Government of INDIA
Circular No. 1/2017 was issued by the Central Board of Direct Taxes on 2 January 2017. Its subject is Government of INDIA.
This is the Board’s annual salary-TDS circular. It restates the law on deduction from salary for one financial year, with the year’s rates and the year’s forms. Use the circular for the year in question, never a later one.
The annual circular on deduction of tax from salaries under section 192 for financial year 2016-17, on the Finance Act, 2016 rates, taking over from Circular No. 20/2015 dated 2 December 2015 which covered financial year 2015-16. The normal rate table is nil up to Rs. 2,50,000, 10 per cent of the excess over Rs. 2,50,000 up to Rs. 5,00,000, Rs. 25,000 plus 20 per cent of the excess over Rs. 5,00,000 up to Rs. 10,00,000, and Rs. 1,25,000 plus 30 per cent of the excess over Rs. 10,00,000, with surcharge, education cess and secondary and higher education cess dealt with separately. The index shows the rest: the method of computing tax under section 192, tax on non-monetary perquisites borne by the employer, salary from more than one employer, relief for arrears or advance salary, the employee's other income and house property income, adjustment for excess or short deduction, the duties of the person responsible under section 204, deposit and due dates, interest, fee, penalty and prosecution, the certificate under section 203, quoting of permanent account number and tax deduction account number, section 206AA, quarterly statements under section 200(3), pension and non-residents, the computation of salary income, exemptions, section 16 deductions and Chapter VI-A, the section 87A rebate of Rs. 5,000 for total income up to Rs. 5 lakh, tax deduction on accumulated provident fund and superannuation balances, and the duty of drawing and disbursing officers to satisfy themselves of the genuineness of a claim. Annexures carry illustrations, Form No. 12BA, Form No. 12BB, the quarterly statement and Form No. 24G procedures and Form No. 10BA.
The Board's yearly intimation of the salary deduction rates and its explanation of the related provisions of the Act and the Income-tax Rules, 1962.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF DIRECT TAXES
DEDUCTION OF TAX AT SOURCEINCOME-TAX DEDUCTION FROM SALARIES
UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961
DURING THE FINANCIAL YEAR 2016-17
CIRCULAR NO. 01/2017
NEW DELHI, the 2nd January, 2017INDEX
Para
No.
Page No.
1 GENERAL 1
2 RATES OF INCOME-TAX AS PER FINANCE ACT, 2013 1
2.1 Rates of tax 1
2.2 Surcharge on Income tax 2
2.3.1 Education Cess on Income tax 2
2.3.2 Secondary and Higher Education Cess on Income-tax 2
3 BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM
"SALARIES".
2
3.1 Method of Tax Calculation 2
3.2 Payment of Tax on Non monetary Perquisites by Employer 2
3.2.1 Computation of Average Income Tax 2
3.3 Salary From More Than One Employer 3
3.4 Relief When Salary Paid in Arrear or Advance 3
3.5 Information regarding Income under any Other head 3
3.6 Computation of Income under the head "Income from house property' 3
3.7 Adjustment for Excess or Shortfall of Deduction 4
3.8 Salary Paid in Foreign Currency 4
4 PERSONS RESPONSIBLE FOR DEDUCTION TAX AND THEIR DUTIES 4
4.1 Stipulation of section 204 of the Act 4
4.2 Tax determined to be deducted from Salary u/s 192 4
4.3 Deduction of Tax at Lower Rate 5
4.4 Deposit of Tax Deducted 5
4.4.1 Due dates for payment of TDS 5
4.4.2 Mode of payment of TDS 5
4.5 Interest, Fee, Penalty & Prosecution for Failure to Deposit Tax Deducted: 6
4.6 Furnishing of Certificate for Tax Deducted (Section 203) 6
4.7 Mandatory Quoting of PAN and TAN 8
4.8 Compulsory Requirement to furnish PAN by employee (Section 206AA) 8
4.9 Statement of Deduction of tax under of section 200(3) [Quarterly
Statement of TDS]
9
4.10 TDS on Income from Pension 10
Para
No.
Page No.
4.11 Matters pertaining to the TDS made in case of Non Resident 10
5 COMPUTATION OF INCOME UNDER THE HEAD "SALARIES" 10
5.1 Income chargeable under the head "Salaries": 10
5.2 Definition of "Salary", "perquisite" and "profit in lieu of salary" (Section
17)
10
5.3 Income not included under the Head "Salaries" (Exemptions) 16
5.4 Deductions u/s 16 of the Act from the Income from Salaries 19
5.5 Deductions under Chapter VI-A of the Act 19
6 REBATE OF RS.5000 FOR INDIVIDUAL HAVING TOTAL INCOME
UPTO RS. 5 LAKHS (SECTION 87A)
27
7 TDS ON PAYMENT OF ACCUMULATED BALANCE UNDER
RECOGNISED PROVIDENT FUND AND CONTRIBUTION FROM
APPROVED SUPERANNUATION FUND
27
8 DDOS TO SATISFY THEMSELVES OF THE GENUINENESS OF CLAIM 28
9 CALCULATION OF INCOME-TAX TO BE DEDUCTED 28
10 MISCELLANEOUS 28
ANNEXURES
Anne
xure
No
Descriptions Page No.
