Monday, January 18, 2016

INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2015-16 ASSESSMENT YEAR 2016-2016 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961

I
Circular 20/2015
Dated the 2nd December, 2015

9. CALCULATION OF INCOME-TAX TO BE DEDUCTED:

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

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

5. COMPUTATION OF INCOME UNDER THE HEAD "SALARIES"

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

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

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

3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM "SALARIES"

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

5.5 DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT

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

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

2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2015

6. REBATE OF Rs 2000 FOR INDIVIDUALS HAVING TOTAL INCOME UPTO Rs 5 LAKH [SECTION 87A]

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

9.4 The amount of tax as arrived at para 9.3 should be deducted every month in equal installments. Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year.
***
ANNEXURE-I
SOME ILLUSTRATIONS
Example 1

For Assessment Year 2016-17

(A) Calculation of Income tax in the case of an employee (Male or Female) below the age of sixty years and having gross salary income of:

i) Rs.2,50,000/- ,
ii) Rs.5,00,000/- ,
iii) Rs.10,00,000/-
iv) Rs.20,00,000/-. and
v) Rs. 1,10,00,000/-

(B) What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Particulars
Rupees
Rupees
Rupees
Rupees
Rupees
(i)
(ii)
(iii)
(iv)
(v)
Gross Salary Income
2,50,000
5,00,000
10,00,000
20,00,000
1,10,00,000
(including allowances)
Contribution of G.P.F.
45,000
50,000
1,00,000
1,00,000
1,00,000

Computation of Total Income and tax payable thereon

ParticularsRupeesRupeesRupees
Rupees
Rupees
(i)
(ii)(iii)
(iv)
(v)
Gross Salary2,50,0005,00,00010,00,000
20,00,000
1,10,00,000
Less: Deduction U/s 80C
45,000
50,000
1,00,000
1,00,000
1,00,000
Taxable Income2,05,0004,50,0009,00,000
19,00,000
1,09,00,000
(A) Tax thereon
Nil
18,000*1,05,000
3,95,000
3095000
Surcharge
3095000
Add:
(i) Education Cess @ 2%.
Nil
360
2100
7,900
68,090
(ii) Secondary and Higher
Nil
180
1050
3950
34,045
Education Cess @1%
Total tax payable
Nil
18,540
1,08,150
406850
35,06,635
(B) TDS under sec. 206AA in
Nil
38,000
1,30,000
406850
35,06,635
case where PAN is not
furnished by the employee
include Rebate of Rs 2000 u/s 87A



Example 2
For Assessment Year 2016-17
Calculation of Income Tax in the case of an employee below the age of sixty years having a handicapped dependent (With valid PAN furnished to employer).
S.No.Particulars
Rupees
1
Gross Salary
4,20,000
2
Amount spent on treatment of a dependant, being person with
7000
disability (but not severe disability)
3
Amount paid to LIC with regard to annuity for the maintenance of
60,000
a dependant, being person with disability( but not severe
disability)
4
GPF Contribution
25,000
5
LIP Paid
10,000
6
Interest Income on Savings Account
12,000
Computation of Tax
S.No.Particulars
Rupees
1
Gross Salary
4,20,000
2
Add: Income from Other Sources
Rs 12,000
Interest Income on Savings Account
3
Gross Total Income
4,32,000
4
Less: Deduction U/s 80DD (Restricted to Rs.60,000/- only)
60,000
5
Less: Deduction U/s 80C (i) GPF Rs.25,000/-
35,000
(ii) LIP Rs.10,000/- = Rs.35,000/-
6
Less: Deduction u/s 80TTA on Interest Income on savings account
10000
(restricted to Rs 10000/-)
7
Total Income
3,27,000
8
Income Tax thereon/payable
5,700
(includes Rebate of Rs 2000 as per Section 87A)
9
Add:
(i). Education Cess @2%
114
(ii). Secondary and Higher Education Cess @1%
57
10
Total Income Tax payable
5,871
11
Rounded off to
5,870


Example 3
For Assessment Year 2016-17

Calculation of Income Tax in the case of an employee below age of sixty years where medical treatment expenditure was borne by the employer (With valid PAN furnished to employer).


