Financial Year 1980-81
Circular No. 267 was issued by the Central Board of Direct Taxes on 24 April 1980. Its subject is Financial Year 1980-81.
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.
Instructs paying offices on deducting income-tax and surcharge from interest on Government securities for financial year 1980-81. Except for interest payable to the Life Insurance Corporation of India, which is exempt from deduction with effect from 1 June 1976, tax comes off the whole interest at the tabulated rates: for a resident other than a company, 10 per cent with nil surcharge on interest on securities other than tax-free securities; for a non-resident other than a company, the higher of 30 per cent income-tax with 3 per cent surcharge and the slab-rate figure as if the interest were his total income, and 15 per cent with 1.5 per cent surcharge on a tax-free security; for a domestic company 21.5 per cent with 1.5 per cent surcharge; and for a company that is not a domestic company 44 per cent with 3.3 per cent surcharge on tax-free securities and 70 per cent with 5.25 per cent surcharge on others. Deduction at these rates applies to payments or credits after 18 June 1980, and where tax has already been deducted at the rates specified by the Finance (No. 2) Act, 1980, no adjustment need be made. It then lists the cases where no tax, or reduced tax, is to be deducted: certificates under section 197(1) issued before 1 April 1980 are to be honoured if operative for the year ending 31 March 1981, and later certificates at their specified rates; nothing is to be deducted where the payer is satisfied the payee is exempt under sections 10 to 15; nothing on 7 per cent Gold Bonds, 1980 held by a resident individual who declares that his holding did not exceed Rs. 10,000 in nominal value at any time in the period; nothing on National Savings Certificates (First Issue), including the Bank Series, or 7-year National Savings Certificates (IV Issue); nothing on National Development Bonds; and nothing on other Central or State Government securities held by a resident individual who declares that he has not previously been assessed, that his total income of the year is not likely to exceed the minimum not chargeable, and as to the nominal value of his holding.
The annual instruction to offices paying interest on Government securities, following the earlier letter for financial year 1979-80, so that deduction from 18 June 1980 followed the rates in the Finance (No. 2) Bill, 1980.
FINANCIAL YEAR 1980-81
Instructions for deduction of tax at source during financial year 1980-81 from interest on securities at the rate specified in Part III of First Schedule to Finance (No. 2) Bill, 1980
DRAFT CIRCULAR REFERRED TO IN INSTRUCTIONS
1. I am to invite your attention to this Office Letter No...........regarding deduction of income-tax and surcharge from interest on Government securities during the financial year 1979-80.
2. According to the Finance (No. 2) Bill, 1980 except in the case of interest on securities payable to Life Insurance Corporation of India which is exempt from deduction of income-tax with effect from June 1, 1976, income-tax is to be deducted from the entire amount of interest on securities at the following rates, namely :Income-tax
Rate of
Rate of
Income-tax
Surcharge
I.
In the case of a person other than a company :
(i)
where the person is resident in India on income by way of interest payable on any security (excluding interest payable on a tax-free security)
10 per cent
Nil
(ii)
where the person is not resident in India—
(a)
on interest on securities(excluding interest payable a on tax-free security)
income-tax at 30 per cent and surcharge at 3 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 Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1981, if such interest income had been the total income, whichever is higher
(b)
on interest payable on a tax-free security
15 per cent
1.5 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)
21.5 per cent
1.5 per cent
(ii)
where the company is not a domestic company—
(a)
on interest payable on a tax-free security
44 per cent
3.3 per cent
(b)
on interest on other securities
70 per cent
5.25 per cent
3. The term "domestic company" means an Indian company or any other company which, in respect of its income liable to income-tax under the Act, for the assessment year commencing on April 1, 1980 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 after June 18, 1980, you are requested to deduct income-tax at the rates specified above, except to cases where an exemption or abatement certificate granted by an Income-tax Officer under sub-section (1) of section 197 is produced. Where deduction of tax has already been made at the rates specified by the Finance (No. 2) Act, 1980, no adjustment need be made. The following instructions should be followed in this connection :
(1) Exemption or abatement certificates issued before April 1, 1980 authorising deduction of tax at a particular rate expressed as percentage of the amount of interest should be accepted and acted upon, if operative for the financial year ending on March 31, 1981.
(2) Where a certificate is issued by the Income-tax Officer on or after April 1, 1980 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 15 of the Act.
(4) No tax should be deducted from any interest payable on 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 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 on National Savings Certificates (First Issue) including National Savings Certificates (First Issue) Bank Series or 7-year National Savings Certificates (IV Issue).
(6) No tax should be deducted from any interest payable on National Development Bonds.
(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 the person responsible for making the payment 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 previous year in which the interest is due is not likely to exceed the minimum amount not chargeable to income-tax; and
(c) the total nominal value of the securities held by him (including such securities, if any, 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 in respect of any securities 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 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 the case of doubt, the Income-tax Officer should be consulted before making the deduction from interest on Government securities. It may be added that the above enunciated list of securities on which no tax shall be deducted is not exhaustive but is only illustrative.
CLARIFICATION 2
1. I am directed to invite a reference to this Ministry’s (Department of Revenue) Circular No. 255 [F.No. 275/29/79-IT(B)], dated 23-5-1979 on the subject of deduction of income-tax from "Interest on Government securities" payable during the year 1979-80.
2. The Finance Act, 1980 prescribes the same rate of deduction of tax from interest on Government securities during the financial year 1980-81, as were in force during the financial year 1979-80. Necessary instructions for continuing deduction of tax at source from "interest on Government securities" at the same rates as are given in Part III of the First Schedule to the Finance Act, 1979 may, therefore, be issued individually to all the Treasury Officers and Sub-Treasury Officers under your control.
Circular : No. 267 [F.No. 275/13/80-IT(B)], dated 24-4-1980.
In an old TDS record of a paying office, or where a security holder's claim for credit or for non-deduction on a declaration is examined.
Source: the Income Tax Department’s own published text — its page for this instrument.
