1184. Clarifications regarding use of Form No. 16 for pensioners where pensioners are drawing their pensions through banks
Circular No. 761 was issued by the Central Board of Direct Taxes on 13 January 1998. Its subject is 1184. Clarifications regarding use of Form No. 16 for pensioners where pensioners are drawing their pensions through banks.
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.
Settles that a bank paying pension must give the pensioner a certificate in Form No. 16 for the tax it has deducted. Three grounds of refusal are rejected. Section 17(1)(ii) makes pension part of salary, so the form is the right one. Once tax has been deducted under section 192 the deductor is bound by section 203 to issue the certificate in Form No. 16, and no employer and employee relationship is needed for that. And the certificate cannot be refused because the deductor does not know what other income the pensioner has.
The Board's attention was drawn to the difficulties of pensioners drawing pension through banks, who were being refused the certificate on the footing that there was no employment relationship, that Form No. 16 was for salary and not pension, or that the bank did not know the pensioner's other income.
1184. Clarifications regarding use of Form No. 16 for pensioners where pensioners are drawing their pensions through banks
1. The attention of the Board has been drawn to certain difficulties being faced by pensioners drawing their pensions through banks where the tax deduction at source certificate in the prescribed Form No. 16 is some-time denied to them on the ground that no employee-employer relationship exists between the banks and the pensioner. At times, objections have also been raised by the banks on the premise that Form No. 16 relates to deductions from salaries and not from pensions. In other cases, the certificates have been denied on the ground that the bank was not aware of any other income which the pensioner may have had.
2. The matter has been considered by the Board. It is hereby clarified that :—
(a) as per section 17(1)(ii) of the Income-tax Act, 1961, the term ‘salary’ includes pension;
(b) once tax has been deducted under section 192 of the Income-tax Act, 1961, the tax-deductor is bound by section 203 to issue the certificate of tax deducted in Form 16. No employee-employer relationship is necessary for this purpose;
(c) the certificate in Form No. 16 cannot be denied on the ground that the tax deductor is unaware of the payees’ other income.
3. These clarifications may be brought to the notice of all concerned, especially the banks in your region.
Circular : No. 761, dated 13-1-1998.
A pensioner's complaint that his bank will not issue Form No. 16, and the credit for tax deducted that turns on it.
Forms it names. Form No. 16
Source: the Income Tax Department’s own published text — its page for this instrument.