I SOME ILLUSTRATIONS 31-41
II FORM NO 12BA 42-43
IIa FORM NO 12BB 44-45
III REVISED PROCEDURE FOR FURNISHING QTLY E-TDS/TCS
STATEMENT BY DEDUCTORS/COLLECTORS
46
IV THE PROCEDURE OF FURNISHING FORM 24G 47-52
V PERSON RESPONSIBLE FOR FILLING FORM 24G IN CASE OF STATE
GOVT DEPARTMENTS/CENTRAL GOVT DEPARTMENTS
53
VI PROCEDURE OF PREPARATION OF QUARTERLY STATEMENT OF
DEDUCTION OF TAX u/s 200 (3)
54-55
VII DEPTT. OF ECO. AFFAIRS NOTIFICATION DATED 22.12.2003 56
VIII BOARD'S NOTIFICATION DATED 24.11.2000 57
IX BOARD'S NOTIFICATION DATED 29.01.2001 58
X FORM NO. 10 BA 59CIRCULAR NO : 01/2017
F.No. 275/192/2016-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
******
North Block, New Delhi
Dated the 2nd January, 2017SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2016-17 UNDER
SECTION 192 OF THE INCOME-TAX ACT, 1961.
*****Reference is invited to Circular No.20/2015 dated 02.12.2015 whereby the rates of deduction of income-tax from
the payment of income under the head "Salaries" under Section 192 of the Income-tax Act, 1961 (hereinafter 'the Act'), during
the financial year 2015-16, were intimated. The present Circular contains the rates of deduction of income-tax from the
payment of income chargeable under the head "Salaries" during the financial year 2016-17 and explains certain related
provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms and Notifications are
available at the website of the Income Tax Department- www.incometaxindia.gov.in.2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2016:
As per the Finance Act, 2016, income-tax is required to be deducted under Section 192 of the Act from income chargeable under
the head "Salaries" for the financial year 2016-17 (i.e. Assessment Year 2017-18) at the following rates:2.1 Rates of tax
A. Normal Rates of tax:
Sl
N
o
Total Income Rate of tax
1 Where the total income does not exceed Rs.
2,50,000/-.
Nil
2 Where the total income exceeds Rs. 2,50,000/-
but does not exceed Rs. 5,00,000/-.
10 per cent of the amount by which the total income exceeds Rs.
2,50,000/-
3 Where the total income exceeds Rs. 5,00,000/- but
does not exceed Rs. 10,00,000/-.
Rs. 25,000/- plus 20 per cent of the amount by which the total
income exceeds Rs. 5,00,000/-.
4 Where the total income exceeds Rs. 10,00,000/-. Rs. 1,25,000/- plus 30 per cent of the amount by which the total
income exceeds Rs. 10,00,000/-B. Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less than eighty years at
any time during the financial year:Sl
No
Total Income Rate of tax
1 Where the total income does not exceed
Rs. 3,00,000/-
Nil
2 Where the total income exceeds Rs.
3,00,000 but does not exceed Rs.
5,00,000/-
10 per cent of the amount by which the total income exceeds Rs.
3,00,000/-
3 Where the total income exceeds Rs.
5,00,000/- but does not exceed Rs.
10,00,000/-
Rs. 20,000/- plus 20 per cent of the amount by which the total income
exceeds Rs. 5,00,000/-.
4 Where the total income exceeds Rs.
10,00,000/-
Rs. 1,20,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-C. In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the
financial year:Sl
No
Total Income Rate of tax
1 Where the total income does not exceed
Rs. 5,00,000/-
Nil
2 Where the total income exceeds Rs.
5,00,000 but does not exceed Rs.
10,00,000/-
20 per cent of the amount by which the total income exceeds Rs.
5,00,000/-
4 Where the total income exceeds Rs.
10,00,000/-
Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-2.2 Surcharge on Income tax:
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section
111A or section 112 of the Income-tax Act, shall, in the case of every individual or Hindu undivided family or association of
persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of
clause (31) of section 2 of the Income-tax Act, having a total income exceeding one crore rupees, be increased by a surcharge for
the purpose of the Union calculated at the rate of fifteen per cent of such income-tax:Provided that in the case of persons mentioned above having total income exceeding one crore rupees, the total amount payable as
income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore
rupees by more than the amount of income that exceeds one crore rupees.2.3.1 Education Cess on Income tax:
The amount of income-tax including the surcharge if any, shall be increased by Education Cess on Income Tax at the rate of two
percent of the income-tax.2.3.2 Secondary and Higher Education Cess on Income-tax:
An additional education cess is chargeable at the rate of one percent of income-tax including the surcharge if any, but not
including the Education Cess on income tax as in 2.3.1.3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM
"SALARIES":3.1 Method of Tax Calculation:
Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income-tax on the
estimated income of the assessee under the head "Salaries" for the financial year 2016-17. The income-tax is required to be
calculated on the basis of the rates given above, subject to the provisions related to requirement to furnish PAN as per sec
206AA of the Act, and shall be deducted at the time of each payment. No tax, however, will be required to be deducted at source
in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs. 2,50,000/-
or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical illustrations of
computation of tax are given at Annexure-I).3.2 Payment of Tax on Perquisites by Employer:
An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may,
at its option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee.
