevalueofperquisites,forthefinancialyearexceedsRs.2,00,000/orRs.2,50,000/orRs.5,00,000/,asthecasemaybe,dependingupontheageoftheemployee.(SometypicalexamplesofcomputationoftaxaregivenatAnnexureI).

3.2PaymentofTaxonPerquisitesbyEmployer:

An option has been given to the employer to pay the tax on nonmonetary perquisites given to anemployee.Theemployermay,atitsoption,makepaymentofthetaxonsuchperquisiteshimselfwithoutmakinganyTDSfromthesalaryoftheemployee.However,theemployerwillhavetopaythetaxatthetimewhensuchtaxwasotherwisedeductiblei.e.atthetimeofpaymentofincomechargeableundertheheadsalariestotheemployee.

3.2.1ComputationofAverageIncomeTax:

Forthepurposeofmakingthepaymentoftaxmentionedinpara3.2above,taxistobedeterminedattheaverageofincometaxcomputedonthebasisofrateinforceforthefinancialyear,ontheincomechargeableundertheheadsalaries,includingthevalueofperquisitesforwhichtaxhasbeenpaidbytheemployerhimself.

3.2.2Illustration:

The income chargeable under the head salaries of an employeebelow sixty years of age for the yearinclusive of all perquisites is Rs.4,50,000/, out of which, Rs.50,000/ is on account of nonmonetaryperquisitesandtheemployeroptstopaythetaxonsuchperquisitesaspertheprovisionsdiscussedinpara



3.2above.

STEPS:

IncomeChargeableundertheheadSalariesinclusiveofallperquisites

Rs.4,50,000/

TaxonTotalSalary(includingCess) Rs.25,750/

AverageRateofTax[(25,750/4,50,000)X100] 5.72%

TaxpayableonRs.50,000/=(5.72%of50,000) Rs.2,861/

Amountrequiredtobedepositedeachmonth Rs.240(Rs.238.4)=2881/12)

ThetaxsopaidbytheemployershallbedeemedtobeTDSmadefromthesalaryoftheemployee.

3.3SalaryFromMoreThanOneEmployer:

Section 192(2)dealswithsituationswherean individualisworkingundermorethanoneemployer orhaschangedfromoneemployertoanother.Itprovidesfordeductionoftaxatsourcebysuchemployer(asthetaxpayermaychoose)fromtheaggregatesalaryoftheemployee,whoisorhasbeeninreceiptofsalaryfrommore than oneemployer.Theemployee is now required to furnish to the present/chosenemployerdetailsoftheincomeundertheheadSalariesdueorreceivedfromtheformer/otheremployerandalsotaxdeductedatsource therefrom,inwritingandduly verifiedbyhimandby theformer/other employer.Thepresent/chosenemployerwill berequired to deduct taxat source onthe aggregate amountof salary(includingsalaryreceivedfromtheformerorotheremployer).

3.4ReliefWhenSalaryPaidinArrearorAdvance:

3.4.1Undersection192(2A)wheretheassessee,beingaGovernmentservantoranemployeeinacompany,cooperativesociety,localauthority,university,institution,associationorbodyisentitledtothereliefunderSection89(1)hemayfurnishtothepersonresponsibleformakingthepaymentreferredtoinPara(3.1),suchparticularsinFormNo.10Edulyverifiedbyhim,andthereuponthepersonresponsible,asaforesaid,shallcomputethereliefonthebasisofsuchparticularsandtakethesameintoaccountinmakingthedeductionunderPara(3.1)above.

Here Universitymeans aUniversity established or incorporated by or under aCentral,State orProvincial Act, and includes an institution declared under section 3 of the University GrantsCommissionAct,1956,tobeaUniversityforthepurposesofthatAct.

3.4.2 With effect from1/04/2010 (AY201011), no such relief shall be granted inrespect of any amountreceived or receivable by an assessee on his voluntary retirement or termination of his service, inaccordancewithanyschemeorschemesofvoluntaryretirementorinthecaseofapublicsectorcompanyreferredtoinsection10(10C)(i)(readwithRule2BA),aschemeofvoluntaryseparation,ifanexemptioninrespectof anyamountreceivedorreceivableon suchvoluntaryretirementor terminationofhis serviceorvoluntary separationhas beenclaimedbythe assesseeundersection 10(10C)in respectof such,or anyother,assessmentyear.

3.5InformationregardingIncomeunderanyotherhead:

(i) Section 192(2B) enables a taxpayer to furnish particulars of income under any head other thanSalaries(notbeingalossunderanysuchheadotherthanthelossundertheheadIncomefromhouseproperty)receivedbythetaxpayerforthesamefinancialyearandofanytaxdeductedatsourcethereon.



Theparticularsmaynowbefurnishedinasimplestatement,whichisproperly signedandverifiedbythetaxpayerinthemannerasprescribedunderRule26B(2) oftheRulesandshallbeannexedtothesimplestatement.Theformofverificationisreproducedasunder:

I,.(nameoftheassessee),dodeclarethatwhatisstatedaboveistruetothebestofmyinformationandbelief.

It is reiterated that theDDOcan take into accountany loss onlyunder the head Income from houseproperty.LossunderanyotherheadcannotbeconsideredbytheDDOforcalculatingtheamountoftaxtobededucted.

3.6ComputationofincomeundertheheadIncomefromhouseproperty:

WhiletakingintoaccountthelossfromHouseProperty,theDDOshallensurethattheemployeefiles the declaration referred to aboveandencloses therewith a computation of such loss fromhouseproperty.FollowingdetailsshallbeobtainedandkeptbytheemployerinrespectoflossclaimedundertheheadIncomefromhousepropertyseparatelyforeachhouseproperty:

a)Grossannualrent/value

b)MunicipalTaxespaid,ifany

c)Deductionclaimedforinterestpaid,ifany

d)Otherdeductionsclaimede)Addressoftheproperty

f)Amountofloan,ifanyand

g)Nameandaddressofthelender(loanprovider)

3.6.1ConditionsforClaimofDeductionofInterestonBorrowedCapitalforComputationofIncomeFromHousePropertySection24(b):

Section24(b)oftheActallowsdeductionfromincomefromhousespropertyoninterestonborrowedcapitalasunder:

(i)thedeductionisallowedonly incaseofhousepropertywhichisownedand isintheoccupationoftheemployeeforhisownresidence.However,ifitisactuallynotoccupiedbytheemployeeinviewofhisplaceof the employment being at other place, his residence in that other place should not be in a buildingbelongingtohim.

(ii)Thequantumofdeductionallowedaspertablebelow:

SlNo

PurposeofborrowingcapitalDateofborrowing

capitalMaximumDeduction

allowable

1Repairorrenewalorreconstructionofthehouse

Anytime Rs.30,000/

2Acquisitionorconstructionofthehouse Before01.04.1999 Rs.30,000/



3Acquisitionorconstructionofthehouse Onorafter01.04.1999 Rs.1,50,000/

IncaseofSerialNo.3above

(a)Theacquisitionorconstructingofthehouseshouldbecompletedwithin3yearsfromtheendoftheFYinwhichthecapitalwasborrowed.HenceitisnecessaryfortheDDOtohavethecompletioncertificateofthe house property against which deduction is claimed either from the builder or through selfdeclarationfromtheemployee.

(b) Further any prior period interest for the FYs upto the FY in which the property was acquired andconstructedshallbedeductedinequalinstallmentsfortheFYinquestionandsubsequentfourFYs.

(c)The employeehas to furnish before the DDO a certificate from the person to whom any interest ispayableon theborrowedcapitalspecifying theamountof interestpayable.Incaseanewloanis takentorepaytheearlier loan,thenthecertificate shouldalsoshowthedetailsofPrincipaland Interestoftheloansorepaid.

3.7AdjustmentforExcessorShortfallofDeduction:

TheprovisionsofSection192(3)allowthedeductortomakeadjustmentsforanyexcessorshortfallinthedeductionoftaxalreadymadeduringthefinancialyear,insubsequentdeductionsforthatemployeewithinthatfinancialyearitself.

3.8SalaryPaidinForeignCurrency:

For thepurposesofdeduction oftaxon salarypayable in foreigncurrency, thevalue inrupeesofsuchsalary shallbe calculatedat theTelegraphic transferbuying rateof such currency ason the date onwhichtaxisrequiredtobedeductedatsource(seeRule26).

4.PERSONSRESPONSIBLEFORDEDUCTINGTAXANDTHEIRDUTIES:

4.1.Aspersection204(i) oftheAct,the personsresponsiblefor payingforthepurposeofSection192meanstheemployerhimselforiftheemployerisaCompany,theCompanyitselfincludingthePrincipalOfficerthereof.Further,asperSection204(iv),inthecaseofcredit,orasthecasemaybe,ifthepaymentisby or on behalf ofCentralGovernment orStateGovernment, theDDOor any other personbywhatevernamecalled,responsibleforcrediting,orasthecasemaybe,payingsuchsumisthepersonsresponsibleforpaying.

4.2.Thetaxdeterminedasperpara9shouldbedeductedfromthesalaryu/s192oftheAct.

4.3.DeductionofTaxatLowerRate:

Ifthe jurisdictionalTDSofficeroftheTaxpayerissues acertificate ofNoDeduction orLowerDeductionofTax under section 197 of the Act, in response to the application filed before him inForm No13by theTaxpayerthen theDDOshouldtake intoaccountsuch certificateanddeduct taxonthesalary payableattheratesmentionedtherein.(seeRule28AA).

4.4.DepositofTaxDeducted:

Rule 30 prescribes time and mode of payment of tax deducted at source to the account of CentralGovernment.

4.4.1.DuedatesforpaymentofTDS



Prescribedtimeofpayment/depositofTDStothecreditofCentralGovernmentaccountisasunder:

a)IncaseofanOfficeofGovernment:

SlNo.Description

Timeuptowhichtobedeposited.

1TaxdepositedwithoutChallan[BookEntry]

SAMEDAY

2TaxdepositedwithChallan 7THDAYNEXTMONTH

3Taxonperquisitesopttobedepositedbytheemployer. 7THDAYNEXTMONTH

b)InanycaseotherthananOfficeofGovernment

SlNo. Description

Timeuptowhichtobedeposited.

