Section 288B l Rounding OFF of TAX
Circular No. 49 was issued by the Central Board of Direct Taxes on 16 November 1970. Its subject is Section 288B l Rounding OFF of TAX.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Explains how section 288B rounding works where the tax splits across minor heads. Section 288B, introduced by the Finance Act, 1966, rounds the tax, interest, penalty, fine or other sum payable and any refund to the nearest rupee, paise of 50 or more going up and less than 50 being ignored. The Board says the rounding is done on the total tax finally payable or refundable, not head by head; where the total is made up of amounts under different minor heads such as income-tax and surcharge, those separate amounts are to be rounded so that they add back to the rounded total, even if that means an individual head is not rounded strictly as section 288B would have it. The assessment form shows the amounts under each head before rounding, while the Demand and Collection Register shows them after, and the demand notice or refund order is issued for the rounded total. A second clarification, prompted by a Reserve Bank of India letter of 4-10-1967 about sub-divided TDS certificates issued by Public Debt Offices where banks hold securities for customers, confirms that rounding happens once, when the tax is finally calculated at the time of deduction, so sub-divided certificates are issued on the actual figures without rounding again.
Clarification was sought on what to do where the separate amounts under the various minor heads each contain fractions of a rupee, and the Reserve Bank raised the related question about sub-divided deduction certificates.
| Under the 1961 Act | Now |
|---|---|
| s.288B | s.516 |
SECTION 288B l ROUNDING OFF OF TAX
1322. Procedure to be followed in cases where separate amounts of tax payable or refundable under various minor heads include fractions of a rupee
CLARIFICATION 1
1. Section 288B, introduced by the Finance Act, 1966, provides for rounding off of the amount of tax (including tax deductible at source or payable in advance), interest, penalty, fine or any other sum payable and the amount of refund due under the provisions of the Act, to the nearest rupee and for this purpose where such amount contains a part of a rupee consisting of paise, then if such part is 50 paise or more, it is to be increased to one rupee and if such part is less than 50 paise, it is to be ignored. The scope and applicability of this section has already been explained in para 56 of Board’s Circular No. 4-P, dated 21-7-1966.
2. Clarification has been sought regarding the procedure to be followed in cases where the separate amounts of tax payable or refundable under the various minor heads, e.g., income-tax, surcharge, etc., include fractions of a rupee. The Board’s views in this matter are set forth in the following paragraphs.
3. Under the provisions of the Act, the rounding off is to be done in relation to total amount of tax finally payable or refundable, and not in relation to the amounts under the various minor heads, viz.,income-tax, surcharge, etc. If the total tax payable or refundable is comprised of amounts falling under different minor heads, the rounding off of these separate amounts should be done in such a manner that the aggregate amount of the tax as rounded off conforms to the sum of the separate amounts under the various minor heads as rounded off. This may be done notwithstanding that in some cases it may result in a rounded off amount under one or more heads not being strictly in conformity with the principle adumbrated in section 288B.
4. The following examples will make the position clear :Tax payable/
refund due under
various heads
Amount
of total
tax payable/ refund due
Rs.
Total tax/refund
due after
rounding off
Rs.
Amounts as
rounded off
under separate
heads
Rs.
Remarks
Rs.
1
2
3
4
5
IT
SC
IT
SC
50.20
5.10
55.30
55.00
50.00
5.00
Rounding off of amount under minor heads in conformity with section 288B.
50.80
5.30
56.10
56.00
51.00
5.00
Rounding off of amount under minor heads in conformity with section 288B.
50.65
5.90
56.55
57.00
51.00
6.00
Rounding off of amount under minor heads in conformity with section 288B.
50.60
5.60
56.20
56.00
51.00
5.00
Rounding off of amount under surcharge has been made to adjust total amount to Rs. 56.
50.60
5.60
56.20
56.00
51.00
5.00
Rounding off of amount under surcharge has been made to adjust total amount to Rs. 56.
50.40
5.30
55.70
56.00
51.00
5.00
Rounding off of amount under income-tax has been made to arrive at the total demand of Rs. 56.
5. Tax payable/refund due will be shown in the assessment from before rounding off under the various heads, but the same will be shown in the Demand and Collection Register after rounding off, as illustrated above. The demand notice or refund order will be issued for the total tax payable/refundable as rounded off.
Letter: F. No. 12/40/66-IT(B), dated 25-1-1967.
CLARIFICATION 2
1. Attention is invited to the Boards’ Circular No. 4-P(LXXVI-61) of 1966, dated 21-7-1966 and Letter F. No. 12/40/66-IT(B), dated 25-1-1967 [Clarification 1] wherein instructions have been issued on the provisions of section 288B.
