Saturday, January 16, 2010


on Saturday, January 16, 2010

Dear Friends ,

CBDT has issued complete a Guide to TDS on salaries with example vide circular 1/2010 on 11.01.2010. This circular has covered all the aspects of tax deduction (tds) on salary Income and Income tax calculation along with example.Further unlike other circular language of the circular is very simple and easy to Under stand.This Circular covers following topics.

1. General            03
2. Finance Act, 2009 3-5
3. Section 192 of Income-tax Act 1961 5-9
4. Persons responsible for deducting tax and their duties 9-14
5. Estimation of income under the head “Salaries” 14
5.1 Income chargeable under the head “Salaries” 14-20
5.2 Incomes not included in the head “Salaries” (Exemptions) 20-26
5.3 Deductions u/s 16 of the Act (Standard Deduction) 26
5.4 Deductions under Chapter VI-A of the Act 26-37
6. Calculation of Income-tax to be deducted 37
7.Clarification on TDS on arrears of salary 38
8. Miscellaneous 39-44

Further Income from self occupied House ,New pension scheme, deduction under section 80C like insurance premium ,tuition fees etc ,section 80D Medical Insurance ,80DD disability ,80G donation ,80GG rent paid where no hra received along with form 10BA,80U disability has been very well explained .
DDO responsibilities and what to do has also been explained ,Tax deposit Form ,procedure ,calculation of average tax ,tax rates,penalty on late deposit of tds ,filing of EDS return ,due date procedure ,notification has also been given in this circular.
And at the end Few example about how to calculate tax in detail has been explained .So in nutshell its must read circular for All The DDO and salaried Persons & pensioners.
Download Circular From Link Given below

TDS on salary with example of salary Income
Extracts of the circular is Given Below

  • 3.6 (i) Sub-section (2B) of section 192 enables a taxpayer to furnish particulars of income under any head other than "Salaries" and of any tax deducted at source thereon. Form no.12C, which was earlier prescribed for furnishing such particulars), has since been omitted from the Income Tax Rules. However, the particulars may now be furnished in a simple statement, which is properly verified by the taxpayer in the same manner as was required to be done in Form 12C.
  • (ii) Such income should not be a loss under any such head other than the loss under the head "Income from House Property" for the same financial year. The person responsible for making payment (DDO) shall take such other income and tax, if any, deducted at source from such income, and the loss, if any, under the head "Income from House Property" into account for the purpose of computing tax deductible under section 192 of the Income-tax Act. However, this sub-section shall not in any case have the effect of reducing the tax deductible (except where the loss under the head "Income from House Property" has been taken into account) from income under the head "Salaries" below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account'. In other words, the DDO can take into account any loss (negative income)only under the head “income from House Property” and no other head for working out the amount of total tax to be deducted. While taking into account the loss from House Property, the DDO shall ensure that the assessee files the declaration referred to above and encloses therewith a computation of such loss from House Property.
  • (iii) Sub-section (2C) lays down that a person responsible for paying any income chargeable under the head “salaries” shall Furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in form no. 12BA. (Annexure-II). Form no. 12BA alongwith form no. 16, as issued by the employer, are required to be produced on demand before the Assessing Officer in terms of Section 139C of the Income Tax Act.

Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property

  • 3.7(i) For the purpose of computing income / loss under the head `Income from House Property' in respect of a self-occupied residential house, a normal deduction of Rs.30,000/- is allowable in respect of interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs.1,50,000/- is available if such loan has been taken on or after 1.4.1999 for constructing or acquiring the residential house and the construction or acquisition of the residential unit out of such loan has been completed within three years from the end of the financial year in which capital was borrowed. Such higher deduction is not allowable in respect of interest on capital borrowed for the purposes of repairs or renovation of an existing residential house. To claim the higher deduction in respect of interest upto Rs.1,50,000/-,the employee should furnish a certificate from the person to whom any interest is payable on the capital borrowed,specifying the amount of interest payable by such employee for the purpose of construction or acquisition of the residential house or for conversion of a part or whole of the capital borrowed, which remains to be repaid as a new loan.
  • 3.7(ii)The essential conditions for availing higher deduction of interest of Rs.1,50,000/- in respect of a self-occupied residential house are that the amount of capital must have been borrowed on or after 01.4.1999 and the acquisition or construction of residential house must have been completed within three years from the end of the financial year in which capital was borrowed. There is no stipulation regarding the date of commencement of construction. Consequently,the construction of the residential house could have commenced before 01.4.1999 but, as long as its construction/ acquisition is completed within three years, from the end of the financial year in which capital was borrowed the higher deduction would be available in respect of the capital borrowed after 1.4.1999.It may also be noted that there is no stipulation regarding the construction/ acquisition of the residential unit being entirely financed by capital borrowed on or after 01.4.1999.The loan taken prior to 01.4.1999 will carry deduction of interest up to Rs.30,000/ only. However, in any case the total amount of deduction of interest on borrowed capital will not exceed Rs.1,50,000/- in a year.
Download Complete circular 1/2010 TDS on salary with example of salary Income