1TaxdeductedinMarch 30thAPRILNEXTFINANCIALYEAR

2Taxdeductedinanyothermonth 7THDAYNEXTMONTH

3Taxonperquisitesoptedtobedepositedbytheemployer

7THDAYNEXTMONTH

However,if aDDOappliesbefore thejurisdictionalAdditional/JointCommissionerof IncomeTax topermitquarterlypaymentsofTDSundersection192,theRule30(3)allowsforpaymentsonquarterlybasisandaspertimegiveninTablebelow:

Sl.No. Quarterofthefinancialyearendedon Dateforquarterlypayment

1 30thJune 7thJuly

2 30thSeptember 7thOctober

3 31stDecember 7thJanuary

4 31stMarch30thAprilnextFinancialYear



4.4.2ModeofPaymentofTDS

4.4.2.1Compulsory filingofStatementbyPAO,TreasuryOfficer,etc incaseofpaymentofTDSbyBookEntry:

InthecaseofanofficeoftheGovernment,wheretaxhasbeenpaidtothecreditoftheCentralGovernmentwithouttheproductionofachallan[BookEntry],thePayandAccountsOfficerortheTreasuryOfficerortheChequeDrawingandDisbursingOfficeroranyotherpersonbywhatevernamecalledtowhomthedeductorreports aboutthe tax deductedandwho isresponsible for creditingsuch sum tothe credit oftheCentralGovernment,shall

(a) submita statementinFormNo.24Gwithintendaysfrom the endof themonth to theagencyauthorizedby theDirectorGeneralof Incometax(Systems)[TINFacilitationCentres currently managed by M/s National Securities Depository Ltd] in respect of taxdeductedbythedeductorsandreportedtohimforthatmonthand

(b)intimatethenumber(hereinafterreferredtoastheBookIdentificationNumberorBIN)generatedbytheagencytoeachofthedeductorsinrespectofwhomthesumdeductedhasbeencredited.BINconsistofreceiptnumberofForm24G,DDOsequencenumberinFormNo.24Ganddateonwhichtaxisdeposited.

TheprocedureoffurnishingForm24GisdetailedinAnnexureIII.PAOs/DDOsshouldgothroughtheFAQsinAnnexure IV tounderstandthe correctprocessto befollowed.TheZAO/PAOofCentralGovernmentMinistriesisresponsibleforfilingofFormNo.24Gonmonthlybasis.ThepersonresponsibleforfilingFormNo.24GincaseofStateGovt.DepartmentsisshownatAnnexureV.

TheprocedureoffurnishingForm24GisdetailedinAnnexureIV.PAOs/DDOsshouldgothroughtheFAQsthereintounderstandthecorrectprocesstobefollowed.

4.4.2.2PaymentbyanIncomeTaxChallan:

(i) In case the payment is madeby an IncomeTax Challan, the amount of tax so deducted shall bedepositedto thecreditof theCentralGovernment byremittingit,withinthetime specifiedinTable inpara4.4.1above, intoanyoffice oftheReserveBankofIndia orbranchesof theStateBankofIndiaor ofanyauthorizedbank

(ii) Incaseof acompanyandaperson (other thanacompany), towhomprovisions of section44ABareapplicable, the amount deductedshall be electronically remitted into theReserveBankof India or theStateBankofIndiaoranyauthorisedbankaccompaniedbyanelectronicincometaxchallan(Rule125).

Theamount shallbeconstruedaselectronicallyremitted to theReserveBankof India orto theStateBankofIndiaortoanyauthorizedbank,iftheamountisremittedbywayof:

(a)internetbankingfacilityoftheReserveBankofIndiaoroftheStateBankofIndiaorofanyauthorizedbankor

(b)debitcard.{NotificationNo.41/2010dated31stMay2010}

4.5Interest,Penalty&ProsecutionforFailuretoDepositTaxDeducted:



4.5.1Ifapersonfailstodeductthewholeoranypartofthetaxatsource,or,afterdeducting,failstopaythewholeoranypartofthetaxtothecreditoftheCentralGovernmentwithintheprescribedtime,heshallbeliabletoactioninaccordancewiththeprovisionsofsection201andshallbedeemedtobeanassesseeindefaultinrespectofsuchtaxandliableforpenalactionu/s221oftheAct.FurtherSection201(1A)laysdownthatsuchpersonshallbeliabletopaysimpleinterest

(i)at1% foreverymonthorpart ofthemonthontheamount ofsuchtaxfromthe dateonwhichsuchtaxwasdeductibletothedateonwhichsuchtaxisdeductedand

(ii)atoneandonehalfpercentforeverymonthorpartofamonthontheamountofsuchtaxfromthedateonwhichsuchtaxwasdeductedtothedateonwhichsuchtaxisactuallypaid.

Such interest, if chargeable, ismandatory innatureand has to be paid before furnishing of quarterlystatementofTDSforrespectivequarter.

4.5.2Section271Cinteralialaysdownthatifanypersonfailstodeductwholeoranypartoftaxatsourceorfailstopaythewholeorpartoftaxundersecondprovisotosection194B,heshallbeliabletopay,bywayofpenalty,asumequaltotheamountoftaxnotdeductedorpaidbyhim.

4.5.3 Further, section 276B lays down that if a person fails to pay to the credit of the CentralGovernment within the prescribed time, as above, the tax deductedat source by him, he shall bepunishablewithrigorousimprisonment for a termwhichshallbebetween3monthsand7 years,alongwithfine.

4.6FurnishingofCertificateforTaxDeducted(Section203):

4.6.1Section203requirestheDDOtofurnishtotheemployeeacertificateinForm16detailingtheamountofTDSandcertainotherparticulars.TheActstipulatesthatForm16shouldbefurnishedtotheemployeeby31stMayaftertheendofthefinancialyearinwhichtheincomewaspaidandtaxdeducted.Eventhebanksdeductingtax atthetimeofpaymentof pensionarerequired toissuesuch certificates.RevisedForm16annexedtoNotificationNo11dated19022013isenclosed.ThecertificateinForm16shallspecify

(a)Validpermanentaccountnumber(PAN)ofthedeductee

(b)Validtaxdeductionandcollectionaccountnumber(TAN)ofthedeductor

(c)(i)Bookidentificationnumberornumbers(BIN)wheredepositoftaxdeductediswithoutproductionofchallanincaseofanofficeoftheGovernment

(ii)Challanidentificationnumberornumbers(CIN*)incaseofpaymentthroughbank.

(*Challan identification number (CIN) means the number comprising the Basic StatisticalReturns (BSR)Code of the Bankbranch where the tax has beendeposited, the date onwhichthetaxhasbeendepositedandchallanserialnumbergivenbythebank.)

(d)Receiptnumbersofalltherelevantquarterlystatementsincasethestatementreferredtoinclause(i)isfortaxdeductedatsourcefromincomechargeableundertheheadSalaries.Thereceiptnumberofthequarterlystatementisof8digit.

Further as perCircular 04/2013dated 17042013all deductors (including Government deductorswho



depositTDSintheCentralGovernmentAccountthroughbookentry)shallissuethePartAofFormNo.16,bygeneratingand subsequentlydownloadingitthroughTRACESPortalandafter dulyauthenticatingandverifying it, in respectof all sumsdeductedonor afterthe 1st day ofApril, 2012under the provisions ofsection192ofChapterXVIIB.PartAofFormNo16shallhaveauniqueTDScertificatenumber. PartB(Annexure)ofFormNo.16shallbepreparedbythedeductormanuallyandissuedtothededucteeafterdueauthenticationandverificationalongwiththePartAoftheFormNo.16.

ItmaybenotedthatunderthenewTDSprocedure,theaccuracyandavailabilityofTAN,PANandreceiptnumberofTDSstatementfiledbythedeductorwillbeuniqueidentifierforgrantingonlinecreditforTDS.Henceduecareshouldbetakeninfillingtheseparticulars.DuecareshouldalsobetakeninindicatingcorrectCIN/BINinTDScertificate.

IftheDDO failstoissuethesecertificates tothepersonconcerned, asrequiredbysection203, hewillbeliable topay, bywayofpenalty, undersection272A(2)(g),a sumwhichshall beRs.100/ forevery dayduringwhichthefailurecontinues.

Itis, however,clarifiedthatthereisno obligationtoissuetheTDScertificateincasetaxatsource isnotdeductible/deductedbyvirtueofclaimsofexemptionsanddeductions.

[Note:TRACESisawebbasedapplicationoftheIncometaxDepartmentthatprovidesaninterfaceto all stakeholders associated with TDS administration. It enables viewing of challan status,downloading of NSDL Conso File, Justification Report and Form16 / 16A as well as viewing ofannualtaxcreditstatements(Form26AS).EachdeductorisrequiredtoRegisterintheTracesportal.Form 16/16A issued to deductees should mandatorily be generated and downloaded from theTRACESportal]

4.6.2.Ifanassesseeisemployedbymorethanoneemployerduringtheyear,eachoftheemployersshallissuePartAofthecertificateinFormNo.16pertainingtotheperiodforwhichsuchassesseewasemployedwitheachoftheemployersandPartBmaybeissuedbyeachoftheemployersorthelastemployerattheoptionoftheassessee.

4.6.3.AuthenticationbyDigitalSignatures:

(i) Where a certificate is to be furnished in Form No. 16, the deductor may, at his option, use digitalsignaturestoauthenticatesuchcertificates.

(ii)Incaseofcertificatesissuedunderclause(i),thedeductorshallensurethat

(a)theconditionsprescribedinpara4.6.1abovearecompliedwith

(b)oncethecertificateisdigitallysigned,thecontentsofthecertificatesarenotamenabletochangeand

(c)thecertificateshaveacontrolnumberandalogofsuchcertificatesismaintainedbythedeductor.

The digital signature is being used to authenticate most of the etransactions on the internet astransmissionofinformationusingdigitalsignatureisfailsafe.Itsavestimespeciallyinorganisationshavinglargenumber ofemployeeswhereissuanceofcertificateofdeduction oftaxwithmanual signatureistimeconsuming(Circularno2of2007dated21.05.2007)

4.6.4.Furnishingofparticularspertainingtoperquisites,etc(Section192(2C):



4.6.4.1Aspersection192(2C),theresponsibilityofprovidingcorrectandcompleteparticularsofperquisitesorprofitsinlieuofsalarygiventoanemployeeisplacedonthepersonresponsibleforpayingsuchincomei.e., the personresponsible for deducting taxat source.The formandmanner of suchparticulars areprescribed in Rule 26A,Form 12BA (Annexure II) and Form16of theRules. Information relating to thenature and value of perquisites is to be provided by the employer inForm 12BA in case salary paid orpayableisaboveRs.1,50,000/.Inothercases,theinformationwouldhavetobeprovidedbytheemployerinForm16itself.

4.6.4.2Anemployer,whohaspaid thetaxon perquisitesonbehalfof theemployeeasper theprovisionsdiscussedinpara3.2ofthiscircular,shallfurnishtotheemployeeconcerned,acertificatetotheeffectthattaxhasbeenpaidtotheCentralGovernmentandspecifytheamountsopaid,therateatwhichtaxhasbeenpaidandcertainotherparticularsintheamendedForm16.

4.6.4.3Theobligationcastonthe employerunderSection192(2C) forfurnishingastatement showingthevalue of perquisites provided to the employee is acrucial responsibilityof theemployer, which isexpectedtobe dischargedinaccordancewithlawand rulesofvaluationframedthere under.Anyfalseinformation, fabricated documentation or suppression of requisite information will entail consequencesthereof providedunderthe law.The certificates inForms16and/orForm12BAspecifiedabove, shall befurnishedtotheemployeeby31stMayofthefinancialyearimmediatelyfollowingthefinancialyearinwhichthe incomewaspaid and taxdeducted. If hefails to issue thesecertificates to the personconcerned, asrequiredby section192(2C),hewillbeliableto pay,bywayofpenalty, undersection272A(2)(i),asumwhichshallbeRs.100/foreverydayduringwhichthefailurecontinues.