2. A copy of a letter No. Co. Dt. Admn. 45/65-66/2119, dated 4-10-1967 [printed here as Annex] received from the Reserve Bank of India, Bombay is printed below. The point raised in para 2 of the letter has been considered and the view expressed is correct. The rounding off process is applied when the tax is finally calculated and this is done at the time of deduction of tax at source by the person responsible for making such deduction. It is, therefore, no necessary to round off the figures again at the time of issue of sub-divided certificates, etc., which should be issued based on the actual figures of tax deduction.
3. The point mentioned in para 3 of the Reserve Bank’s letter is covered by the example in the Board’s above-noted circular dated 25-1-1967 and the Bank’s presumption is confirmed.
Circular: No. 49 [F.No. 12/135/69-ITJ], dated 16-11-1970.
ANNEX - LETTER, DATED 4-10-1967 REFERRED TO IN CLARIFICATION
1. Please refer to your Circular letter F. No. 12/40/66-IT(B), dated 25-1-1967 on the above subject.
2. Our Public Debt Offices are often required to issue sub-divided income-tax deduction certificates in respect of deduction certificates already issued while paying interest on Government securities. This usually happens in the case of banks, who hold the securities on behalf of their customers and who do not disclose this fact while collecting interest. As, in terms of the instructions contained in your above circular, the rounding off of tax deducted from interest on Government securities is to be done in relation to the total tax deductible and the amounts under the minor heads, viz., income-tax, surcharge, etc., are to be rounded off in such a manner that their aggregate agrees with the total rounded off figure, once the tax is deducted and income-tax deduction certificate is issued, the issue of sub-divided deduction certificate, if requested by a bank or other holders of Government securities, present certain difficulties.
To cite an example, half-yearly interest on securities of 4 per cent Loan 1970 amounting to Rs. 2,000 is Rs. 40 and income-tax and surcharge chargeable thereon is Rs. 9 [Income-tax Rs. 7.20 + Surcharge Rs. 1.60 = Rs. 8.80, i.e., Rs. 9 (Rs. 7 + Rs. 2) after rounding off]. If the securities had actually belonged to two persons in amounts of Rs. 1,000 each the gross amount of interest payable to each would have been Rs. 20, and the amount of tax Rs. 4[Income-tax Rs. 3.60+Surcharge Re. 0.80 = Rs. 4.40, i.e., Rs. 4.00 (Rs. 3 + Re. 1) after rounding off]. Thus, for both holders, the amount of tax deducted would have been Rs. 8 as against Rs. 9 actually deducted. In some of other cases, splitting up of income-tax deduction certificate might reveal that deductible tax was more than the actually recovered on the basis that the holding belonged to one person. For example, half-yearly interest on securities of 5 per cent Loan 1982 for Rs. 2,000 would be Rs. 50 and the deduction of tax on the basis that they belong to only one person would be Rs. 11 [Income-tax Rs. 9 + Surcharcharge Rs. 2]. If the securities had actually belonged to two persons in equal shares deduction of tax for each (on gross amount of interest of Rs. 25) would have been Rs. 6 [Income-tax Rs. 4.50 + Re. 1.00 = Rs. 5.50, i.e., Rs. 6.50 (Rs. 5 + Re. 1) after rounding off] and total tax deduction for both the holder would have been Rs. 12 as against Rs. 11 actually deducted. We presume that such discrepacies may be ignored by the Public Debt Offices and that they may issue sub-divided deduction certificates on he basis of tax actually deducted and the amounts in such sub-divided certificates need not be in round figures. We shall be glad to have your concurrence to this proposal.
3. In the example cited above, where the income-tax is shown as Rs. 3.60 and surcharge Re. 0.80 both the broken amount exceed 50 paise and we have ignored the broken amount under income-tax and rounded off the surcharge to the next higher rupee. There may also be cases where the broken amount of surcharge is less than the broken amount of income-tax, and still it may be necessary to ignore the broken amount the income-tax and rounded off the surcharge to next higher rupee, as shown below :
Amount of interest: Rs. 13Income-tax
Rs. 2.70
Surcharge
Re. 0.60
Total
Rs. 3.30
After rounding off
Rs. 3.00
Income-tax
Rs. 2.00
Surcharge
Re. 1.00
Further, where the total tax after rounding off amounts to Re. 1.00 only, surcharge need not be shown at all as in the example given below :
Amount of interest : Rs. 500
Re. 0.90
Income-tax
Re. 0.20
Surcharge
Re. 0.20
Total
Re. 1.10
After rounding off
Re. 1.00
Income-tax
Re. 1.00
Surcharge
Nil
We shall be glad if you will please examine the above proposals and let us have your instructions in the matter.
On a reconciliation between the demand notice and the head-wise figures in the assessment order, or on a sub-divided TDS certificate from a Public Debt Office.
Source: the Income Tax Department’s own published text — its page for this instrument.
