Financial Year 1972-73
Circular No. 82 was issued by the Central Board of Direct Taxes on 20 March 1972. Its subject is Financial Year 1972-73.
Circulates to treasuries the rates for deducting from interest on Government securities from 1 April 1972, in a draft the Accountant General is to issue individually to every treasury officer and sub-treasury officer. On the Finance Bill, 1972 the rates on the whole interest are: for a resident payee other than a company, 20 per cent tax with 3 per cent surcharge on interest other than on a tax-free security; for a non-resident other than a company, 30 per cent with 4.5 per cent surcharge or tax and surcharge on the slab rates as if the interest were his total income, whichever is higher, and 15 per cent with 2.25 per cent surcharge on a tax-free security; for a domestic company, 22 per cent with 1 per cent surcharge; and for a company that is not a domestic company, 44 per cent with 2.2 per cent on a tax-free security and 70 per cent with 3.5 per cent on other securities. The draft then works the exceptions: a certificate under section 197 issued before 1 April 1972 fixing a percentage is to be honoured if operative for the year ending 31 March 1973, and one issued later is to be acted on at the rate it specifies; nothing is deducted where the payer is satisfied that the payee is exempt under sections 10 to 13; nothing is deducted on interest on the four and a quarter per cent National Defence Bonds, 1972 or on the gold bonds of 1977 and 1980 held by a resident individual, in the case of the gold bonds against a written declaration that the total nominal value held, including holdings through others, never exceeded Rs. 10,000 during the period the interest relates to; nothing is deducted from interest paid to a non-resident on the National Defence Loans of 1968 and 1972, that interest being exempt under a notification issued under section 10(4), while residents other than individuals bear deduction on them.
The yearly instruction that puts the current rates and the exemption certificate practice before the treasuries that actually pay interest on Government securities.
FINANCIAL YEAR 1972-73
1732. Instructions for deduction of tax at source from interest on securities during financial year 1972-73 at the rates specified in Part III of First Schedule to Finance Bill, 1972
I am directed to forward a copy of draft circular letter setting out the rates at which income-tax and surcharge should be deducted from interest on Government securities on or after April 1, 1972. It is requested that a circular on the basis of this draft may be issued by you immediately to all Treasury Officers and Sub-Treasury Officers under your control, individually.
Circular : No. 82 [F. No. 275/9/72-ITJ], dated 20-3-1973.
DRAFT CIRCULAR REFERRED TO IN INSTRUCTIONS
1. I am to invite your attention to this Office Letter......regarding deduction of income-tax and surcharge from interest on Government securities during the financial year 1971-72.
2. According to the Finance Bill, 1972, income-tax is to be deducted from the entire amount of interest on securities at the following rates, namely :Income-tax
Rate of Income-tax
Rate of Surcharge
I.
In the case of a person other than a company—
(i) where the person is resident in India—
on interest on securities (excluding interest payable on a tax-free security)
20 per cent
3 per cent
(ii ) where the person is not resident in India—
(a) on interest on securities (excluding interest payable on a tax-free security)
income-tax at 30 per cent and surcharge at 4.5 per cent of the amount of the interest,
or
income-tax and surcharge on income-tax in respect of the interest at the rates prescribed in Paragraph A of Part III of the First Schedule to the Finance Bill, 1972 if such interest income had been the total income,
whichever is higher;
(b) on interest payable on a tax-free security
15 per cent
2.25 per cent
II.
In the case of a company—
(i) where the company is a domestic company—
on interest on securities (excluding interest payable on a tax-free security)
22 per cent
1 per cent
(ii) where the company is not a domestic company—
(a) on interest payable on a tax-free security
44 per cent
2.2 per cent
(b) on interest on other securities
70 per cent
3.5 per cent
3. The term "domestic company" for the present purposes means an Indian company, or any other company which, in respect of its income liable to income-tax under the Act has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income in accordance with the provisions of section 194.
4. In making payment or crediting interest on Government securities on or after April 1, 1972 you should, therefore, deduct income-tax at the rates specified above, except in the cases where an exemption or abatement certificate, granted by an Income-tax Officer under sub-section (1) of section 197 is produced. The following instructions should be followed in this connection :
(1) Exemption or abatement certificates issued before April 1, 1972 authorising deduction of tax at a particular rate expressed as a percentage of the amount of interest should be accepted and acted upon, if operative for the financial year ending on March 31, 1973.
(2) Where a certificate is issued by the Income-tax Officer on or after April 1, 1972 authorising deduction of tax at a specified rate in respect of any person, income-tax should be deducted at the rates specified therein.
(3) No tax should be deducted in cases in which from a certificate, issued by the Income-tax Officer or otherwise, you are satisfied that the payee is a person exempt from income-tax under sections 10 to 13.
(4) No tax should be deducted from any interest payable on 4¼ per cent National Defence Bonds, 1972 or 6½ per cent Gold Bonds, 1977 or 7 per cent Gold Bonds, 1980 where any such Bonds are held by a resident individual and in the case of the aforesaid Gold Bonds, where the holder thereof makes a declaration in writing before the person responsible for making the payment that the total nominal value of the 6½ per cent Gold Bonds, 1977 or, as the case may be, the 7 per cent Gold Bonds, 1980 held by him (including such Bonds, if any, held on his behalf by any other person) did not in either case exceed Rs. 10,000 at any time during the period to which the interest relates.
(5) No tax should be deducted from interest payable to a non-resident on 4¼ per cent National Defence Loans, 1968 and 4¾ per cent National Defence Loans, 1972 as the interest paid on these loans to non-residents is totally exempt from income-tax under Notification No. SO 3331, issued under section 10(4). In the case of residents receiving interest on these loans, deduction of tax has to be made at the prescribed rates, except when the recipient is an individual.
(6) No tax should be deducted from interest payable on National Savings Certificates (First Issue) including National Savings Certificates (First Issue) Bank Series or 7-year National Savings Certificates (Fourth Issue).
(7) No tax should be deducted from any interest payable on any other security of the Central or State Government where the security is held by a resident individual, and the holder makes a declaration in writing before you to the effect that—
(a) he has not previously been assessed under the 1961 Act, or under the 1922 Act;
(b) his total income of the previous year in which the interest is due is not likely to exceed the maximum amount not chargeable to income-tax; and
(c) the total nominal value of the securities held by him (including such securities, if any, as are held on his behalf, by any other person) did not exceed Rs. 2,500 at any time during the said previous year.
(8) No tax should be deducted from any sum payable by way of interest or dividends in respect of any securities or shares owned by a corporation established by or under a Central Act which under any law for the time being in force is exempt from income-tax on its income.
(9) Under section 288B, fractions of one rupee contained in the amount of tax (including advance tax and tax deducted at source) will have to be rounded off to the nearest rupee by ignoring amounts less than fifty paise and increasing amounts of fifty paise or more to one rupee. Hence, the amount of tax to be deducted at source should be rounded off to the nearest rupee in accordance with the aforesaid provisions of the Act.
(10) In cases of doubt, the Income-tax Officer should be consulted before making the deduction from interest on Government securities.
In an old dispute over deduction from a security holder's interest warrant, or on a holder's claim that his section 197 certificate was ignored.
Source: the Income Tax Department’s own published text — its page for this instrument.