S.No.Particulars
Rupees
1Gross Salary
5,20,000
2Medical Reimbursement by employer on the treatment of self and
35,000
dependent family member
3Contribution of GPF
20,000
4LIC Premium
20,000
5Repayment of House Building Advance
25,000
6Tuition fees for two children
60,000
7Investment in Unit-Linked Insurance Plan
30,000
8Interest Income on Savings Account
8,000
9Interest Income on Time Deposit
15,000

Computation of Tax
S.No.Particulars
Rupees
1Gross Salary
5,20,000
2Add: Perquisite in respect of reimbursement of Medical Expenses
20,000
In excess of Rs.15,000/- in view of Section 17(2)(v)
3Income from Other Sources
23,000
i)Interest Income on Savings Account
Rs 8,000
ii)Interest Income on Savings Account
Rs 15,000
4
Gross Total Income
5,63,000
5a.Less: Deduction U/s 80C
(i) GPFRs.20,000/-
(ii) LICRs.20,000/-
(iii) Repayment of House Building AdvanceRs.25,000/-
(iv) Tuition fees for two childrenRs.60,000/-
(v) Investment in Unit-Linked Insurance PlanRs.30,000/-
Total=Rs.1,55,000/-
Restricted to Rs. 1,58,000/-
b. Less : Deduction u/s 80TTA on Interest Income on savings
account (restricted to Rs 8000/- - available only on Savings
account interest) Rs 8000
Total deduction available Rs 1,58,000/-
1,58,000
6
Total Income
4,05,000
7Income Tax thereon/payable (after rebate u/s 87A)
15,800
8Add:
(i). Education Cess @2%
276
(ii). Secondary and Higher Education Cess @1%
138
9
Total Income Tax payable
14,214
10
Rounded off to
14,214


Example 4
For Assessment Year 2016-17

Illustrative calculation of House Rent Allowance U/s 10 (13A) in respect of residential accommodation situated in Delhi in case of an employee below the age of sixty years (With valid PAN furnished to employer).

S.No.Particulars
Rupees
1Salary
3,50,000
2Dearness Allowance
2,00,000
3House Rent Allowance
1,40,000
4House rent paid
1,44,000
5General Provident Fund
36,000
6Life Insurance Premium
4,000
7Subscription to Unit-Linked Insurance Plan
50,000

Computation of total income and tax payable thereon
S.No.Particulars
Rupees
1Salary + Dearness Allowance + House Rent Allowance
6,90,000
3,50,000+2,00,000+1,40,000 = 6,90,000
2
Total Salary Income
6,90,000
3Less: House Rent allowance exempt U/s 10(13A):
Least of:
(a). Actual amount of HRA received=
1,40,000
(b). Expenditure of rent in excess of 10% of salary
(including D.A. presuming that D.A. is taken
for retirement benefit) (1,44,000-55,000) =
89,000
(c). 50% of Salary(Basic+ DA)
=
2,75,000
89,000
Gross Total Income
6,01,000
Less: Deduction U/s 80C
(i) GPF
Rs.36,000/-
(ii) LIC
Rs. 4,000
(iii) Investment in Unit-Linked Insurance Plan
Rs.50,000/-
Total=Rs.1,14,000/-
90,000
3
Total Income
5,11,000
Tax payable
27,200
Add:
(i). Education Cess @2%
544
(ii). Secondary and Higher Education Cess @1%
272
Total Income Tax payable
28016
Rounded off to
28020


Example 5
For Assessment Year 2016-17

Illustrating valuation of perquisite and calculation of tax in the case of an employee below age of sixty years of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months ( With valid PAN furnished to employer).