However, the employer will have to pay the tax at the time when such tax was otherwise deductible i.e. at the time of payment
of income chargeable under the head "salaries" to the employee.3.2.1 Computation of Average Income Tax:
For the purpose of making the payment of tax mentioned in para 3.2 above, tax is to be determined at the average of
income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head
"salaries", including the value of perquisites for which tax has been paid by the employer himself.3.3 Salary From More Than One Employer:
Section 192(2) deals with situations where an individual is working under more than one employer or has changed from one
employer to another. It provides for deduction of tax at source by such employer (as the tax payer may choose) from the
aggregate salary of the employee, who is or has been in receipt of salary from more than one employer. The employee is now
required to furnish to the present/chosen employer details of the income under the head "Salaries" due or received from the
former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other
employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including
salary received from the former or other employer).3.4 Relief When Salary Paid in Arrear or Advance:
3.4.1 Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative
society, local authority, university, institution, association or body is entitled to the relief under Section 89(1) he may furnish to
the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E duly verified by
him, and thereupon the person responsible, as aforesaid, shall compute the relief on the basis of such particulars and take the
same into account in making the deduction under Para(3.1) above.Here "university" means a university established or incorporated by or under a Central, State or Provincial Act, and includes an
institution declared under Section 3 of the University Grants Commission Act, 1956 to be a university for the purpose of that Act.3.4.2 With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or
receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of
voluntary retirement or in the case of a public sector company referred in section 10(10C)(i) (read with Rule 2BA), a scheme of
voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination
of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other,
assessment year.3.5 Information regarding Income under any other head:
(i) Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than "Salaries" ( not being a loss
under any such head other than the loss under the head " Income from house property") received by the taxpayer for the same
financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is
properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2) of the Rules and shall be annexed to
the simple statement. The form of verification is reproduced as under:I, …………………. (name of the assessee), do declare that what is stated above is true to the best of my
information and belief.It is reiterated that the DDO can take into account any loss only under the head "Income from house property". Loss under any
other head cannot be considered by the DDO for calculating the amount of tax to be deducted.3.6 Computation of income under the head " Income from house property":
While taking into account the loss from House Property, the DDO shall ensure that the employee files the declaration referred to
above and encloses therewith a computation of such loss from house property. Following details shall be obtained and kept by the
employer in respect of loss claimed under the head " Income from house property" separately for each house property:a) Gross annual rent/value
b) Municipal Taxes paid, if any
c) Deduction claimed for interest paid, if any
d) Other deductions claimed
e) Address of the propertyThe DDO shall also ensure furnishing of the evidence or particulars in Form No. 12BB in respect of deduction of interest
as specified in Rule 26C read with section 192 (2D).3.6.1 Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House
Property [Section 24(b)]:Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-
(i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for
his own residence. However, if it is actually not occupied by the employee in view of his place of the employment
being at other place, his residence in that other place should not be in a building belonging to him.(ii) the quantum of deduction allowed as per table below:
Sl
No
Purpose of borrowing capital Date of borrowing
capital
Maximum Deduction allowable
1 Repair or renewal or reconstruction of the
house
Any time Rs. 30,000/-
2 Acquisition or construction of the house Before 01.04.1999 Rs. 30,000/-
3 Acquisition or construction of the house On or after 01.04.1999 Rs. 1,50,000/-
(upto AY 2014-15)
Rs. 2,00,000/-
(w. e. f. AY 2015-16)In case of Serial No. 3 above
(a) The acquisition or construction of the house should be completed within3 years from the end of the FY in which
the capital was borrowed. Hence, it is necessary for the DDO to have the completion certificate of the house
property against which deduction is claimed either from the builder or through self-declaration from the employee.(b) Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as
reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal
installments for the FY in question and subsequent four FYs.(c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the
borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan,
then the certificate should also show the details of Principal and Interest of the loan so repaid.
In a section 201 proceeding on short deduction from salary for financial year 2016-17, and when reconciling an employee's Form No. 16 with the return for assessment year 2017-18.
Forms it names. Form No. 10, Form No. 10E, Form No. 12BA, Form No. 12BB
Rules it names. Rule 26B, 26C, 2BA of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
It mentions. Circular No. 01/2017, Circular No. 20/2015
Source: the Income Tax Department’s own published text — its page for this instrument.