As per Section 139C of the Act,the Assessing Officer can require the taxpayer to produce Form 12BAalongwithForm16,asissuedbytheemployer.

4.7MandatoryQuotingofPANandTAN:

4.7.1Section203AoftheActmakesitobligatoryforallpersonsresponsiblefordeductingtaxatsourcetoobtain and quote theTax deduction and collection AccountNo (TAN) in the challans, TDScertificates,statementsandotherdocuments.DetailedinstructionsinthisregardareavailableinthisDepartmentsCircularNo.497[F.No.275/118/87IT(B)dated9.10.1987].Ifapersonfailstocomplywiththeprovisionsofsection203A,hewillbeliabletopay,bywayofpenalty,undersection272BB,asumoftenthousandrupees.Similarly,asperSection139A(5B),itisobligatoryforpersonsdeductingtaxatsourcetoquotePANof the persons from whose income tax has been deducted in the statement furnished u/s 192(2C),certificatesfurnishedu/s203andallstatementspreparedanddeliveredas pertheprovisionsofsection200(3)oftheAct.

4.7.2All tax deductorsare required to file theTDSstatements inFormNo.24Q (for taxdeducted fromsalaries).AstherequirementoffilingTDScertificatesalongwiththereturnofincomehasbeendoneawaywith,thelackofPANofdeducteesiscreatingdifficultiesingivingcreditforthetaxdeducted.Taxdeductorsare,therefore,advisedtoprocureandquotecorrectPANdetailsofalldeducteesintheTDSstatementsforsalaries in Form 24Q. Taxpayers are also liable to furnish their correct PAN to their deductors. NonfurnishingofPANbythedeductee(employee)tothedeductor(employer)willresultindeductionofTDSathigherratesu/s206AAoftheActmentionedinpara4.8below.

4.8CompulsoryRequirementtofurnishPANbyemployee(Section206AA):

4.8.1Section206AAintheActmakesfurnishingofPANbytheemployeecompulsoryincaseofreceiptofanysumorincomeoramount,onwhichtaxisdeductible.Ifemployee(deductee)failstofurnishhis/herPANtothedeductor,thedeductorhasbeenmaderesponsibletomakeTDSathigherofthefollowingrates:i)attheratespecifiedintherelevantprovisionofthisActorii)attherateorratesinforceoriii)attherateoftwentypercent.



ThedeductorhastodeterminethetaxamountinallthethreeconditionsandapplythehigherrateofTDS.However,wheretheincomeoftheemployeecomputedforTDSu/s192isbelowtaxablelimit,notaxwillbededucted.But where the incomeof the employee computed forTDSu/s 192 is above taxable limit, thedeductorwillcalculatetheaveragerateofincometaxbasedonratesinforceasprovidedinsec192.Ifthetaxsocalculatedisbelow20%,deductionoftaxwillbemadeattherateof20%andincasetheaveragerate exceeds20%, tax is to deductedat the average rate.Educationcess@ 2%andSecondaryandHigherEducationCess@1%isnottobededucted,incasethetaxisdeductedat20%u/s206AAoftheAct.

4.9Statementofdeductionoftaxundersection200(3)[QuarterlyStatementofTDS]:

4.9.1The persondeducting the tax (employer in caseof salary income), is required to file duly verifiedQuarterlyStatementsofTDSinForm24Qfortheperiods[detailsinTablebelow]ofeachfinancialyear,tothe TIN/facilitationCentres authorizedby DGIT (Systems) which is currentlymanaged by M/sNationalSecuritiesDepository Ltd(NSDL).Particularsof eTDSIntermediaryat anyof theTINFacilitationCentresareavailableathttp://www.incometaxindia.gov.inandhttp://tinnsdl.comportals.TherequirementoffilinganannualreturnofTDShasbeendoneawaywithw.e.f.1.4.2006.ThequarterlystatementforthelastquarterfiledinForm24Q(asamendedbyNotificationNo.S.O.704(E)dated12.5.2006)shallbetreatedastheannualreturnofTDS.DuedatesoffilingthisstatementquarterwiseisasintheTablebelow.

TABLE:DatesoffilingQuarterlyStatementsETDSReturn24Q

SlNo ReturnforQuarterendingDuedateforGovernment

OfficesDuedateforOther

Deductors

130thJune

31stJuly 15thJuly

230thSeptember 31stOctober 15thOctober

331stDecember 31stJanuary 15thJanuary

431stMarch

15thMay15thMay

4.9.2Thestatementsreferredabovemaybefurnishedinpaperformorelectronicallyunderdigitalsignatureor alongwith verification of the statement in Form 27A of verified through an electronic process inaccordancewith the procedures, formats and standards specified by the DirectorGeneral of Incometax(Systems).TheprocedureforfurnishingtheeTDS/TCSstatementisdetailedatAnnexureVI.

4.9.3AllReturnsinForm24Qarerequiredtobefurnishedinelectronicallyexceptincasewherethenumberofdeducteerecordsislessthan20anddeductorisnotanofficeofGovernment,oracompanyorapersonwhoisrequiredtogethisaccountsauditedundersection44ABoftheAct.[NotificationNo.11dated19.02.2013].

4.9.4Feefordefaultinfurnishingstatements(Section234E):



Ifapersonfailstodeliverorcausedtobedeliveredastatementwithinthetimeprescribedinsection200(3)inrespectoftaxdeductedatsourceonorafter1.07.2012heshallbeliabletopay,bywayoffeeasumofRs.200foreverydayduringwhichthefailurecontinues.However,theamountofsuchfeeshallnotexceedtheamountoftaxwhichwasdeductibleatsource.Thisfeeismandatoryinnatureandtobepaidbeforefurnishingofsuchstatement.

4.9.5Penaltyforfailureinfurnishingstatementsorfurnishingincorrectinformation(section271H):

Ifapersonfailstodeliverorcausedtobedeliveredastatementwithinthetimeprescribedinsection200(3)orfurnishesanincorrectstatement,inrespectoftaxdeductedatsourceonorafter1.07.2012,heshallbeliabletopay,bywayofpenaltyasumwhichshallnotbelessthanRs.10,000/butwhichmayextendtoRs1,00,000/.However,thepenaltyshallnotbeleviedifthepersonprovesthatafterpayingTDSwiththefeeandinterest,ifany,tothecreditofCentralGovernment,hehaddeliveredsuchstatementbeforetheexpiryofoneyearfromthetimeprescribedfordeliveringthestatement.

4.9.6Atthetimeofpreparingstatementsoftaxdeducted,thedeductorisrequiredtomandatorilyquote:

(i)histaxdeductionandcollectionaccountnumber(TAN)inthestatement

(ii) his permanent account number (PAN) in the statement except in the case where thedeductor is an office of the Government( including State Government). In case ofGovernmentdeductorsPANNOTREQDtobequotedintheeTDSstatement

(iii)thepermanentaccountnumberPANofalldeductees

(iv)furnishparticularsofthe taxpaidtotheCentralGovernment includingbookidentificationnumberorchallanidentificationnumber,asthecasemaybe.

(v)furnishparticularofamountspaidorcreditedonwhichtaxwasnotdeductedinviewoftheissueofcertificateofnodeductionoftaxu/s197bytheassessingofficerofthepayee.

4.10TDSonIncomefromPension:

Inthe caseofpensionerswhoreceivetheir pensionfroma nationalizedbank,theinstructions containedinthis circularshall applyin thesame manneras they apply to salaryincome.Thedeductions from theamount of pensionunder section80Conaccount ofcontribution toLife Insurance,Provident Fund,NSCetc.,ifthepensionerfurnishestherelevantdetailstothebanks,maybeallowed.Necessaryinstructionsin this regard were issued by the Reserve Bank of India to the State Bank of India and othernationalizedBanksvideRBIsPensionCircular(CentralSeries)No.7/C.D.R./1992 (Ref.CO:DGBA:GA(NBS)No.60/GA.64(11CVL)/92)dated the27th April1992, and,theseinstructionsshouldbefollowedbyallthebranchesoftheBanks,whichhavebeenentrustedwiththetaskofpaymentofpensions.Furtherallbranchesofthebanksareboundu/s203toissuecertificateoftaxdeductedinForm16tothepensionersalsovideCBDTcircularno.761dated13.1.98.

4.11.MatterspertainingtotheTDSmadeincaseofNonResident:

4.11.1 WhereNonResidents are deputed toworking India and taxes are borneby the employer, if anyrefundbecomesduetotheemployeeafterhehasalreadyleftIndiaandhasnobankaccountinIndiabythetime the assessment orders arepassed, the refund canbe issued to the employer asthe tax has beenbornebyit[CircularNo.707dated11.07.1995].

4.11.2In respect of nonresidents, the salary paid for services rendered in India shall be regarded as



incomeearnedinIndia.IthasbeenspecificallyprovidedintheActthatanysalarypayableforrestperiodor leaveperiodwhich isboth preceded or succeededbyservice in Indiaand formspart ofthe servicecontractofemploymentwillalsoberegardedasincomeearnedinIndia.

5.COMPUTATIONOFINCOMEUNDERTHEHEADSALARIES

5.1INCOMECHARGEABLEUNDERTHEHEADSALARIES:

(1)ThefollowingincomeshallbechargeabletoincometaxundertheheadSalaries:

(a)anysalaryduefromanemployeroraformeremployertoanassesseeinthepreviousyear,whetherpaidornot

(b)anysalarypaidorallowedtohiminthepreviousyearbyoronbehalfofanemployeroraformeremployerthoughnotdueorbeforeitbecameduetohim.

(c)any arrearsofsalarypaid orallowedtohim inthepreviousyear byoron behalfofanemployeroraformeremployer,ifnotchargedtoincometaxforanyearlierpreviousyear.

(2)For theremoval ofdoubts, itisclarified thatwhere anysalary paidinadvance isincluded inthe totalincomeofanypersonforanypreviousyearitshallnotbeincludedagaininthetotalincomeofthepersonwhenthesalarybecomesdue.

Any salary, bonus, commission or remuneration, bywhatever name called, due to, or receivedby, apartnerofafirmfromthefirmshallnotberegardedasSalary.

5.2DEFINITIONOFSALARY,PERQUISITEANDPROFITINLIEUOFSALARY(SECTION17):

5.2.1Salaryincludes:

i.wages,fees,commissions,perquisites,profitsinlieuof,or,inadditiontosalary,advanceofsalary,annuityorpension,gratuity,paymentsinrespectofencashmentofleaveetc.

ii. the portion of the annual accretion to the balance at the credit of the employeeparticipating in a recognized provident fundas consists of {Rule 6 of PartA of theFourthScheduleoftheAct}:

a) contributions made by the employer to the account of the employee in a recognizedprovidentfundinexcessof12%ofthesalaryoftheemployee,b)interestcreditedonthebalancetothecreditoftheemployeeinsofarasitisallowedatarateexceedingsuchrateasmaybefixedbyCentralGovernment.[w.e.f.01092010rateisfixedat9.5%NotificationNoSO1046(E)dated13052011]

iii.thecontributionmadebytheCentralGovernmentoranyotheremployertotheaccountoftheemployeeundertheNewPensionSchemeasnotifiedvideNotificationF.N.5/7/2003 ECB&PR dated 22.12.2003 (enclosed as Annexure VII) referred to in section80CCD(para5.5.3ofthisCircular).

