Financial Year 2000-2001
Circular No. 4 was issued by the Central Board of Direct Taxes on 12 February 2001. Its subject is Financial Year 2000-2001.
Revises the surcharge that employers were to build into salary deduction for the financial year 2000-01 and opens a limited window for earthquake relief donations. Following the Taxation Laws (Amendment) Ordinance, 2001 an additional surcharge of two per cent was levied, so that after reducing the tax by the Chapter VIII-A rebate the surcharge becomes 12 per cent of the tax where total income exceeds Rs. 60,000 but not Rs. 1,50,000, and 17 per cent where it exceeds Rs. 1,50,000, for residents and non-residents alike. The same Ordinance gave a hundred per cent deduction under section 80G for donations to a fund set up by the State Government of Gujarat exclusively for earthquake victims, and to any trust, institution or fund for that relief between 26 January 2001 and 30 September 2001. Departing from the general position in paragraph 5.4(6) of Circular No. 798 dated 30 October 2000 that drawing and disbursing officers should not allow donations from salary income, the Board permits them, where the donation is deducted from salary and paid over in a consolidated sum by the employer, to allow the full hundred per cent while computing tax under section 192 for the financial year 2000-01.
The Ordinance of 3 February 2001 changed both the surcharge and the section 80G position mid-year, and employers needed to know how to work their salary deductions for the balance of the year.
FINANCIAL YEAR 2000-2001
962. Instructions for deduction of tax at source from salaries during the financial year 2000-2001 - Taxation Laws (Amendment) Ordinance, 2001
An additional surcharge of 2% has also been levied vide the Taxation Laws (Amendment) Ordinance, 2001 for the purpose of deduction of tax at source. In view of this, the amount of income-tax computed at the prescribed rates shall be reduced by the amount of rebate of income-tax calculated under Chapter VIII-A and the income-tax so reduced shall be increased by a surcharge :
(a) @ 12% of such income-tax where the total income exceeds sixty thousand rupees but does not exceed one lakh fifty thousand rupees;
(b) @ 17% of such income-tax where the total income exceeds one lakh fifty thousand rupees.
Surcharge is payable by both resident and non-resident assessees.
In view of this, Drawing and Disbursing Officers are required to take into account the revised rates of surcharge at 12% or 17%, as the case may be, while computing the tax deductible at source under section 192 of the Act during the financial year 2000-01.
2. Reference is invited to the Taxation Laws (Amendment) Ordinance, 2001, dated February 3, 2001 whereby it has been notified that the benefit of 100% deductions will be available to the assessees under section 80G of the Income-tax Act, 1961, in respect of donations made to :
(i) any fund set up by the State Government of Gujarat exclusive for providing reliefs to the victims of earthquake in Gujarat,
(ii) any trust, institution or fund during the period beginning on the 26th day of January, 2001 and ending on the 30th day of September 2001, for providing relief to the victims of earthquake in Gujarat.
3. In this regard attention is drawn to para 5.4(6) dealing with ‘Deductions under Chapter VI-A of the Act’ of Circular No. 798, dated October 30, 2000 on the above subject wherein it is clarified that no deduction should be allowed by the Drawing and Disbursing Officers from the salary income in respect of any donations made for charitable purposes. The tax relief on such donations as admissible under section 80G of the Act, will have to be claimed by the taxpayers in the return of income. However, DDOs on due verification may allow donations to the extent of 50% or 100% of the contribution, as the case may be, to such bodies as mentioned in the aforesaid Circular.
4. The matter relating to Deduction of tax at Source from Salaries has been considered by the Board in the light of the extension of benefit of 100% deduction under section 80G of the Act as discussed in para 2 above. It has been decided that in such cases, where the donations are being deducted out of the salaries payable to the employees by the employers themselves for making payment of the consolidated donations to any trust, institution or fund for providing relief to the victims of earthquake in Gujarat, the Drawing and Disbursing Officers may allow the benefit of 100% deduction on such donations in respect of such employees while computing the tax deductible at source under the provisions of section 192 of the Act during the financial year 2000-01. However, the employers must ensure that the payment of consolidated donations deducted out of the salaries payable to the employees during the current financial year is made latest by April 15, 2001 to approved trust, institution or fund for providing relief to the victims of earthquake in Gujarat and the fact of such payment should be clearly indicated in the receipt issued to the employees by the employers in this regard.
Circular : No. 4/2001, dated 12-2-2001.
In a short-deduction proceeding against an employer for the financial year 2000-01, or in reconciling a Form No. 16 of that year that shows a hundred per cent section 80G deduction against salary.
Source: the Income Tax Department’s own published text — its page for this instrument.
