626. Relief in the case of amounts repaid under Additional Emoluments (Compulsory Deposit) Act - Procedure laid down for working out relief under the section
Circular No. 239 was issued by the Central Board of Direct Taxes on 16 May 1978. Its subject is 626. Relief in the case of amounts repaid under Additional Emoluments (Compulsory Deposit) Act - Procedure laid down for working out relief under the section.
Lays down a working method for disbursing officers on repayments under the Additional Emoluments (Compulsory Deposit) Act, 1974. Section 8(2) of that Act deems the amount repaid to be salary paid in arrears for computing total income, attracting section 89(1) and, with it, rule 21A(2)(a). To relieve employees whose income would not have been taxable but for the repayment, the Board directs the disbursing officer to compute the total income of the year excluding the repayment, allocate the repayment to the years to which the deposit relates, add the allocated amount to the total income of each of those years, and work out the tax on each such year's total income at that year's rates. If on that working no tax is payable for any of the years to which the repayment is allocated, the disbursing officer need not deduct tax at source in the year of repayment, even though the income of that year is taxable. If tax is payable for any of those years, he must deduct on the total income including the repayment at the rates of the year of repayment, and the employee must go to the Income-tax Officer for relief under section 89(1).
Representations said that claiming relief under section 89(1) in the prescribed way caused considerable hardship, particularly to employees whose income would not have been taxable but for the repayment of the compulsory deposit.
626. Relief in the case of amounts repaid under Additional Emoluments (Compulsory Deposit) Act - Procedure laid down for working out relief under the section
1. Section 8(2) of the Additional Emoluments (Compulsory Deposit) Act, 1974 provides that for the purposes of computing the total income under the Income-tax Act, the amount repaid to an individual is deemed to be salary paid in arrears and the provisions of section 89(1) of the Income-tax Act shall apply. Under section 89(1), relief to be accorded in such cases is to be worked out on the basis of the rules as prescribed in rule 21A(2)( a) of the Income-tax Rules, 1962.
2. Representations have been received by the Board that the claiming of relief under section 89(1), as prescribed, is causing considerable hardship to certain categories of employees, particularly, in those cases of employees where the income of the employee was not taxable but for the repayment of compulsory deposits.
3. The Board have considered these representations and have decided with a view to removing hardship that the following procedure may be adopted by the Disbursing Officers :
a. compute the total income of the relevant previous year excluding the amount, received as repayment of deposit ;
b. allocate the amount received as repayment to the years to which the deposit relates ;
c. add to the amount allocated to each year, the total income of the year; and
d. compute the tax payable on such total income for each year at the rate applicable to that year.
4. If thereafter, it is found that no tax is payable as per (d) above for any of the years to which the repayment has been allocated, the Disbursing Officer need not deduct tax at source from the total income of the employee in the year in which the deposit is being repaid notwithstanding the fact that in the year in which the deposit is repaid the income is taxable.
5. If, however, it is found that by allocating the repayment to the relevant years tax is payable for any year, the Disbursing Officers must deduct tax on the total income including repayment at the rate applicable to the year in which repayment is made. Such employees will have to apply to the Income-tax Officer for claiming relief under section 89(1).
Circular : No. 239 [F. No. 174/72/78-IT(A-I)], dated 16-5-1978.
In the salary deduction working of a Government or public sector disbursing officer when a compulsory deposit was repaid, and in a section 89(1) relief claim before the Assessing Officer.
Rules it names. Rule 21A 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.