Itmay benoted that, since salary includes pension,tax at sourcewould have to be deducted frompensionalso,unlessotherwisesorequired.However,notaxisrequiredtobedeductedfromthecommuted



portionofpensiontotheextentexemptundersection10(10A).

Family Pension is chargeable to tax under head Income from other sources and not under the headSalaries.Therefore,provisionsofsection192oftheActarenotapplicable.HencenoTDSisrequiredtobemadeonfamilypension.

5.2.2Perquisiteincludes:

I.Thevalueofrentfreeaccommodationprovidedtotheemployeebyhisemployer

II. The value of any concession in thematter of rent in respect of any accommodation provided to theemployeebyhisemployer

III.Thevalueofanybenefitoramenitygrantedorprovidedfreeofcostoratconcessionalrateinanyofthefollowingcases:

i)Byacompanytoanemployeewhoisadirectorofsuchcompany

ii)Byacompanytoanemployeewhohasasubstantialinterestinthecompany

iii)Byanemployer(includingacompany)toanemployee,whoisnotcoveredby(i)or(ii)aboveandwhoseincomeundertheheadSalaries(whetherduefromorpaidorallowedbyoneormoreemployers),exclusiveofthevalueofallbenefitsandamenitiesnotprovidedbywayofmonetarypayment,exceedsRs.50,000/.

[WhatconstitutesconcessioninthematterofrenthavebeenprescribedinExplanation1to4below17(2)(ii)oftheAct]

IV.Anysumpaidbytheemployerinrespectofanyobligationwhichwouldotherwisehavebeenpayablebytheassessee.

V.Anysumpayablebytheemployer,whetherdirectlyorthroughafund,otherthanarecognizedprovidentfundoranapprovedsuperannuationfundorotherspecifiedfundsu/s17,toeffectanassuranceonthelifeofanassesseeortoeffectacontractforanannuity.

VI. The value of any specified security or sweat equity shares allotted or transferred, directly orindirectly,bytheemployer,orformeremployer,freeofcostoratconcessionalratetotheemployeeandforthispurpose,.

(a)specified security means the securities as defined in section 2(h) of the SecuritiesContracts (Regulation) Act, 1956 and, where employees stock option has been grantedunder any plan or scheme therefor, includes the securities offered under such plan orscheme

(b) sweat equity sharesmeans equity shares issued by a company to its employees ordirectorsatadiscountorforconsiderationotherthancashforprovidingknowhowormakingavailable rights in the nature of intellectual property rights or value additions, bywhatevernamecalled

(c)thevalueofanyspecifiedsecurityorsweatequitysharesshallbethefairmarketvalueofthespecifiedsecurityorsweatequityshares,asthecasemaybe,onthedateonwhichtheoptionisexercisedbytheassesseeasreducedbytheamountactuallypaidby,orrecovered



fromtheassesseeinrespectofsuchsecurityorshares

(d)fairmarketvaluemeansthevaluedeterminedinaccordancewiththemethodasmaybeprescribed

(e)option means a right but not an obligation granted to an employee to apply for thespecifiedsecurityorsweatequitysharesatapredeterminedprice

VII.Theamountofanycontributiontoanapprovedsuperannuationfundbytheemployerinrespectoftheassessee,totheextentitexceedsonelakhrupeesand

VIIIThevalueofanyotherfringebenefitoramenityasprescribed(inRule3).

5.2.2ARulesforvaluationofsuchbenefitoramenityasgiveninRule3areasunder:

I.ResidentialAccommodationprovidedbytheemployer[Rule3(1)]:

Accommodationincludesahouse,flat,farmhouseorpartthereof,hotelaccommodation,motel,serviceapartment,guesthouse,acaravan,mobilehome,shiporotherfloatingstructure.

A.Forvaluation ofthe perquisiteofrentfreeunfurnished accommodation,allemployeesaredividedintotwocategories:

(i)For employeesoftheCentralandStategovernmentsthe value of perquisite shallbeequalto thelicencefeechargedforsuchaccommodationasreducedbytherentactuallypaidbytheemployee.Employeesof autonomous,semiautonomous institutions,PSUs/PSEs&subsidiaries,Universities,etc.arenotcoveredunderthisprovision.

(ii) For all others, i.e., thosesalaried taxpayers not inemployment of theCentral government and theStategovernment,thevaluationofperquisiteinrespectofaccommodationwouldbeatprescribedrates,asdiscussedbelow:

a)Wheretheaccommodationprovidedtotheemployeeisownedbytheemployer:

SlNo Citieshavingpopulationasperthe2001census Perquisite

1 Exceeds25lakh15%ofsalary

2Exceeds10lakhsbutdoesnotexceed25lakhs 10%ofsalary

3 Forotherplaces7.5%ofsalary

b)Wheretheaccommodationsoprovidedistakenonlease/rentbytheemployer:

Theprescribed rate is 15%of the salary or the actual amount of lease rental payable by the employer,whicheverislower,asreducedbyanyamountofrentpaidbytheemployee.MeaningofSalaryforthepurposeofcalculationofperquisiteinrespectofResidentialAccommodation:



a.BasicSalary

b.DearnessAllowance,orDearnessPayif itentersintothecomputationofsuperannuationorretirementbenefitoftheemployees

c.Bonus

d.Commission

e.Fees

f.Allothertaxableallowances(excludingtheportionnottaxable)and

g.Anymonetarypaymentwhichischargeabletotax(bywhatevernamecalled).

Salary from all employers shall be taken into consideration in respect of the period during which anaccommodationisprovided.Whereonaccountofthetransferofanemployeefromoneplacetoanother,heisprovidedwithaccommodationatthenewplaceofpostingwhileretainingtheaccommodationattheotherplace,thevalueofperquisiteshallbedeterminedwithreferencetoonlyonesuchaccommodationwhichhasthelowervalueforaperiodnotexceeding90daysandthereafterthevalueofperquisiteshallbechargedforbothsuchaccommodation.

B.Valuationofthe perquisiteoffurnishedaccommodation, thevalue ofperquisite asdeterminedbytheabovemethod(inA)shallbeincreasedby

i)10%ofthecostoffurniture,appliancesandequipments,or

ii)wherethefurniture,appliancesandequipmentshavebeentakenonhire,bytheamountofactualhirechargespayableasreducedbyanychargespaidbytheemployeehimself.

ItisaddedthatwheretheaccommodationisprovidedbytheCentralGovernmentoranyStateGovernmentto an employee who is serving on deputation with any body or undertaking under the control of suchGovernment,

(i). the employer of such an employee shall be deemed to be that body orundertakingwheretheemployeeisservingondeputationand

(ii).thevalueofperquisiteofsuchanaccommodationshallbetheamountcalculatedin accordance with Table in A(ii)(a) above, as if the accommodation is owned by theemployer.

C. FurnishedAccommodation inaHotel:The value of perquisite shall be determinedon the basis oflowerofthefollowingtwo:

1.24%ofsalarypaidorpayableinrespectofperiodduringwhichtheaccommodationisprovidedor

2. Actual charges paid or payable by the employer to such hotel, for the period during which suchaccommodationisprovidedasreducedbyanyrentactuallypaidorpayablebytheemployee.

However,nothinginCshallbetaxableiffollowingtwoconditionsaresatisfied:



1.Thehotelaccommodationisprovidedforatotalperiodnotexceedinginaggregate15daysinapreviousyear,and

2.Suchaccommodationisprovidedonanemployeestransferfromoneplacetoanotherplace.

Itmaybe clarified that while services providedas an integral part of the accommodation, neednot bevalued separatelyas perquisite,any otherservices over andabove that forwhich theemployermakespayment orreimburses theemployee shall bevaluedasa perquisiteas perthe residualclause. Inotherwords,compositetariffforaccommodationwillbevaluedaspertheRulesandanyotherchargesforotherfacilitiesprovidedbythehotelwillbeseparatelyvaluedundertheresidualclause.

D.However,thevalueofanyaccommodationprovidedtoanemployeeworkingataminingsiteoranonshoreoilexplorationsiteoraprojectexecutionsiteoradamsiteorapowergenerationsiteoranoffshoresitewillnotbetreatedasaperquisiteif:

i)suchaccommodationshouldislocatedinaremoteareaor

ii)whereitisnot locatedina remotearea,the accommodationshouldbeof atemporarynaturehavingplinthareaofnotmorethan800squarefeetandshouldnotbelocatedwithin8kilometersofthelocallimitsofanymunicipalityorcantonmentboard.

Aprojectexecutionsiteheremeansasiteofprojectuptothestageof itscommissioning.Aremoteareameansanarealocatedatleast40kilometersawayfromatownhavingapopulationnotexceeding20,000asperthelatestpublishedallIndiacensus.

IIPerquisiteonMotorcarprovidedbytheEmployer[Rule3(2)]:

(1)Ifanemployerprovidesmotorcarfacilitytohisemployeethevalueofsuchperquisiteshallbe:

a)Nil,ifthemotorcarisusedbytheemployeewhollyandexclusivelyintheperformanceofhisofficialduties.

b)Actualexpenditureincurredbytheemployerontherunningandmaintenanceofmotorcarincluding remuneration to chauffeur as increasedby the amount representing normalwearandtearofthemotorcarandasreducedbyanyamountchargedfromtheemployeeforsuchuse(incasethemotorcarisexclusivelyforprivateorpersonalpurposesoftheemployeeoranymemberofhishousehold).

c)Rs.1800/(plusRs.900/,ifchauffeurisalsoprovided)permonth(incasethemotorcarisused partly in performance of duties and partly for private or personal purposes of theemployeeor anymember ofhis householdifthe expensesonmaintenanceand runningofmotorcar aremet orreimbursedby theemployer).However,thevalue ofperquisitewillbeRs. 2400/(plusRs. 900/, if chauffeur is also provided) permonth if the cubic capacity ofengineofthemotorcarexceeds1.6litres.

d)Rs.600/(plusRs.900/,ifchauffeurisalsoprovided)permonth(Incasethemotorcarisused partly in performance of duties and partly for private or personal purposes of theemployeeor anymember ofhis householdifthe expensesonmaintenanceand runningofmotorcarforsuchprivateorpersonalusearefullymetbytheemployee).However,thevalueofperquisitewill beRs.900/(plusRs.900/,ifchauffeur isalsoprovided)permonthifthecubiccapacityofengineofthemotorcarexceeds1.6litres.



