Circular No. 214

What this is

Circular No. 214 was issued by the Central Board of Direct Taxes on 30 March 1977. Its subject is Instructions for deduction of tax at source from salary during financial year 1977-78 at the rates specified in Part III of First Schedule to Finance (No. 2) Bill, 1977.

What it does

Carries the instructions and rates for deducting tax from salary in the financial year 1977-78 under Part III of the First Schedule to the Finance (No. 2) Bill, 1977. The rates for individuals, Hindu undivided families, unregistered firms, associations of persons, bodies of individuals and artificial juridical persons are nil up to Rs. 8,000; fifteen per cent of the excess over Rs. 8,000 up to Rs. 15,000; Rs. 1,050 plus eighteen per cent above Rs. 15,000; Rs. 1,950 plus twenty-five per cent above Rs. 20,000; Rs. 3,200 plus thirty per cent above Rs. 25,000; Rs. 4,700 plus forty per cent above Rs. 30,000; Rs. 12,700 plus fifty per cent above Rs. 50,000; Rs. 22,700 plus fifty-five per cent above Rs. 70,000; and Rs. 39,200 plus sixty per cent above Rs. 1,00,000. By the proviso no tax is payable on a total income not exceeding Rs. 10,000, and where total income is between Rs. 10,000 and Rs. 10,540 the tax may not exceed seventy per cent of the excess over Rs. 10,000. The tax so computed is increased by a surcharge for the purposes of the Union at fifteen per cent. The worked examples show the standard deduction under section 16(i) at Rs. 2,000 plus ten per cent of salary above Rs. 10,000, the exclusion of the amount deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974, a scheme the circular notes was discontinued by an Ordinance with effect from 6 May 1977, and the deduction of qualifying contributions to the general provident fund, life insurance premia, the Unit-linked insurance plan and Post Office cumulative time deposits.

Why it was issued

It is the annual instruction to employers on deduction from salary, setting out the rates proposed for the financial year 1977-78.

Who it reaches

• Employers and disbursing officers deducting tax from salary in 1977-78
• Salaried employees near the Rs. 10,000 threshold, where marginal relief applies
• Employees whose emoluments were subject to compulsory deposit under the 1974 Act

The provisions it speaks to

The instrument, as the Board published it

Instructions for deduction of tax at source from salary during financial year 1977-78 at the rates specified in Part III of First Schedule to Finance (No. 2) Bill, 1977
ANNEX I - EXTRACT FROM PART III OF FIRST SCHEDULE TO FINANCE (NO. 2) BILL, 1977
Paragraph A
Sub-Paragraph I
In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii ) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies,—
Rates of income-tax

(1)

where the total income does not exceed Rs. 8,000

Nil;

(2)

where the total income exceeds Rs. 8,000 but does not exceed Rs. 15,000

15 per cent of the amount by which the total income exceeds Rs. 8,000;

(3)

where the total income exceeds Rs. 15,000 but does not exceed Rs. 20,000

Rs. 1,050 plus 18 per cent of the amount by which the total income exceeds Rs. 15,000;

(4)

where the total income exceeds Rs. 20,000 but does not exceed Rs. 25,000

Rs. 1,950 plus 25 per cent of the amount by which the total income exceeds Rs. 20,000;

(5)

where the total income exceeds Rs. 25,000 but does not exceed Rs. 30,000

Rs. 3,200 plus 30 per cent of the amount by which the total income exceeds Rs. 25,000;

(6)

where the total income exceeds Rs. 30,000 but does not exceed Rs. 50,000

Rs. 4,700 plus 40 per cent of the amount by which the total income exceeds Rs. 30,000;

(7)

where the total income exceeds Rs. 50,000 but does not exceed Rs. 70,000

Rs. 12,700 plus 50 per cent of the amount by which the total income exceeds Rs. 50,000;

(8)

where the total income exceeds Rs. 70,000 but does not exceed Rs. 1,00,000

Rs. 22,700 plus 55 per cent of the amount by which the total income exceeds Rs. 70,000;

(9)

where the total income exceeds Rs. 1,00,000

Rs. 39,200 plus 60 per cent of the amount by which the total income exceeds Rs. 1,00,000 :

Provided that for the purposes of this Sub-Paragraph,—
(i) no income-tax shall be payable on a total income not exceeding Rs. 10,000;
(ii) where the total income exceeds Rs. 10,000 but does not exceed Rs. 10,540, the income-tax payable thereon shall not exceed seventy per cent of the amount by which the total income exceeds Rs. 10,000.
Surcharge on income-tax
The amount of income-tax computed in accordance with the preced­ing provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of fifteen per cent of such income-tax.
ANNEX II - TYPICAL EXAMPLES OF INCOME-TAX CALCULATION
Example I

Rs.

1.

Total salary income [including Rs. 164 deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974. The scheme has since been discontinued by an Ordinance issued by the President w.e.f. 6-5-1977]

16,164

2.

Contribution to general provident fund

2,000

3.

Payments towards life insurance premia

1,000

4.

Participation in Unit-linked insurance plan, 1971 made under section 19(1)( cc) of the Unit Trust of India Act, 1963 (52 of 1963)

500

5.

Deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959

500

4,000

6.

Total salary income

16,164

7.

Deduct : Amount deposited under the Additional Emolu­ments (Compulsory Deposit) Act, 1974

164

16,000

8.

Deduct : Amount by way of standard deduction under section 16(i) in respect of expenditure incidental to the employ­ment at Rs. 2,000 plus 10 per cent of the amount by which salary exceeds Rs. 10,000

2,600

13,400

9.

Deduct : Whole of Rs. 4,000 of qualifying contributions towards general provident fund, life insurance premia, Unit-linked insurance plan and deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959

4,000

10.

