1696. Exemption limit of income raised from Rs. 6,000 to Rs. 8,000 by Finance (Amendment) Act, 1975 - Employers permitted to make adjustments of tax deducted at source against tax deductible from salaries
Circular No. 185 was issued by the Central Board of Direct Taxes on 18 December 1975. Its subject is 1696. Exemption limit of income raised from Rs. 6,000 to Rs. 8,000 by Finance (Amendment) Act, 1975 - Employers permitted to make adjustments of tax deducted at source against tax deductible from salaries.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Permits non-Government employers, as a special case, to adjust tax already deducted from employees who ceased to be taxable when the exemption limit rose from Rs. 6,000 to Rs. 8,000. Circular No. 176 dated 16 August 1975 had circulated the revised deduction rates under the Finance (Amendment) Act, 1975, but tax had already been deducted in the first few months of the year from employees with taxable income between Rs. 6,000 and Rs. 8,000. The Board holds that once tax is deducted under section 192 and paid to Government under rule 30 an employer cannot make internal adjustments as of right, but to avoid the hardship of those employees having to claim refunds it permits the adjustment. The employer must first work out the excess deducted in earlier months for employees whose annual taxable salary is likely to be below Rs. 8,000, show for the month of adjustment the total deduction due reduced by that excess, revise the earlier monthly returns in Form No. 21 under rule 32, furnish a certificate that the employees concerned have been reimbursed, and take care in the individual deduction certificates to show the adjustment so that the same amount is not claimed again as a refund.
Several representations were received that the deduction made in the first months of the year had become superfluous after the exemption limit was raised, and that requiring those employees to file for refunds would cause undue hardship.
1696. Exemption limit of income raised from Rs. 6,000 to Rs. 8,000 by Finance (Amendment) Act, 1975 - Employers permitted to make adjustments of tax deducted at source against tax deductible from salaries
1. Attention is invited to paragraph 2 of Circular No. 176 [F. No. 275/12/75-ITJ], dated 16-8-1975 enclosing an extract of the revised Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1975, giving the revised rate of tax deduction at source from salaries during financial year 1975-76, consequent to raising of the exemption limit of taxable income from Rs. 6,000 to Rs. 8,000. It was requested in the said circular that deduction of income-tax may be made during the financial year according to the revised rates indicated in the Schedule.
2. Several representations have been received stating that tax has already been deducted in the first few months of the current financial year on the basis of the rates specified in the Finance Act, 1975 and that such deduction made on behalf of the employees drawing taxable income up to Rs. 8,000 has become superfluous in view of the revised rates for deduction of tax stipulated by the Finance (Amendment) Act of 1975 and that undue hardship would be caused to such persons from whose emoluments tax has been deducted and from whom, by virtue of the Amendment Act, tax was not deductible under section 192 if they have to approach the Department for refund of tax so deducted. It has been requested that in such cases of excess deduction and payment to Government account, employers may be permitted to adjust tax deducted in the first few months from the emoluments of employees having taxable income exceeding Rs. 6,000 but below Rs. 8,000 in the subsequent tax deduction bills against tax deductible from other employees whose taxable emoluments exceed Rs. 8,000 so that the benefit granted under the Amendment Act really reached this class of employees and they may be saved the routine of having to make regular claims of refunds of tax deducted at source by filing of returns, etc., after April 1, 1976.
3. These representations have been very carefully considered. Once tax is deducted at source, as required under section 192, and paid to Government account as required under rule 30 of the Income-tax Rules, it is not permissible for the employer to make internal adjustments of taxes deducted on behalf of employees in the manner suggested in the representations. However, to mitigate the real hardship that would arise in requiring employees having taxable emoluments below Rs. 8,000 to approach the Income-tax Department for refund of taxes deducted in the first few months of the current financial year, it has been decided that the employers would be permitted, as a special case, to make necessary adjustment of such tax deduction at source made by them on behalf of this group of employees in their tax deduction bill for the subsequent months.
4. Rule 30(1)(b)(ii) requires private employers making deduction of tax at source from salaries paid to the employees to deposit such tax to Government account within a week of deduction thereof. The rules also require that the employer furnishes a monthly return to the Income-tax Officer concerned in Form No. 21 prescribed under rule 32 indicating the name of the employee on whose behalf tax is deducted, the details of emoluments, perquisites and tax deduction made in the month as also deduction made up to the end of the month, etc. Therefore, while making the adjustments now permitted to be made, the employers should, in the first instance, determine the excess deduction made in the earlier months on account of such employees whose taxable annual income under the head "Salaries" is likely to be below Rs. 8,000. After such determination, the employers should clearly indicate for the month in which the adjustment is proposed to be made, the total deduction due for the month and reduce it by the amount of excess deductions made in the months previous to the month in which the adjustment is made. Simultaneously, the employers should ensure that the monthly returns filed in Form No. 21 for the months earlier to the month in which the adjustment is made is also suitably revised to put matters beyond doubt. They should also furnish a certificate that the concerned employees have been reimbursed the deduction made earlier and now permitted to be adjusted. The employers should also ensure that, while giving certificates of tax deduction at source in individual cases, due care is taken to indicate the adjustments, they are now permitted to make, so that the excess tax now permitted to be adjusted is not claimed as a refund by the employees.
5. These instructions would apply to non-Government employers for the financial year 1975-76 only.
Circular No. 185 [F. No. 275/12/75-ITJ], dated 18-12-1975.
In an old reconciliation of an employer's monthly deduction returns for 1975-76 with the tax actually paid to Government.
Forms it names. Form No. 21
Rules it names. Rule 30, 32 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.