(2)If themotorcaror anyotherautomotive conveyanceisownedby theemployeebutthe actualrunningandmaintenance charges aremet or reimbursedby the employer, themethodof valuation of perquisitevalueisdifferentandasbelow:

a) where the motor car or any other automotive conveyance is owned by the employee but actualmaintenance&runningexpenses(includingchauffeursalary,ifany)aremetorreimbursedbytheemployer,no perquisiteshall notbe chargeable totax if thecar isusedwholly andexclusively forofficial purposes.Howeverfollowingcompliancesarenecessary:

Theemployerhasmaintainedcompletedetailsofthejourneyundertakenforofficialpurposes

Theemployergivesacertificatethattheexpenditurewasincurredwhollyforofficialduties.

Howeverifthemotorcarisusedpartlyforofficialorpartlyforprivatepurposesthentheamountofperquisiteshallbetheactualexpenditureincurredbytheemployerasreducedbytheamountsinc)&d)referredtoin(1)above,asthecasemaybe.

Normalwearandtearofthemotorshallbetakenat10%perannumoftheactualcostofthemotorcar.

III Personal attendants etc. [Rule 3(3)]: The value of free service of all personal attendantsincludingasweeper,gardenerandawatchmanistobetakenatactualcosttotheemployer.Wheretheattendantisprovidedattheresidenceoftheemployee,fullcostwillbetaxedasperquisiteinthehandsofthe employeeirrespective of thedegreeofpersonalservice renderedto him.Anyamountpaid bytheemployeeforsuchfacilitiesorservicesshallbereducedfromtheaboveamount.

IVGas,electricity&waterforhouseholdconsumption[Rule3(4)]:Thevalueofperquisiteinthenatureofgas,electricityandwatershallbetheamountpaidorpayablebytheWherethesupplyismadefromtheemployersownresources,themanufacturingcostperunitincurredbytheemployerwouldbetakenforthevaluationofperquisite.Anyamountpaidbytheemployeeforsuchfacilitiesorservicesshallbereducedfromtheperquisitevalue.

VFreeorconcessionaleducation[Rule3(5)]:Perquisiteonaccountoffreeorconcessionaleducationforany member of the employees household shall be determined as the sum equal to the amount ofexpenditure incurred bythe employer in that behalf.However,where sucheducational institution itself ismaintained and owned by the employer or where such free educational facilities are provided in anyinstitution by reason of his being in employment of that employer, the value of the perquisite to theemployeeshallbedeterminedwithreferencetothecostofsucheducationinasimilarinstitutioninornearthe locality if the cost of sucheducation or suchbenefit per child exceedsRs.1000/ p.m.The value ofperquisiteshallbereducedbytheamount,ifany,paidorrecoveredfromtheemployee.

VICarriageofPassenger Goods [Rule 3(6)]: The value of any benefit or amenity resulting from theprovisionbyanemployer,whoisengagedinthecarriageofpassengersorgoods,toanyemployeeortoanymember of his household for personal or private journey free of cost or at concessional fare, in anyconveyanceowned,leasedormadeavailablebyanyotherarrangementbysuchemployerforthepurposeoftransportofpassengersorgoodsshallbetakentobethevalueatwhichsuchbenefitoramenityisofferedbysuchemployertothepublicasreducedbytheamount,ifany,paidbyorrecoveredfromtheemployeeforsuchbenefitoramenity.Thiswillnotapplytotheemployeesofanyairlineortherailways.

VII Interest freeorconcessional loans[Rule 3(7)(i)]: It is commonpractice,particularly infinancialinstitutions, to provide interest free or concessional loans to employees or any member of hishousehold. The valueof perquisite arising fromsuchloanswould be the excess ofinterest payable atprescribed interest rateover interest, if any, actually paid by the employee or anymember of hishousehold.TheprescribedinterestratewouldnowbetheratechargedperannumbytheStateBankofIndiaasonthe1stdayoftherelevantfinancialyearinrespectofloansofsametypeandforthe



samepurposeadvancedbyittothegeneralpublic.Perquisite valuewould becalculated on thebasis ofthemaximumoutstandingmonthly balancemethod. For valuing perquisites under this rule, any othermethod of calculation and adjustmentotherwise adoptedby theemployer shall notbe relevant.However,small loansup toRs. 20,000/in theaggregateareexempt.

LoansformedicaltreatmentofdiseasesspecifiedinRule3Aarealsoexempt,providedtheamountofloanformedical reimbursement is not reimbursed under any medical insurance scheme.Where anymedicalinsurancereimbursementisreceived,theperquisitevalueat theprescribedrateshallbechargedfromthedate of reimbursement on the amount reimbursed, but not repaid against the outstanding loan takenspecificallyforthispurpose.

VIIIPerquisiteonaccountoftravelling,touring,accommodationandanyotherexpensespaidfororreimbursedbytheemployerforanyholidayavailed[Rule3(7)(ii)]:

Thevalueofperquisiteonaccountof travelling,touring,accommodationandanyotherexpensespaid foror reimbursedbythe employerfor any holidayavailed of bythe employeeor anymemberof hishousehold,otherthanleavetravelconcession(aspersection10(5)),shallbetheamountoftheexpenditureincurredbytheemployerinthatbehalf.

Wheresuchfacilityismaintainedbytheemployer,andisnotavailableuniformlytoallemployees,thevalueofbenefitshallbetakentobethevalueatwhichsuchfacilitiesareofferedbyotheragenciestothepublic. If a holiday facility ismaintainedby the employer and is available uniformly to all employees, thevalueofsuchbenefitwouldbeexempt.

Where the employee is on official tour and the expenses are incurred in respect of any member of hishouseholdaccompanyinghim,theamountofexpenditurewithrespecttothememberofthehouseholdshallbeaperquisite.

IX Value of Subsidized / Free food / nonalcoholic beverages provided by employer to anemployee[Rule3(7)(iii)]:

Valueoftaxableperquisiteiscalculatedasunder:

Expenditure incurred by the employer on the value of food / nonalcoholic beverages includingpaidvoucherswhicharenottransferableandusableonlyateatingjointsXXXLess:FixedvalueofasumofRs.50/permealXXXLess:Amount recoveredfrom theemployeeXXXXXXBalanceamount isthe taxablenonmonetaryperquisitesonthevalueoffoodprovidedtotheemployeesXXX

Note:Exemptionisgiveninfollowingsituations:

1.Tea/snacksprovidedinworkinghours.

2.Food&nonalcoholicbeveragesprovidedinworkinghoursinremoteareaorinanoffshoreinstallation.

XMembershipfeesandAnnualFees [Rule3(7)(v)]:Anymembership feesandannualfees incurredbythe employee(or anymember ofhis household),whichis charged toa credit card (includingany addoncard) providedby the employer, or otherwise, paid for or reimbursedby the employer is taxable on thefollowingbasis:

AmountofexpenditureincurredbytheemployerXXXLess:ExpenditureonuseforofficialpurposesXXXLess:Amount,ifany,recoveredfromtheemployeeXXXXXXAmounttaxableasnonmonetaryperquisiteXXX

Howeveriftheamountisincurredwhollyandexclusivelyforofficialpurposesitwillbeexemptifthefollowing



conditionsarefulfilled

i) Complete details of such expense, including date and nature of expenditure ismaintainedbytheemployer.

ii)Employergivesacertificatethatthesamewasincurredwhollyandexclusivelyforofficialpurpose.

XIClubExpenditure[Rule3(7)(vi)]:

AnyannualorperiodicalfeeforClubfacilityandanyexpenditureinaclubbytheemployee(oranymemberofhishousehold),whichispaidorreimbursedbytheemployeristaxableonthefollowingbasis:

AmountofexpenditureincurredbytheemployerXXXLess:ExpenditureonuseforofficialpurposesXXXLess:Amount,ifany,recoveredfromtheemployeeXXXXXXAmounttaxableasnonmonetaryperquisiteXXX

Howeveriftheamountisincurredwhollyandexclusivelyforofficialpurposesitwillbeexemptifthefollowingconditionsarefulfilled

i) Complete details of such expense, including date and nature of expenditure ismaintainedbytheemployer.

ii)Employergivesacertificatethatthesamewasincurredwhollyandexclusivelyforofficialpurpose.

Note:1)Healthclub,sportfacilitiesetc.provideduniformlytoallclassesofemployeebytheemployerattheemployerspremisesandexpenditureincurredonthemareexempt.

2)The initial onetime deposits or fees for corporate or institutionalmembership, where benefit does notremainwithaparticularemployeeaftercessationofemploymentareexempt.Initialfees/deposits,insuchcase,isnotincluded.

XIIUseofassets[Rule3(7)(vii)]:Itiscommonpracticeforamovableasset(otherthanthosereferredinother sub rules of rule 3) owned by the employer to be used by the employee or any member of hishousehold.Thisperquisiteistobechargedattherateof10%of theoriginal costof theassetas reducedby anychargesare coveredfrom theemployee forsuchuse.However,theuseofComputersandLaptopswouldnotgiverisetoanyperquisite.

XIIITransferofassets[Rule3(7)(viii)]:Oftenanemployeeormemberofhishouseholdbenefitsfromthetransferofmovableasset(notbeingsharesorsecurities)atnocostoratacostlessthanitsmarketvaluefrom the employer.The differencebetween the original cost of themovable asset (not being shares orsecurities)andthesum,ifany,paidbytheemployee,shallbetakenasthevalueofperquisite.Incaseofamovableasset,whichhasalreadybeenputtouse, theoriginalcost shallbereducedby asumof 10%ofsuchoriginalcostforeverycompletedyearofuseoftheasset.Owingtoahigherdegreeofobsolescence,in case of computers and electronic gadgets, however, the value of perquisite shall be worked out byreducing 50% of the actual cost by the reducingbalance method for each completed yearofuse.Electronicgadgetsinthiscasemeansdatastorageandhandlingdeviceslikecomputer,digitaldiariesandprinters. Theydo not includehousehold appliance (i.e. white goods) like washingmachines, microwaveovens,mixers,hotplates,ovensetc.Similarly,incaseofcars,thevalueofperquisiteshallbeworkedoutby



reducing20%ofitsactualcostbythereducingbalancemethodforeachcompletedyearofuse.

XIVGifts[Rule3(7)(iv)]:

Thevalueofanygiftorvouchersortokeninlieuofwhichsuchgiftmaybereceived,givenbytheemployertotheemployeeormemberofhishousehold,istaxableasperquisite.Howevergift,etclessthanRs.5,000inaggregateperannumwouldbeexempt.

XVTransferGrantAllowance:

Inthisconnectionitistobenotedthataspersec.10(14)readwithrule2BBanyallowancegrantedtomeetthe cost of travel on tour or on transfer includes any sumpaid in connection with transfer, packing andtransportationofpersonaleffectsonsuchtransfershallbeexempt.Alsoanyallowance,whether,grantedfortheperiodofjourneyinconnectionwithtransfer,tomeettheordinarydailychargesincurredbyanemployeeonaccountofabsencefromhisnormalplaceofdutyshallbeexempt.

