Circular No. 606

622. Computation of surcharge on the amount of income-tax where assessee is entitled to rebate under Chapter VIII

What this is

Circular No. 606 was issued by the Central Board of Direct Taxes on 20 June 1991. Its subject is 622. Computation of surcharge on the amount of income-tax where assessee is entitled to rebate under Chapter VIII.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Answers the order of computation between rebate and surcharge for assessment year 1991-92, where total income exceeds Rs. 75,000. Surcharge is to be worked out on the income-tax as reduced by the Chapter VIII rebate, not on the gross tax before rebate. So the rebate on life insurance premia, provident fund contributions and investment in certain new shares or units comes off first, and surcharge is charged on what is left.

Why it was issued

The Board had received queries from assessees preparing returns for assessment year 1991-92 on whether surcharge went on the tax before or after the Chapter VIII rebate.

Who it reaches

Individuals with total income above Rs. 75,000 for assessment year 1991-92
Assessees claiming Chapter VIII rebate on insurance, provident fund or new shares or units
Assessing Officers and return preparers computing surcharge for that year

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.

622. Computation of surcharge on the amount of income-tax where assessee is entitled to rebate under Chapter VIII
1. Central Board of Direct Taxes have received queries from the assessees, who are to file their returns of income for the assessment year 1991-92, regarding computation of surcharge on income-tax where the total income of a person exceeds Rs. 75,000. The queries are as to whether surcharge is to be computed on the amount of income-tax before or after allowing tax rebate under Chapter VIII of the Income-tax Act, i.e., tax rebate on life insurance premia, contributions to provident fund and investment in certain new shares or units, etc.
2. This is to clarify that surcharge is to be computed on the amount of income-tax as reduced by the tax rebate calculated under Chapter VIII of the Act.
Circular : No. 606, dated 20-6-1991.

What to watch

The Rs. 75,000 figure and the surcharge itself belong to the rate schedule for assessment year 1991-92.
Chapter VIII rebate has since been replaced by the deduction scheme in Chapter VI-A, so the sequence stated here is now of historical use.
The circular settles only the order of computation and says nothing about eligibility for the rebate itself.

Where you meet it

On a rectification or intimation dispute for assessment year 1991-92 where the Department computed surcharge on the pre-rebate tax.

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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.