S.No.Particulars
Rupees
1Salary
7,00,000
2Bonus
1,40,000
3Free gas, electricity, water etc. (Actual bills paid by company)
40,000
4(a)Flat at concessional rate (for ten month).
@ Rs.36000/month
3,60, 000
4(bHotel rent paid by employer (for two month)
1,00,000
4(c)Rent recovered from employee.
60,000
4(d)Cost of furniture.
2,00,000
5Subscription to Unit Linked Insurance Plan
50,000
6Life Insurance Premium
10,000
7Contribution to recognized P.F.
42,000

COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:
S.No.Particulars
Rupees
1Salary
7,00,000
2Bonus
1,40,000
3Total Salary(1+2) for Valuation of Perquisites
8,40,000
Valuation of perquisites
4(a)Perquisite for flat:
Lower of (15% of salary for 10 months=Rs.1,05,000/-)
and (actual rent paid= Rs 3,60,000) i.e. Rs. 1,05,000
4(b)Perquisite for hotel :
Lower of (24% of salary of 2 months=Rs 33,600)
and (actual payment= Rs 1,00,000) i.e. Rs
33,600
4(c)Perquisites for furniture(Rs.2,00,000) @ 10% of cost
Rs. 20,000
4(c)(i)Total of [4(a)+(b)+(c)] (1,05,000+ 33,600+ 20,000)Rs.158,600
Less: rent recovered
(-)Rs. 60,000
=
Rs. 98,600
4(d)Add
Perquisite for free gas, electricity, water etc. Rs.40,000 (+) Rs
98,600 [4(c)(i)] =Rs1,38,600
Total perquisites
1,38,600
5Gross Total Income (Rs.8,40,000+ 1,38,600)
9,78,600
6Gross Total Income
9,78,600
7Less: Deduction U/s 80C:
(i). Provident Fund (80C)
:42,000
(ii). LIC (80C)
:10,000
(iii). Subscription to Unit Linked Insurance Plan(80C) :50,000/-
Total
= 1,02,000
Restricted to Rs 1,02,000 u/s 80C
1,02,000
8Total Income
8,76,600
9Tax Payable
1,00,320
10Add:
(i). Education Cess @2%
2,006
(ii). Secondary and Higher Education Cess @1%
1,003
11Total Income Tax payable
1,03,329
12Rounded off to
1,03,330


Example 6
For Assessment Year 2016-17

Illustrating Valuation of perquisite and calculation of tax in the case of an employee below the age of 60 years of a Private Company posted at Delhi and repaying House Building Loan ( With valid PAN furnished to employer).


S.No.Particulars
Rupees
1Salary
4,00,000
2Dearness Allowance
1,00,000
3House Rent Allowance
1,80,000
4Special Duties Allowance
12,000
5Provident Fund
60,000
6LIP
10,000
7Deposit in NSC VIII issue
30,000
8Rent Paid by the employee for house hired by her
1,20,000
9Repayment of House Building Loan (Principal)
60,000
10Tuition Fees for three children (Rs.10,000 per child)
30,000

Computation of total income and tax payable thereon
S.No.Particulars
Rupees
1Gross Salary (Basic+DA+HRA+SDA)
6,92,000
Less : House rent allowance exempt U/s 10 (13A)
Least of:
(a). Actual amount of HRA received.
:Rs.1,80,000
(b). Expenditure on rent in excess of 10% of salary
(Including D.A.)assuming D.A. is included for
retirement benefits (1,20,000- 50,000)
:Rs. 70,000
(c). 50% of salary (including D.A)
: Rs. 2,50,000
70,000
2
Gross Total Taxable Income
6,22,000
Less: Deduction U/s 80C
(i).Provident Fund:
60,000
(ii).LIP:
10,000
(iii). NSC VIII Issue:
30,000
(iv). Repayment of HBA:
60,000
(v).Tuition Fees (Restricted to two children):
20,000
Total: 1,80,000
Restricted to 1,50,000
1,50,000

Total Income
4,72,000
Income Tax thereon/payable
20,200
Add:
(i). Education Cess @2%
404
(ii). Secondary and Higher Education Cess @1%
202
Total Income Tax payable
20,806
Rounded off to
20,810


Example 7
For Assessment Year 2016-17

A. Calculation of Income tax in the case of a retired employee above the age of sixty years but below the age of 80 years and having gross pension of:
iv) Rs.4,50,000/-,
v) Rs.8,00,000/- ,
vi) Rs. 12,50,000/-.