XVILeaveTravelConcession(LTC):

Thefollowingaretheimportantpoints,tobetakenintoconsideration,forclaimingexemptionu/s10(5)oftheActreadwithRule2BoftheRules:

1.DefinitionValueofLTCreceivedbyorduetoanindividualfromhispresentorpreviousemployer,asthecasemaybe,forhimselfandhisfamilyinconnectionwithhisproceedingonleavetoanyplaceinIndiaortoanyplaceinIndiaafterretirementorterminationfrom/ofservice.

2.NumberofTripsTheexemptionshallbeavailableinrespectof2journeysperformedintheblockof4calendaryears.

Withoutperforminganyjourneyandincurringexpensesthereon,noexemptioncanbeclaimed.

Thequantumof exemptionwill be subjectto thefollowingmaximum limitsfor journeys performedonorafter01.10.1997:

SlNo

JourneyPerformedby ExemptionLimit

1 Air AirEconomyfareofthenationalcarrier(AirIndia)bytheshortestroutetotheplaceofdestination

2 Placesconnectedbyrailandjourneyperformedbyanymodeotherthanbyair.

FirstClassAirconditionedrailfarebytheshortestroutetotheplaceofdestination

3 Placeoforiginanddestinationorpartthereofnotconnectedbyrail.

a)Wherepublictransportsystemexists,firstclassordeluxeclassfareonsuchtransportbytheshortestroutetotheplaceofdestination.b)Wherenopublictransportsystemexists,firstclassA/Crailfare,forthedistanceofthejourneybytheshortestroute,asifthejourneyhasbeenperformedbyrail

oThisexemptionislimitedtotheactualexpensesincurredonthejourneywhichinturnisstrictlylimitedtoexpenseson air fare, rail fare andbus fare only. Noother expenses like local conveyance, sightseeingexpenseetc.,shallqualifyforexemption.



oWherethejourneyisperformedinacircuitousroute,theexemptionislimitedtowhatisadmissiblebytheshortest route. Likewise,where the journey is performed in a circular form touching different places, theexemption is limited to what is admissible for the journey from the place of origin to the farthest pointreachedinIndia,bytheshortestroute.

Restriction on children Theexemption will not be available tomore than2 surviving children of anindividualbornafter01.10.1998.Thisrestrictionshallnotapplyinrespectofchildrenbornbefore01.10.1998andalsoincaseofmultiplebirthsafteronechild.Itmaybenotedthatsection2(15B)oftheActdefinesachildasincludesastepchildandanadoptedchildoftheindividual.

DefinitionofFamilyAspertheprovisionsoftheRules,familymeans:

oSpouseandchildrenoftheindividual.

oParents,brothersandsisterswhoarewhollyormainlydependentontheindividual.

ForeignTravelAspertheprovisionsoftheRules,exemptionisnotallowableincaseoftravelabroad.

ObligationoftheemployerTheemployerhastosatisfytheobligationthatleavetravel(fare)concessionisnottaxableinviewofsection10(5)theemployerisnotonlyrequiredtobesatisfiedabouttheprovisionsofthesaidclausebutalsotokeepandpreserveevidenceinsupportthereof.

Someimportantpointstobeconsideredareasunder:

1.Itisuniformforallemployees

2. Where an employee does not avail LTC, either oneor on both the occasions during the block of 4calendaryears, thevalue ofLTC firstavailed duringthefirst calendaryear ofthe immediatelysucceedingblockshallbeeligibleforexemptioninlieuofexemptionnotavailedduringtheprecedingblockOnlyonetripcanbecarriedforwardtobeavailedintheimmediatelysucceedingblock.3.QuantumofExemptionThebasicruleisthatquantumofexemptionwillbelimitedtotheactualexpenseincurredonthejourney.

AnyLeaveencashedforthepurposeofLeavetravelorhometravelconcessionistaxable.

XVIIMedicalReimbursementby theemployerexceedingRs. 15,000/p.a. u/s 17(2)is to betakenasperquisite.

Itisfurtherclarifiedthattherulepositionregardingvaluationofperquisitesaregivenatsection17(2)oftheAct and in rule 3 of theRules. The deductorsmay look into the aboveprovisions carefully before theydeterminetheperquisitevaluefordeductionpurposes.

Itispertinenttomentionthatbenefitsspecificallyexemptu/s10(13A),10(5),10(14),17etc.oftheActwouldcontinuetobeexempt.Theseincludebenefitslikehouserentallowance,leavetravelconcession,travelontour and transfer, daily allowance to meet tour expenses as prescribed, medical facilities subject toconditions.

5.2.3Profitsinlieuofsalaryshallinclude

I. the amount of any compensation due to or received by an assessee from his employer or formeremployer at orin connectionwith the termination ofhis employment or themodification ofthe termsandconditionsrelatingthereto



II.anypayment(otherthananypaymentreferredtoinclauses(10),(10A),(10B),(11),(12)(13)or(13A)ofsection10duetoorreceivedbyanassesseefromanemployeroraformeremployerorfromaprovidentorother fund,to theextent towhich it doesnot consistof contributions bythe assesseeor intereston suchcontributionsoranysumreceivedunderaKeymaninsurancepolicyincludingthesumallocatedbywayofbonusonsuchpolicy.

Keymaninsurancepolicyshallhavethesamemeaningasassignedtoitinsection10(10D)

III.anyamountduetoorreceived,whetherinlumpsumorotherwise,byanyassesseefromanyperson

(A)beforehisjoininganyemploymentwiththatpersonor

(B)aftercessationofhisemploymentwiththatperson.

5.3INCOMESNOTINCLUDEDUNDERTHEHEADSALARIES(EXEMPTIONS)

Anyincome fallingwithin anyof thefollowing clausesshall notbe includedin computingthe incomefromsalariesforthepurposeofsection192oftheAct:

5.3.1The value ofany travel concessionor assistance receivedby ordue to an employee fromhisemployerorformeremployerforhimselfandhisfamily,inconnectionwithhisproceeding(a)onleavetoanyplaceinIndia or(b)afterretirement fromservice,or,after terminationofservice toanyplace inIndiaisexemptunderSection10(5)subject,however,totheconditionsprescribedinRule2BoftheRules.

Forthepurposeofthisclause,familyinrelationtoanindividualmeans:

(i)thespouseandchildrenoftheindividualand

(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainlydependentontheindividual.

Itmayalsobe notedthattheamountexemptunderthisclause shallinnocaseexceed theamountofexpensesactuallyincurredforthepurposeofsuchtravel.

5.3.2Deathcumretirementgratuityoranyothergratuityisexempttotheextentspecifiedfrominclusionincomputing thetotalincomeunderSection10(10).Anydeathcumretirementgratuity receivedundertherevised Pension Rules of the Central Government or, as the case may be, the Central Civil Services(Pension)Rules, 1972,orunderany similarschemeapplicable tothemembers ofthecivilservices oftheUnion or holders of posts connected with defence or of civil posts under the Union (such members orholdersbeingpersonsnotgovernedbythesaidRules)ortothemembersoftheallIndiaservicesortothemembersofthecivilservicesofaStateorholdersofcivilpostsunderaStateortotheemployeesofalocalauthorityorany paymentofretiringgratuityreceivedunderthePensionCodeorRegulationsapplicabletothe members of the defence service.Gratuity received in cases other than those mentionedabove, onretirement,terminationetcisexemptuptothelimitasprescribedbytheBoard.PresentlythelimitisRs.10lakhsw.e.f. 24.05.2010[Notification no. 43/2010S.O. 1414(E) F.No. 200/33/2009ITA1 dated 11th June2010].

5.3.3AnypaymentincommutationofpensionreceivedundertheCivilPensions(Commutation)RulesoftheCentralGovernmentorunderanysimilarschemeapplicabletothemembersofthecivilservicesoftheUnion or holders of posts connected with defence or of civil posts under the Union (such members orholdersbeingpersonsnotgovernedbythesaidRules)ortothemembersoftheallIndiaservicesortothemembersofthedefenceservicesortothemembersofthecivilservicesofaStateorholdersofcivilposts



underaStateor tothe employeesofa localauthority] oracorporation establishedby aCentral,StateorProvincialAct,isexemptunderSection10(10A)(i).Asregardspaymentsincommutationofpensionreceivedunderanyschemeofanyotheremployer,exemptionwillbegovernedbytheprovisionsofsection10(10A)(ii).Also,anypaymentincommutationofpensionfromafundreferredtoinSection10(23AAB)isexemptunderSection10(10A)(iii).

5.3.4AnypaymentreceivedbyanemployeeoftheCentralGovernmentoraStateGovernment,ascashequivalentof the leavesalary in respect of the period of earned leaveat his creditat the timeofhisretirement,whetheronsuperannuation orotherwise,isexemptunderSection10(10AA)(i). Inthecaseofotheremployees,thisexemptionwillbedeterminedwithreferencetotheleavetotheircreditatthetimeofretirementonsuperannuationorotherwise,subjecttoamaximumoftenmonthsleave.Thisexemptionwillbe further limited to the maximum amount specified by the Government of India NotificationNo.S.O.588(E) dated 31.05.2002atRs. 3,00,000/ in relation to such employeeswho retire, whether onsuperannuationorotherwise,after1.4.1998.

5.3.5UnderSection 10(10B), the retrenchment compensation receivedby aworkman is exempt fromincometaxsubjecttocertainlimits.Themaximumamountofretrenchmentcompensationexemptisthesumcalculatedonthebasisprovidedinsection25F(b)oftheIndustrialDisputesAct,1947oranyamountnotlessthanRs.50,000/astheCentralGovernmentmaybynotificationspecifyintheOfficialGazette,whicheverisless.Theselimitsshallnotapplyinthecasewherethecompensationispaidunderanyschemewhichisapproved inthis behalfby theCentralGovernment, havingregard totheneed forextending specialprotection to the workmen in the undertaking to which the scheme applies and other relevantcircumstances.The maximum limit of suchpayment isRs. 5,00,000/where retrenchment is on or after1.1.1997asspecifiedinNotificationNo.1096of25061999.

5.3.6UnderSection 10(10C), any payment receivedor receivable(even if received in installments) by anemployee ofthefollowing bodies atthetimeofhis voluntary retirement or termination of his service, inaccordancewithanyschemeorschemesofvoluntaryretirementorinthecaseofpublicsectorcompany,aschemeofvoluntaryseparation,isexemptfrom incometaxtotheextentthat suchamountdoesnotexceedRs.5,00,000/:

a)Apublicsectorcompany

b)Anyothercompany

c)AnAuthorityestablishedunderaCentral,StateorProvincialAct

d)ALocalAuthority

e)ACooperativeSociety

f)Auniversity establishedorincorporatedorunder aCentral,StateorProvincialAct,or,anInstitutiondeclared tobe aUniversity undersection 3of theUniversityGrantsCommissionAct,1956

g)AnyIndianInstituteofTechnologywithinthemeaningofSection3(g)oftheInstituteofTechnologyAct,1961

h)SuchInstituteofManagementastheCentralGovernmentmayby notification inthe OfficialGazette,specifyinthisbehalf.



