Circular No. 459

Financial Year 1986-87

What this is

Circular No. 459 was issued by the Central Board of Direct Taxes on 16 June 1986. Its subject is Financial Year 1986-87.

What it does

Carries the salary deduction instructions forward into the financial year 1986-87. The Finance Act, 1986 made no change in the rate at which tax is deductible from salary under section 192, the relevant extract of Sub-Paragraph I of Paragraph A of Part III of the First Schedule being annexed, so Circular No. 429 dated 8 August 1985 continues to explain the duty to deduct at the average rate, the method of calculation, the exemptions and deductions to be allowed and the consequences of failing to deduct or to pay over. Two changes are flagged: standard deduction for salaried taxpayers is raised to 30 per cent of salary subject to a maximum of Rs. 10,000, effective from 1 April 1987 and so applying from assessment year 1987-88, and the ceiling of Rs. 400 a month on house rent allowance relief is removed, to end the disparity between an employee drawing house rent allowance and one given rent-free accommodation.

Why it was issued

The annual instruction to employers on salary deduction, updated for the Finance Act, 1986. The Board says the contents are not exhaustive and are meant to help employers understand the material provisions.

Who it reaches

Employers and drawing and disbursing officers deducting tax from salary in 1986-87
Salaried employees claiming standard deduction
Employees drawing house rent allowance
Employees provided rent-free accommodation

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.192	s.392, s.402

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

FINANCIAL YEAR 1986-87
Instructions for deduction of tax at source from salary during the financial year 1986-87 at the rates specified in Part III of First Schedule to Finance Act, 1986

1. I am directed to invite the reference to this Ministry’s Circular No. 429 [F. No. 275/35/85-IT(B)], dated 8-8-1985, wherein the rates of income-tax deductions during the financial year 1985-86 from the payment of income chargeable under the head "Salaries" under section 192 were intimated.
2. The aforesaid circular explains the duties devolving upon the person responsible for paying any income chargeable under the head "Salaries" to deduct income-tax on the amount payable at the average rate of income computed on the basis of the rates in force for the financial year in which the payment is made and also the method of calculation of such deductions. It also explains the liabilities to which such a person will be exposed in case of failure to deduct tax at source or after deducting fails to pay the tax to the credit of the Central Government within the stipulated time. It also refers to the various exemptions/deductions admissible under the Income-tax Act, in computing the income-tax for the purpose of deduction under section 192.
3. The Finance Act, 1986 has not made any modification in the rate at which income-tax will be deductible during the financial year 1986-87 from the payment of income chargeable under the head ‘Salaries’. An extract of Sub-Paragraph I of Paragraph A of Part III of the First Schedule is at Annex I. Some important changes brought about by the Finance Act, 1986, in relation to income-tax deduction from the payment of income chargeable under the head ‘Salaries’ during the financial year 1986-87 are given below :
(1) The standard deduction admissible in the case of salaried taxpayers has been raised to 30 per cent of the salary subject to a maximum of Rs. 10,000. This amendment is effective from April 1, 1987 and will accordingly apply in relation to the assessment year 1987-88 and subsequent years.
(2) With a view to providing relief to employees getting house rent allowance and removing the disparity in the matter of liability of income-tax as between an employee getting house rent allowance and another provided with rent-free accommodation by the employer, the ceiling limit of Rs. 400 per month has been removed.
4. The contents of this circular are not exhaustive and are issued with a view to helping the employers to understand the material provisions of the Income-tax Act which are applicable to deduction from ‘Salary’ income. Wherever there is any difference of opinion or doubt a reference should always be made to the provisions of the Income-tax Act and the relevant Finance Act, through which changes in the tax structure are made. Wherever necessary, the previous years’ circular may also be referred to.
Circular : No. 459 [F.No. 275/64/86-IT(B)], dated 16-6-1986, as amended by Circular No. 476, dated 11-12-1986.

What to watch

The rates and figures are for the financial year 1986-87 alone and carry no weight for any other year.
The raised standard deduction of 30 per cent up to Rs. 10,000 does not apply to 1986-87 income: it operates from 1 April 1987, that is from assessment year 1987-88.
The Board itself says the circular is not exhaustive and directs the reader to the Act and the Finance Act where there is doubt.
The text records that this circular was amended by Circular No. 476 dated 11 December 1986, which must be read with it.

Where you meet it

An employer's computation of monthly salary deduction for 1986-87, and any later short deduction proceeding arising from it.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 02 /2023 — Procedure format and standards for filling an application for grant of certificate under sub rule 4 and its proviso of r 27 September 2023
Circular No. 4/2023 — Clarification regarding deduction of TDS under section 192 read with sub-section (1A) of section 115BAC of the Income-ta 5 April 2023
Circular No. 24/2022 — Government of INDIA 7 December 2022
Circular No. 10/2022 — Circular regarding use of functionality under section 206AB and 206CCA of the income tax act 1961 17 May 2022
Circular No. 4/2022 — Government of INDiA 15 March 2022
Circular No. 11/2021 — Circular regarding use of functionality under Section 206AB and 206CCA of the Income-tax Act, 1961 21 June 2021

← Circular No. 458 · Circular No. 457 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.