B What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:
Particulars
Rupees
Rupees
Rupees
(i)
(ii)
(iii)
Gross Pension
4,50,000
8,00,000
12,50,000
Contribution of P.P.F.
70,000
1,00,000
1,50,000

Computation of Total Income and tax payable thereon

Particulars
Rupees
Rupees
Rupees
(i)
(ii)
(iii)
Gross Pension
4,50,000
8,00,000
12,50,000
Less: Deduction U/s 80C
70,000
1,00,000
1,50,000
Taxable Income
3,80,000
7,00,000
11,00,000
Tax thereon (after rebate u/s 87A)
6,000
60,000
1,50,000
Add:
(i) Education Cess @ 2%.
120
1200
3000
(ii) Secondary and Higher Education Cess @1%
60
600
1500
Total tax payable
6,180
61,800
1,54,500
TDS under sec. 206AA in case where PAN is not
24,000
90,000
1,70,000
furnished by the employee



Example 8
For Assessment Year 2016-17

A. Calculation of Income tax in the case of a retired employee above the age of 80 years and having gross pension of:
i) Rs.5,00,000/-,
ii) Rs.8,00,000/- ,
iii) Rs. 12,50,000/-.

B What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:
Particulars
Rupees
Rupees
Rupees
(i)
(ii)
(iii)
Gross Pension
5,00,000
8,00,000
12,50,000
Contribution of P.P.F.
80,000
1,20,000
1,50,000

Computation of Total Income and tax payable thereon
Particulars
Rupees
Rupees
Rupees
(i)
(ii)
(iii)
Gross Pension
5,00,000
8,00,000
12,50,000
Less: Deduction U/s 80C
80,000
1,20,000
1,50,000
Taxable Income
4,20,000
6,80,000
11,00,000
Tax thereon
Nil
36,000
1,30,000
Add:
(i) Education Cess @ 2%.
720
2600
(ii) Secondary and Higher Education Cess @1%
360
1300
Total tax payable
Nil
37,080
1,33,900
B. TDS under sec. 206AA in case where PAN is
Nil
37,080
1,33,900
not furnished by the employee



Example 9 


Exemption u/s 10 (13A)
1. Mr. A, employed with XYZ Ltd. Up to 31.10.2015, received following emoluments :
S.No.
Particulars
Rupees
1.
Basic pay p.m.
13,000
2.
Bonus for the year received in July, 2015
72,000
3.
Club facility (for private use only) Expenditure by employer p.m.
700
4.
House Rent Allowance p.m.
2,800
5.
Employer’s contribution to URPF p.m. (Mr. A also made equal
1,000
contribution)
W.e.f. 01.11.2015, Mr. A joined PQR Ltd., with following pay package :
1.
Basic pay p.m.
18,000
2.
House Rent Allowance p.m.
1,600
3.
Club Facility (for private use only) Expenditure by employer p.m.
1,100
4.
Use of car for journey between office and residence – Employer’s
600
expenditure p.m.
5.
Employer’s contribution to RPF p.m. (Mr. A also made equal contribution)
2,000
Other particulars of Mr. A are as under :
1.
Mr. A resides at Amritsar paying a monthly rent of
3,500
2.
Mr. A’s income from other sources
95,000
3.
Mr. A contributed to LIC/PPR/NSC etc.
20,000
Compute Mr. A’s taxable income and tax liability for A.Y. 2016-17.


Computation of Tax
S.No.
Particulars
Rupees
1.
Income from Salary
(a) From XYZ Ltd.
Basic pay (Rs.13,000 x 7)
91,000
Bonus
7,200
Club facility (Rs.700 x 7)
Rupees
4,900
H.R.A. (Rs.2,800 x 7)
19,600
Less : Exempt u/s 10(13A)
15,400
4,200
Employer’s Contribution to U.R.P.F.
1,07,300
(b) From PQR Ltd.
Rupees
Basic pay (Rs.18,000 x 5)
90,000
H.R.A. (Rs.1,600 x 5)
8,000
Less : Exempt u/s 10(13A)
8,000
Club Facility (Rs.1,100 x 5)
5,500
Facility of Car (not taxable as perquisite)
15,400
Employer’s Contribution to R.P.F.
95,500
Gross Salary
2,02,800
Less: Deduction
-----
Net Salary
2,02,800