Theexemption of amount received under VRS has beenextended to employees of theCentralGovernment andState Government and employeesof notified institutions having importance throughoutIndia or any State orStates. It mayalso be noted thatwhere this exemption has been allowed to anyemployeeforanyassessmentyear,itshallnotbeallowedtohimforanyotherassessmentyear.Further,if relief has been allowed under section 89 for any assessment year in respect of amount received onvoluntaryretirementorsuperannuation,noexemptionundersection10(10C)shallbeavailable.

5.3.7AnysumreceivedunderaLifeInsurancePolicy(Sec10(10D),includingthesumallocatedbywayofbonusonsuchpolicyotherthanthefollowingisexemptundersection10(10D):

i)anysumreceivedundersection80DD(3)orsection80DDA(3)or

ii)anysumreceivedunderaKeymaninsurancepolicyor

iii)anysumreceivedunderaninsurancepolicyissuedonorafter1.4.2003,butonorbefore31032012,inrespectofwhichthepremiumpayableforanyoftheyearsduringthetermofthepolicyexceeds20percentoftheactualcapitalsumassuredor

iv) any sum received under an insurancepolicy issuedon or after 1.4.2012 in respect ofwhich the premiumpayable for any of the years during the termof the policy exceeds10percentoftheactualcapitalsumassuredor

iv) any sum received under an insurance policy issued on or after 1.4.2013. In cases ofpersons with disability or person with severe disability as perSec 80U or suffering fromdiseaseorailment asspecifiedinSec80DDB, inrespectofwhichthe premiumpayableforanyof theyearsduringthe termofthepolicy exceeds15percentof the actualcapital sumassured

However,anysumreceivedundersuchpolicyreferredtoin(iii),(iv)and(v)above,onthedeathofapersonwouldbeexempt.

5.3.8 AnypaymentfromaProvidentFundtowhichtheProvidentFundsAct,1925, appliesor fromanyotherprovidentfundsetupbytheCentralGovernmentandnotifiedbyitintheOfficialGazetteisexemptundersection10(11).

5.3.9 Under section10(13A) of theAct, any specialallowancespecifically granted to an assesseeby hisemployer tomeet expenditure incurredonpaymentof rent (by whatever name called) in respect ofresidentialaccommodationoccupiedbytheassesseeisexemptfromIncometaxtotheextentasmaybe prescribed, having regard to theareaorplace inwhich suchaccommodation issituated andotherrelevantconsiderations.AccordingtoRule2AoftheRules,thequantumofexemptionallowableonaccountofgrantofspecialallowancetomeetexpenditureonpaymentofrentshallbetheleastofthefollowing:

(a)Theactualamountofsuchallowancereceivedbytheassesseeinrespectoftherelevantperiodi.e.theperiodduringwhichtheaccommodationwasoccupiedbytheassesseduringthefinancialyearor

(b)Theactual expenditure incurred in payment of rent in excess of 1/10 of the salary due for therelevantperiodor

(i)WheresuchaccommodationissituatedinBombay,Calcutta,DelhiorMadras,50%ofthesalaryduetotheemployeefortherelevantperiodor



(ii)Wheresuchaccommodationissituatedinanyotherplaces,40%ofthesalaryduetotheemployeefortherelevantperiod,

Forthispurpose,Salaryincludesdearnessallowance,ifthetermsofemploymentsoprovide,butexcludesallotherallowancesandperquisites.

Ithastobenotedthatonlytheexpenditureactuallyincurredonpaymentofrentinrespectofresidentialaccommodation occupied by the assessee subject to the limits laid down inRule 2A, qualifies forexemptionfromincometax.Thus, houserentallowancegrantedtoanemployeewhoisresidinginahouse/flat owned by him is not exempt from incometax. The disbursing authorities should satisfythemselvesinthisregardbyinsistingonproductionofevidenceofactualpaymentofrentbeforeexcludingtheHouseRentAllowanceoranyportionthereoffromthetotalincomeoftheemployee.

Though incurring actual expenditure on payment of rent is aprerequisitefor claiming deduction undersection10(13A),ithasbeendecidedasanadministrativemeasurethatsalariedemployeesdrawinghouserentallowanceuptoRs.3000/permonthwillbeexemptedfromproductionofrentreceipt.Itmay,however,benotedthatthisconcessionisonlyforthepurposeoftaxdeductionatsource,and,intheregular assessment of the employee, the Assessing Officer will be free to make such enquiry as hedeemsfitfor the purpose of satisfying himself that the employee has incurred actual expenditure onpaymentofrent.

Further if annual rent paid by the employee exceeds Rs 1,00,000 per annum, it is mandatory for theemployee to report PAN of the landlord to the employer. In case the landlord doesnot have aPAN, adeclarationtothiseffectfromthelandlordalongwiththenameandaddressofthelandlordshouldbefiledbytheemployee.

5.3.10Section10(14)providesforexemptionofthefollowingallowances:

(i) Any special allowance or benefit granted to an employee to meet theexpenseswholly, necessarily and exclusively incurred in the performance of his duties asprescribed under Rule 2BB subject to the extent to which such expenses are actuallyincurredforthatpurpose.

(ii)Any allowancegrantedtoan employeeeithertomeethispersonal expensesattheplaceofhispostingorattheplaceheordinarilyresidesortocompensatehimfortheincreasedcostofliving,whichmaybeprescribedandtotheextentasmaybeprescribed.

However,theallowancereferredtoin(ii)aboveshouldnotbeinthenatureofapersonalallowancegrantedtotheassessee toremunerateorcompensate himforperformingduties ofaspecial naturerelatingtohisofficeoremploymentunlesssuchallowanceisrelatedtohisplaceofpostingorresidence.

TheCBDThasprescribedguidelines forthepurpose ofSection 10(14)(i)&10 (14)(ii) videnotificationNo.SO617(E) dated7th July, 1995 (F.No.142/9/95TPL)which has beenamended vide notification SONo.403(E) dt 24.4.2000 (F.No.142/34/99TPL). The transportallowancegranted to an employee tomeethisexpenditurefor thepurposeofcommutingbetweentheplaceofhis residenceandtheplaceofdutyisexempttotheextentofRs.800p.m.orRs1600p.m(forablindperson)videnotificationS.O.No.395(E)dated13.5.98.

5.3.11UnderSection10(15)(iv)(i)oftheAct,interestpayablebytheGovernmentondepositsmadebyanemployee of the CentralGovernment or a StateGovernment or a public sector company out of his



retirementbenefits,inaccordancewithsuchschemeframedinthisbehalfbytheCentralGovernmentand notified in theOfficialGazetteis exempt fromincometax.BynotificationNo.F.2/14/89NSIIdated7.6.89,asamendedbynotificationNo.F.2/14/89NSIIdated12.10.89,theCentralGovernmenthasnotifiedaschemecalledDepositSchemeforRetiringGovernmentEmployees,1989forthepurposeofthesaidclause.

5.3.12Any scholarshipgranted tomeet the costof education isnot tobe included intotal incomeas perprovisionsofsection10(16)oftheAct.

5.3.13Section 10(18) provides forexemption of any incomebywayof pensionreceivedby an individualwhohas been in theservice of theCentralGovernmentorStateGovernment andhas beenawardedParam Vir Chakra or Maha Vir Chakra or Vir Chakra or such other gallantry award as may bespecifically notifiedby theCentralGovernment.Family pension receivedby anymemberof thefamily ofsuchindividualisalso exempt[NotificationsNo.S.O.1948(E)dated24.11.2000and81(E)dated29.1.2001,whichareenclosedasperAnnexureVIII&IX].FamilyforthispurposeshallhavethemeaningassignedtoitinSection10(5)oftheAct.

DDOmaynot deduct any tax in the case of recipients of suchawards after satisfying himself about theveracityoftheclaim.

5.3.14UnderSection17oftheAct,exemptionfromtaxwillalsobeavailableinrespectof:

(a)thevalueofanymedicaltreatmentprovidedtoanemployeeoranymemberofhisfamily,inanyhospitalmaintainedbytheemployer

(b)anysumpaidbytheemployerinrespectofanyexpenditureactuallyincurredbytheemployeeonhismedicaltreatmentorofanymemberofhisfamily:

(i)inanyhospitalmaintainedbytheGovernmentoranylocalauthorityoranyotherhospitalapprovedbytheGovernmentforthepurposesofmedicaltreatmentofitsemployees

ii)inrespectoftheprescribeddiseasesorailmentsasprovidedinRule3A(2)oftheRulesinany hospital approved bythe ChiefCommissionerhaving regard to theprescribedguidelinesasprovidedinRule3(A)(1)oftheRules.

(c) premium paid by the employer in respect of medical insurance taken for his employees (underanyschemeapprovedby theCentralGovernment or InsuranceRegulatory andDevelopmentAuthority) orreimbursementofinsurancepremiumtotheemployeeswhotakemedicalinsuranceforthemselvesorfortheirfamilymembers(underanyschemeapprovedbytheCentralGovernmentorInsuranceRegulatoryandDevelopmentAuthority)

(d)reimbursement,bytheemployer,oftheamountspentbyanemployeeinobtainingmedicaltreatmentforhimselforanymemberofhisfamilyfromanydoctor,notexceedingintheaggregateRs.15,000/inanyear.

(e)Asregardsmedicaltreatmentabroad,theactualexpenditureonstayandtreatmentabroadoftheemployee or any member of his family, or, on stay abroad of oneattendantwhoaccompanies thepatient,inconnectionwithsuchtreatment,willbeexcludedfromperquisitestotheextentpermittedbytheReserve Bank of India. It may be noted that the expenditure incurred on travel abroad by thepatient/attendant, shall be excluded fromperquisites only if the employees gross total income, ascomputedbeforeincludingthesaidexpenditure,doesnotexceedRs.2lakhs.



Forthepurposeofavailingexemptiononexpenditureincurredonmedicaltreatment,hospitalincludesadispensary or clinic or nursing home, and family in relationto an individual means the spouse andchildrenoftheindividual.Familyalsoincludesparents,brothersandsistersoftheindividualiftheyarewhollyormainlydependentontheindividual.

5.4DEDUCTIONSU/S16OFTHEACTFROMTHEINCOMEFROMSALARIES

5.4.1EntertainmentAllowance[Section16(ii)]:

A deduction is also allowed under section 16(ii)in respect of any allowance in the nature of anentertainmentallowance specificallygrantedbyan employerto theassessee,whois inreceipt ofa salaryfromtheGovernment,asumequaltoonefifthofhissalary(exclusiveofanyallowance,benefitorotherperquisite)orfivethousandrupeeswhicheverisless.Nodeductiononaccountofentertainmentallowanceisavailabletonongovernmentemployees.

5.4.2TaxonEmployment[Section16(iii)]:

Thetax onemployment (ProfessionalTax)withinthemeaningof article276(2)of theConstitution ofIndia,leviablebyorunder anylaw,shallalsobeallowedasadeduction incomputingtheincomeundertheheadSalaries.

Itmaybeclarified thatStandardDeduction fromgrosssalaryincome,whichwasbeingalloweduptofinancialyear200405isnotallowablefromfinancialyear200506onwards.