Taxable income

9,400

11.

Income-tax payable on Rs. 9,400

Nil

Example II

1.

Total salary income [including Rs. 470 deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974, since discontinued]

17,970

2.

Contribution to general provident fund

2,000

3.

Payments towards life insurance premia

1,500

4.

Participation in Unit-linked insurance plan, made under section 19(1)( cc) of the Unit Trust of India Act, 1963

500

5.

Deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959

500

4,500

6.

Total salary income

17,970

7.

Deduct : Amount deposited under the Additional Emolu­ments (Compulsory Deposit) Act, 1974

470

17,500

8.

Deduct : Amount of standard deduction under section 16(i) in respect of expenditure incidental to the employment at Rs. 2,000 plus 10 per cent of the amount by which salary exceeds Rs. 10,000

2,750

14,750

9.

Deduct : Amount on account of contributions towards general provident fund, life insurance premia, unit-linked insur­ance plan and deposit in 10-year account or 15-year account under the Post Office (Cumulative Time Deposits) Rules, 1959 :

Total amount paid Rs. 4,500 but restricted to 30 per cent of Rs. 14,750, i.e., Rs. 4,425

- on the first Rs. 4,000 (full)

Rs. 4,000

- on the next Rs. 425 at 50 per cent

Rs. 213

4,213

10.

Taxable income

10,537

Rounded off to

10,540

11.

Income-tax on Rs. 10,540 (i.e., at 15 per cent of Rs. 2,540) : Rs. 381 but restricted to Rs. 378 being 70 per cent of the amount by which the total income exceeds Rs. 10,000 i.e., 70 per cent of Rs. 540

Thus, income-tax payable on Rs. 10,540

378

Surcharge on income-tax at 15 per cent

57

435

Example III

Rs.

1.

Total salary income [including Rs. 2,400 as conveyance allowance at Rs. 200 p.m. received from the employer and Rs. 580 deposited under the Additional Emoluments (Compulsory Deposit) Act, 1974, since discontinued in May 1977]

30,580

2.

Contribution to general provident fund

3,000

3.

Payments towards life insurance premia

3,000

4.

Participation in Unit-linked insurance plan, made under section 19(1)( cc) of the Unit Trust of India Act, 1963

2,000

5.

Deposits in a 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959

2,000

10,000

6.

Total salary income

30,580

7.

Deduct : Amount deposited under the Additional Emolu­ments (Compulsory Deposit) Act, 1974

580

30,000

8.

Deduct : Amount of standard deduction under section 16(i), in respect of expenditure incidental to the employment restricted to Rs. 1,000 in view of proviso (a) to the aforesaid section16(i)

1,000

29,000

9.

Deduction on account of contributions towards general provident fund, life insurance premia, Unit-linked insurance plan and deposits in 10-year account or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959 :

Paid Rs. 10,000 in all but limited to 30 per cent of Rs. 29,000, i.e., Rs. 8,700

- on the first Rs. 4,000 (full)

Rs. 4,000

- on the next Rs. 4,700 at 50 per cent

Rs. 2,350

6,350

10.

Taxable income

22,650

11.

Income-tax payable on Rs. 22,650

2,612.50

12.

Surcharge on income-tax at 15 per cent

391.87

Total tax payable

3,004.37

Rounded off to

3,004.00

CLARIFICATION 2
1. I am directed to invite a reference to this Department’s Circular No. 195 [F. No. 275/47/76-ITJ], dated 25-3-1976, on the subject of deduction of income-tax from salaries paid during the year 1976-77.
2. The Finance Bill, 1977, as introduced in the Parliament, prescribes the same rates for deduction of tax from "salaries" during the financial year 1977-78 as were in force during the financial year 1976-77. Hence, until further instructions, the tax at source from salaries may be deducted at the same rates as are given in Part III of the First Schedule to the Finance Act, 1976.
3. This may please be brought to the notice of all the disbursing officers and State undertakings under the control of the State Government.
Circular : No. 214 [F. No. 275/13/77-IT(B)], dated 30-3-1977.

What to watch

• The rates and thresholds speak only for the financial year 1977-78, and are those of the Finance (No. 2) Bill, 1977.
• The Rs. 10,000 exemption in the proviso, and the marginal relief up to Rs. 10,540, sit above the Rs. 8,000 slab entry and are easy to miss.
• The circular itself records that the Additional Emoluments (Compulsory Deposit) scheme was discontinued from 6 May 1977, so the deduction shown in the examples applies only to deposits made while it ran.
• The text as supplied consists of the annexed rate extract and worked examples and is clipped in the second example, so the body of the instruction is not before you.

Where you meet it

Only in an old salary deduction matter for the financial year 1977-78, or when reconstructing a computation of that year.

On the same provision

• Notification No. 89/2026-CBDT [F. No. 164/1/2026-ITA-1] / SO 3936(E) — Ministry of Finance 17 July 2026
• Notification No. 75/2026 [F. No. 275/18/2026-IT(B)] / SO 3610(E) : TDS Exemption on Ship Lease Payments to IFSC Units — 4 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 3 July 2026
• Notification No. 74/2026 [F. No. 275/16/2026-IT(B)] / SO 3609(E) : TDS Exemption on Aircraft Lease Payments to IFSC Units — 4 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 3 July 2026
• Notification No. 65/2025 [F. No. 300196/4/2019-ITA-I] / S.O. 2739(E) — Ministry of Finance 19 June 2025
• Notification No. 56 /2025 [F.No.300164/4/2024-ITA-1] / SO 2576(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 12 June 2025
• Notification No. 52/2025 [F. No. 300164/5/2024-ITA-1] / SO 2447(E) — Ministry of Finance 30 May 2025

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