2.
Income from Others Sources
95,000
Gross Total Income
2,97,800
Less : Deduction u/s 80C
: Contribution to LIC/PPF/NSC
Rs. 20,000
: Contribution to RPF ( Rs.2000 x 5)
Rs. 10,000
30,000
Total Income
2,67,800
Computation of Tax Liability
Tax payable on Rs.2,67,800
1,780
Less : Rebate u/s 87A
1,780
Net Income-tax payable
Nil
Add : Surcharge
Nil
Add : EC @ 2%
---
Add : S&HEC @ 1%
---
Total Tax Payable
Nil


Example 10
2. One Computation of Taxable Salary and allowances, Deduction for Interest on Housing Loan and Deduction u/s 80C.

Mr. X, a Central Govt. Officers in Delhi, is receiving Basic Pay Rs.23,720, grade Pay Rs.7,600, DA at prescribed rates, transport allowances @ Rs.3200+DA thereon, and HRA 30% of basic pay + grade pay (though living in his own house). His date of increment is Ist July. The following are other particulars of his income. Compute his taxable income and tax payable, for A.Y.2015-16.

S.No.
Particulars
Rupees
1.
Honorarium for valuation of answer books of a departmental examination
3,000
2.
Fee for work done for a private body (1/3rd of fees has been retained by
6,000
Govt.)
3.
Contributions to G.P.F. p.m.
4,700
4.
Postal Life Insurance Premium financed from G.P.F. p.m.
280
5.
Contribution to Central Govt. Employees Group Insurance Scheme p.m.
500
6.
Life Insurance Premium (being a Life Insurance Policy of Rs.1,00,000
10,500
taken in name of his wife before 1.04.2012)
7.
Contribution to Public Provident Fund
10,000
8.
Repayment of HDFC loan borrowed after 1.04.1999 EMI Rs.25,000
3,00,000
(Towards loan Rs.95,000, towards interest Rs.2,05,000)

Computation of Tax
S.No.
Particulars
Rupees
1.
Income from Salary
Basic Pay @ Rs 23,720 p.m
(March to June ’14)
94,880
@ Rs 24,660 p.m * (July 2014 to Feb 2015)
1,97,280
2,92,160
91,200

Grade Pay @ Rs 7,600 p.m
Dearness Allowance
1.3.2014 to 30.06.2014 @ 100% i.e., Rs 31,320 p.m
1,25,280
1.7.2014 to 31.12.2014 @ 107% i.e. Rs 34,518 p.m
2,07,108
1.1.2015 to 28.02.2015 @ 113% (assumed) i.e.,
Rs. 36,454 p.m
72,908
4,05,296
House Rent Allowance
@ 30% of basic pay + grade pay
1.3.2014 to 30.06.2014 @ Rs 9,396
33,584
1.07.2014 to 28.2.2015 @ Rs 9,678
77,424
1,15,008
Transport Allowance
1.3.2014 to 30.6.2014 @ Rs 6,400 p.m
25600
1.7.2014 to 31.12.2014 @ Rs 6,624 p.m
39,744
1.1.2015 to 28.2.2015 @ Rs 6,816 p.m
13,632
78,976
Less: Exempt u/s 10(14) @ 800 p.m
9600
69,376
9,73,040
Honorarium
3,000
Fees (2/3 retained by him)
4000
Total Salary
9,80,040
Less: Standard Deduction
-
Net Salary
9,80,040
2.
Income from House Property
Self-occupied u/s 23(2)(a) deemed at nil
Less : Interest on HDFC Loan
2,00,000 (-)
2,00,000
Gross Total Income
7,80,040
Less: Deduction u/s 80 C
- GPF @ Rs 4,700/-p.m
56,400
-CGEGIS @ Rs 500/- p.m
6,000
- Life Insurance Premium
10, 500
- Repayment of HDFC Loan
95,000
- Deposit in Public Provident Fund
10,000
1,77,900
1,50,000
Restricted to a maximum of Taxable Income
6,30, 040
Computation of Tax Liability
Tax payable
51,008
Add: Surcharge
-
Add : Education Cess
1020
Total Tax Liability
52,538


See Income Tax Deduction from Salaries during FY 2015-16 AY 2016-17: Circular No. 20/2015



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