5.5DEDUCTIONSUNDERCHAPTERVIAOFTHEACT

Incomputingthetaxableincomeoftheemployee,thefollowingdeductionsunderChapterVIAoftheActaretobeallowedfromhisgrosstotalincome:

5.5.1 Deduction in respectof Life insurancepremia, deferredannuity, contributions to providentfund,subscriptiontocertainequitysharesordebentures,etc.(section80C)

A.Section80C, entitlesan employee to deductionsfor thewholeof amounts paidor deposited in thecurrentfinancialyearinthefollowingschemes,subjecttoalimitofRs.1,00,000/:

(1)Paymentofinsurancepremiumtoeffectortokeepinforceaninsuranceonthelifeoftheindividual,thespouseoranychildoftheindividual.

(2)Anypaymentmadetoeffectortokeepinforceacontractforadeferredannuity,notbeinganannuityplans isreferred to initem (7)herein belowonthe lifeof theindividual, the spouseor any child of theindividual, provided that such contract does not contain a provision for the exercise by the insuredof anoptiontoreceiveacashpaymentinlieuofthepaymentoftheannuity

(3)Anysumdeductedfromthesalarypayableby,or,onbehalfoftheGovernmenttoanyindividual,beinga sumdeducted inaccordancewiththe conditionsof his service forthe purpose ofsecuring tohimadeferredannuityormakingprovision forhis spouseor children, inso faras thesumdeducteddoesnotexceed1/5thofthesalary

(4)Anycontributionmade:

(a)byanindividualtoanyProvidentFundtowhichtheProvidentFundAct,1925applies

(b)to any provident fund set up by theCentralGovernment, andnotified byit inthis behalf intheOfficialGazette,wheresuchcontributionistoanaccountstandinginthenameofanindividual,orspouseorchildren



[TheCentralGovernmenthassincenotifiedPublicProvidentFundvideNotificationS.O.No.1559(E)dated3.11.05]

(c)byanemployeetoaRecognizedProvidentFund

(d)byanemployeetoanapprovedsuperannuationfund

ItmaybenotedthatcontributiontoanyFundshallnotincludeanysumsinrepaymentofloanoradvance

(5)Anysubscription:

(a)toanysuchsecurityoftheCentralGovernmentoranysuchdepositschemeastheCentralGovernmentmay,bynotificationintheOfficialGazette,specifyinthisbehalf

(b)toanysuchsavingcertificatesasdefinedundersection2(c)oftheGovernmentSavingCertificateAct,1959astheGovernmentmay,bynotificationintheOfficialGazette,specifyinthisbehalf.

[TheCentralGovernmenthassincenotifiedNationalSavingCertificate(VIIIthIssue)videNotificationS.O.No. 1560(E)dated3.11.05andNationalSavingCertificate (IXth Issue) videNotification.G.S.R. 848(E), dated the29thNovember, 2011, publishing the National Savings Certificates (IXIssue) Rules, 2011G.S.R. 868(E), dated the 7thDecember, 2011,specifying theNationalSavingsCertificatesIXIssue as theclass of Savings CertificatesF No113/2011NSII r/w amendmentNotification No.GSR319(E),dated2542012]

(6)Anysumpaidascontributioninthecaseofanindividual,forhimself,spouseoranychild,

a.forparticipationintheUnitLinkedInsurancePlan,1971oftheUnitTrustofIndia

b.forparticipationinanyunitlinkedinsuranceplanoftheLICMutualFundreferredtosection10(23D)andasnotifiedbytheCentralGovernment.

[TheCentralGovernment has since notifiedUnit Linked InsurancePlan (formerly knownasDhanraksha,1989)ofLICMutualFundvideNotificationS.O.No.1561(E)dated3.11.05.]

(7)AnysubscriptionmadetoeffectorkeepinforceacontractforsuchannuityplanoftheLifeInsuranceCorporationor any other insurer as theCentralGovernment may, by notification in theOfficialGazette,specify

[TheCentralGovernmenthassincenotifiedNewJeevanDhara,NewJeevanDharaI,NewJeevanAkshay,New JeevanAkshayI and New JeevanAkshayII vide NotificationS.O. No. 1562(E) dated3.11.05 andJeevanAkshayIIIvideNotificationS.O.No.847(E)dated1.6.2006]

(8)AnysubscriptionmadetoanyunitsofanyMutualFund,ofsection10(23D),orfromtheAdministratoror the specified company referred to inUnitTrust of India (Transfer of Undertaking&Repeal)Act, 2002under any plan formulated in accordance with any scheme as the Central Government, may, bynotificationintheOfficialGazette,specifyinthisbehalf

[TheCentralGovernmenthassince notifiedtheEquity LinkedSavingScheme, 2005forthis purposevideNotificationS.O.No.1563(E)dated3.11.2005]Theinvestmentsmadeafter1.4.2006inplansformulatedinaccordancewithEquityLinkedSavingScheme,



1992orEquityLinkedSavingScheme,1998shallalsoqualifyfordeductionundersection80C.

(9)AnycontributionmadebyanindividualtoanypensionfundsetupbyanyMutualFundreferredtoin section 10(23D), or, by theAdministrator or the specified companydefined in Unit Trust of India(TransferofUndertaking&Repeal)Act,2002,astheCentralGovernmentmay,bynotificationintheOfficialGazette,specifyinthisbehalf

[TheCentralGovernmenthassince notifiedtheEquity LinkedSavingScheme, 2005forthis purposevideNotificationS.O.No.1563(E)dated3.11.2005]

(10)Anysubscriptionmadetoanysuchdepositschemeof,or,anycontributionmadetoanysuchpensionfundsetupby,theNationalHousingBank,astheCentralGovernmentmay,bynotificationintheOfficialGazette,specifyinthisbehalf

(11)Anysubscriptionmadetoanysuchdepositscheme,astheCentralGovernmentmay,bynotificationintheOfficialGazette,specifyforthepurposeofbeingfloatedby(a)publicsectorcompaniesengagedinprovidinglongtermfinanceforconstructionorpurchaseofhousesinIndiaforresidentialpurposes,or,(b)anyauthorityconstitutedinIndiaby,or,underanylaw,enactedeitherforthepurposeofdealingwithandsatisfying theneedforhousing accommodationorforthepurposeofplanning,developmentorimprovementofcities,townsandvillages,orforboth.

[The Central Government has since notified the Public Deposit Scheme of HUDCO vide NotificationS.O.No.37(E),dated11.01.2007,forthepurposesofSection80C(2)(xvi)(a)].

(12)Anysumspaidbyanassesseeforthepurposeofpurchaseorconstructionofaresidentialhouseproperty,theincomefromwhichischargeabletotaxundertheheadIncomefromhouseproperty(orwhichwould,ifithasnotbeenusedforassesseesownresidence,havebeenchargeabletotaxunderthathead)where suchpayments aremade towardsor bywayof anyinstalment orpart paymentof theamount dueunderanyselffinancingorotherschemeofanyDevelopmentAuthority,HousingBoardetc.

Thedeductionwillalsobe allowableinrespect ofrepayment ofloansborrowedbyanassessee fromtheGovernment, or any bank or Life Insurance Corporation, or National Housing Bank, or certain othercategories of institutions engaged in the business of providing long term finance for construction orpurchaseofhousesinIndia.Anyrepaymentofloanborrowedfromtheemployerwillalsobecovered,iftheemployerhappenstobeapubliccompany,orapublicsectorcompany,orauniversityestablishedbylaw,oracollegeaffiliatedtosuchuniversity,oralocalauthority,oracooperativesociety,oranauthority,oraboard,oracorporation,oranyotherbodyestablishedunderaCentralorStateAct.

The stamp duty, registration fee and other expenses incurred for the purposeof transfer shall also becovered.Paymenttowardsthecostofhouseproperty,however,willnotinclude,admissionfeeorcostofshareorinitialdepositorthecostofanyadditionoralterationto,or,renovationorrepairofthehousepropertywhichiscarriedoutaftertheissueofthecompletioncertificatebycompetentauthority,orafterthe occupation of the house by the assessee or after it has been let out. Payments towards anyexpenditureinrespectofwhichthedeductionisallowableundertheprovisionsofsection24oftheActwillalsonotbeincludedinpaymentstowardsthecostofpurchaseorconstructionofahouseproperty.

Where the house property in respect of which deduction has been allowed under these provisions istransferredbythetaxpayeratanytimebeforetheexpiryoffiveyearsfromtheendofthefinancialyearinwhich possession of such property is obtainedby him or he receives back, by wayof refundorotherwise, any sumspecified insection 80C(2)(xviii),no deduction under these provisions shall beallowed inrespect ofsuch sumspaid in suchpreviousyear inwhichthe transferismadeand theaggregateamountofdeductionsofincomesoallowedintheearlieryearsshallbeaddedtothetotalincomeoftheassesseeofsuchpreviousyearandshallbeliabletotaxaccordingly.



(13)Tuitionfees,whether atthe timeofadmission orthereafter, paidtoany university,college, schoolorothereducationalinstitutionsituatedinIndia,forthepurposeoffulltimeeducationofanytwochildrenoftheemployee.

Fulltimeeducation includesany educational course offeredbyany university, college, schoolorother educational institution to a student who is enrolled fulltime for the said course. It is alsoclarifiedthatfulltimeeducationincludesplayschoolactivities,prenurseryandnurseryclasses.

It is clarified thatthe amount allowable as tuition feesshall includeany payment of feeto any university,college,schoolorothereducationalinstitutioninIndiaexcepttheamountrepresentingpaymentinthenatureofdevelopmentfeesordonationorcapitationfeesorpaymentofsimilarnature.

(14)Subscriptiontoequitysharesordebenturesformingpartofanyeligibleissueofcapitalmadebyapubliccompany,whichisapprovedbytheBoardorbyanypublicfinanceinstitution.

(15) Subscription to anyunitsof any mutual fund referred to in clause (23D) of Section 10 andapproved by theBoard,if the amountof subscription to suchunits is subscribedonly in eligibleissueofcapitalofanycompany.

(16) Investmentas atermdepositfor a fixedperiodof notless than fiveyearswith ascheduled bank,whichisinaccordancewithaschemeframedandnotifiedbytheCentralGovernment,intheOfficialGazetteforthesepurposes.

[TheCentralGovernment has since notified theBank TermDepositScheme, 2006 for this purpose videNotificationS.O.No.1220(E)dated28.7.2006]

(17)SubscriptiontosuchbondsissuedbytheNationalBankforAgricultureandRuralDevelopment,astheCentralGovernmentmay,bysuchnotificationintheOfficialGazette,specifyinthisbehalf.

(18)AnyinvestmentinanaccountundertheSeniorCitizensSavingsSchemeRules,2004.

(19)AnyinvestmentasfiveyeartimedepositinanaccountunderthePostOfficeTimeDepositRules,1981.

B. Section 80C(3)& 80C(3A) states that in case of InsurancePolicy other than contract for a deferredannuitytheamountofanypremiumorotherpaymentmadeisrestr

How to Calculate TDS on Salary FY 2013-14 _ AY 2014-15

Documents