1693. Exemption limit raised - Employees drawing salary between Rs. 8,000 and Rs. 10,000 - Adjustment of tax deducted at source during financial year 1977-78 against tax deductible from salaries
Circular No. 235 was issued by the Central Board of Direct Taxes on 19 December 1977. Its subject is 1693. Exemption limit raised - Employees drawing salary between Rs. 8,000 and Rs. 10,000 - Adjustment of tax deducted at source during financial year 1977-78 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.
Lets a non-Government employer recover, through the payroll rather than through refund claims, the tax it had already deducted from employees who fell out of charge when the exemption limit went from Rs. 8,000 to Rs. 10,000 by the Finance (No. 2) Act, 1977. The employer first works out the tax deducted and paid in the earlier months for employees whose estimated annual salary is now likely to be below Rs. 10,000, the surplus payment, and then reduces the tax for the month and the progressive figures in columns 8 and 9 of the monthly return in Form No. 21 under rule 32 by that amount, enclosing a list of the employees and the surplus against each. The earlier Form No. 21 returns up to the month of adjustment are to be revised and sent to the Income-tax Officer. Where the Commissioner has exempted the employer from monthly returns under rule 34, he must still file them separately for these employees up to the month of adjustment. A certificate that the employees have been reimbursed must accompany the return for the month of adjustment, and the section 203 certificate given to each employee must show the excess deducted because of the raised limit and refunded to him.
It was represented that tax had been deducted before the Act was passed from employees with estimated salary above Rs. 8,000 but not above Rs. 10,000, and that making them apply to the Income-tax Officer for refund after 31 March 1978 would cause hardship.
| Under the 1961 Act | Now |
|---|---|
| s.203 | s.395 |
1693. Exemption limit raised - Employees drawing salary between Rs. 8,000 and Rs. 10,000 - Adjustment of tax deducted at source during financial year 1977-78 against tax deductible from salaries
1. Attention is invited to Board’s Circular No. 225 [F. No. 275/13/77-IT(B)], dated 30-6-1977 on the above subject.
2. The exemption limit of taxable income was raised from Rs. 8,000 to Rs. 10,000 by the Finance (No. 2) Act, 1977. It has been represented that, before the enactment of the said Act, income-tax was deducted at source in the case of employees whose estimated annual salary income exceeded Rs. 8,000 but did not exceed Rs. 10,000 and that it would cause hardship to such persons if they were to apply to the Income-tax Officers concerned for refund of such tax deducted at source after March 31, 1978.
3. In order to mitigate such hardship, it has been decided that the "persons responsible for paying" the income in respect of "salaries" should be permitted, as a special case, to make adjustments of the tax deducted at source on behalf of this group of employees against the tax deductible from salaries of employees with estimated annual salary incomes exceeding Rs. 10,000 and payable to the credit of the Central Government during the subsequent months of the current financial year. Such adjustments will be made in the following manner :
4. The "persons responsible for paying" the salaries should, in the first instance, determine the amount of tax deducted and paid to the credit of the Central Government in the earlier months on account of the employees whose estimated annual salary income is likely to be below Rs. 10,000 (hereinafter referred to as "surplus payment"). After such determination, he should reduce the total of the tax deducted during the month and the progressive figures by the amount of "surplus payment" under columns 8 and 9 of the monthly return for the months of adjustment, in Form No. 21 prescribed under rule 32. A list showing names of the employees and the amount of "surplus payment" against each should also be enclosed with the said monthly return. Simultaneously, action should be taken to revise the returns in Form No. 21 filed for the months earlier up to the month in which the adjustment of "surplus payment" is made, and send them to the Income-tax Officer concerned so as to put matters beyond doubt. Even where any persons responsible for paying the salaries has been exempted by the Commissioner of Income-tax, under rule 34 from the requirement of furnishing the monthly return in Form No. 21, he should submit, in respect of the employees whose income from salary is likely to be below Rs. 10,000, the monthly returns separately for each month only up to and along with the return in respect of such employees for the month in which the adjustment of tax deducted at source is made.
5. A certificate should also be furnished with the monthly return for the month in which adjustment of "surplus payment" is made to the effect that the concerned employees have been reimbursed the amount of tax deducted earlier and which has been adjusted in that month.
6. While giving certificates of tax deduction at source under section 203 of the Act in individual cases, the person responsible for payment should take due care to indicate therein the amount of tax deducted in excess as a result of the raising of the exemption limit and refunded to the employees concerned.
7. These instructions would apply only to non-Government employers for the financial year 1977-78.
Circular : No. 235 [F. No. 275/88/77-IT(B)], dated 19-12-1977.
An employer's TDS reconciliation for 1977-78, or a query on why a Form No. 21 return was revised downwards.
An employer had deducted Rs. 900 in all from four employees whose estimated salary now falls below Rs. 10,000. It repays them the Rs. 900, reduces the month's deduction and the progressive figure in Form No. 21 by Rs. 900, encloses the list of the four employees, revises the earlier returns and certifies the reimbursement.
Forms it names. Form No. 21
Rules it names. Rule 32, 34 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.