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

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"

5.2 DEFINITION OF “SALARY”, “PERQUISITE” AND “PROFIT IN LIEU OF SALARY” (SECTION 17):

5.3 INCOMES NOT INCLUDED UNDER THE HEAD "SALARIES" (EXEMPTIONS)

(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

4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES

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
Particulars	Rupees	Rupees	Rupees	Rupees	Rupees
	(i)	(ii)	(iii)	(iv)	(v)
Gross Salary	2,50,000	5,00,000	10,00,000	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 Income	2,05,000	4,50,000	9,00,000	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
1	Gross Salary				5,20,000
2	Medical Reimbursement by employer on the treatment of self and				35,000
	dependent family member
3	Contribution of GPF				20,000
4	LIC Premium				20,000
5	Repayment of House Building Advance				25,000
6	Tuition fees for two children				60,000
7	Investment in Unit-Linked Insurance Plan				30,000
8	Interest Income on Savings Account				8,000
9	Interest Income on Time Deposit				15,000
Computation of Tax
S.No.		Particulars			Rupees
1	Gross Salary				5,20,000
2	Add: Perquisite in respect of reimbursement of Medical Expenses				20,000
	In excess of Rs.15,000/- in view of Section 17(2)(v)
3	Income 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
5	a.Less: Deduction U/s 80C
	(i) GPF		Rs.20,000/-
	(ii) LIC		Rs.20,000/-
	(iii) Repayment of House Building Advance		Rs.25,000/-
	(iv) Tuition fees for two children		Rs.60,000/-
	(v) Investment in Unit-Linked Insurance Plan		Rs.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
7	Income Tax thereon/payable (after rebate u/s 87A)				15,800
8	Add:
	(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
1	Salary				3,50,000
2	Dearness Allowance				2,00,000
3	House Rent Allowance				1,40,000
4	House rent paid				1,44,000
5	General Provident Fund				36,000
6	Life Insurance Premium				4,000
7	Subscription to Unit-Linked Insurance Plan				50,000
Computation of total income and tax payable thereon

S.No.		Particulars			Rupees
1	Salary + 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
3	Less: 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
1	Salary			7,00,000
2	Bonus			1,40,000
3	Free 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(b	Hotel 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
5	Subscription to Unit Linked Insurance Plan			50,000
6	Life Insurance Premium			10,000
7	Contribution to recognized P.F.			42,000
COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:
S.No.	Particulars			Rupees
1	Salary			7,00,000
2	Bonus			1,40,000
3	Total 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
5	Gross Total Income (Rs.8,40,000+ 1,38,600)			9,78,600
6	Gross Total Income			9,78,600
7	Less: 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
8	Total Income			8,76,600

9	Tax Payable	1,00,320
10	Add:
	(i). Education Cess @2%	2,006
	(ii). Secondary and Higher Education Cess @1%	1,003

11	Total Income Tax payable	1,03,329
12	Rounded 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
1	Salary				4,00,000
2	Dearness Allowance				1,00,000
3	House Rent Allowance				1,80,000
4	Special Duties Allowance				12,000
5	Provident Fund				60,000
6	LIP				10,000
7	Deposit in NSC VIII issue				30,000
8	Rent Paid by the employee for house hired by her				1,20,000
9	Repayment of House Building Loan (Principal)				60,000
10	Tuition Fees for three children (Rs.10,000 per child)				30,000
Computation of total income and tax payable thereon

S.No.		Particulars			Rupees
1	Gross 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 (1/3^rd 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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