Enough room for tax rebates under I-T Act
B S Jindal & Akhil Jindal
The computation of salary for tax deductions under section 192 has a complex listing, which is to be used which making these deductions. The I-T Act also provides for rebates under various clauses which could be used beneficially by the assessees. The income taxable under the head "Salaries" are:
Any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
Any salary paid to the assessee in the previous year by an employer or a former employer though not due or before it became due to him.
Any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
Any salary, bonus, commission or remuneration received by a partner of a firm shall not be regarded as "Salary" but will be taxable under the head "Income from Business or Profession"."Salary" includes wages, fees, commission, perquisites, profits in lieu of, or, in addition to
salary, advance of salary, annuity or pension, gratuity payments in respect of encashment of leave etc. It also includes the annual accretion to the employee's account in a recognised provident fund to the extent it is chargeable to tax under rule 6 of Part A of the Fourth Schedule of the Income Tax Act. The value of perks like free or concessional residential accommodation, or transport provided by employer to their employees are determined under rule 3 of the Income Tax Rules, 1962. However, the use of any vehicle provided by a company or an employer to commute from the employee's residence to his office or other places of work are not considered as a benefit or amenity granted or provided to him free of cost or at concessional rate under this rule. Other benefits or amenities provided free of cost or at concessional rates to the employees like supply of gas, electric energy, water for household consumption, educational facilities, etc., are also taken into account to compute the estimated income of
the employee. The valuation has to be done in accordance with rule 3 of the Income Tax Rules. However, Clause (14) of section 10 provides for exemption of the following allowances:
Any special allowance or benefit granted to an employee to meet the expenses incurred in the performance of his duties as prescribed under rule 2BB subject to the extent to which such expenses are actually incurred for that purpose;
Any allowance granted to an assessee either to meet his personal expenses at the place of his posting or at the place he ordinarily resides or to compensate him for the increased cost of living;
However, the allowance referred to in the first clause above should not be in the nature of a personal allowance granted to the assessee to remunerate or compensate him for performing special duties relating to his office or employment unless such allowance is related to his place of posting or residence. Deductions under Section 16 of the Act: Under Section 16 of the Income Tax Act the standard
deduction available is of a sum equal to thirty-three and one-third per cent of the salary or Rs 20,000. The tax on employment within the meaning of clause (2) of Article 276 of the Constitution of India leviable by, or, under any law, shall be allowed as a deduction in computing the income under the head "Salaries". Deduction under Chapter VI A The following deductions under Chapter VI A are available: As per Section 80CCC, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India for receiving pension from the Fund referred to in clause (23AAB) of Section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee's account, if any) as
does not exceed the amount of Rs 10,000 in the previous year. Under Section 80D, in the case of the following categories of persons a deduction can be allowed for a sum not exceeding Rs 10,00 per annum to the extent payment is made by cheque out of their income chargeable to tax to keep in force an insurance on the health of the categories of persons specified provided that such insurance is in accordance with the scheme framed by the General Insurance Corporation of India as approved by the Central Government, popularly known as "Mediclaim". Deduction under Section 80 DD Deduction of Rs 15,000 is allowed under this section. In case of an individual, who incurs expenditure on medical treatment including nursing of handicapped, dependent relative suffering from permanent physical disability, deduction is available without any restriction on his total income. The Drawing and Disbursing Officer can allow the deduction while computing the salary after obtaining certificate as prescribed under
rules. Deduction under Section 80DDA An individual is entitled to a deduction for an amount not exceeding Rs 20,000 deposited in the specific scheme of the LIC and the UTI which provides for payment of annuity on lump sum for the benefit of handicapped, dependent. Deduction under Section 80DDB An assessee who is resident in India incurs any expenditure on the medical treatment of such diseases as may be specified in the Rules for himself or a dependent relative, shall be allowed a deduction of Rs 15,000 in respect of the previous year in which such expenditure was incurred. The diseases are listed in Rule 11D. The assessee has to furnish a certificate in the Form 10-I to the employer. Deduction under Section 80E This section allows a deduction in respect of repayment of loan taken for higher education subject to certain conditions. The employer while making deduction of tax should take care of all the deductions available to the assessee subject to the limits laid down in
the Act to avoid excessive deduction of tax. The Jindals are Delhi-based chartered accountants
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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