INCOME TAX

Circular No. 49

Dated 16/11/1970

SECTION 288B - ROUNDING OFF OF TAX

Procedure to be followed in cases where separate amounts of tax payable or refundable under various minor heads include fractions of a rupee

CLARIFICATION 1

1. Section 288B, introduced by the Finance Act, 1966, provides for rounding off of the amount of tax (including tax deductible at source or payable in advance), interest, penalty, fine or any other sum payable and the amount of refund due under the provisions of the Act, to the nearest rupee and for this purpose where such amount contains a part of a rupee consisting of paise, then if such part is 50 paise or more, it is to be increased to one rupee and if such part is less than 50 paise, it is to be ignored. The scope and applicability of this section has already been explained in para 56 of Boards Circular No. 4-P, dated 21-7-1966.

2. Clarification has been sought regarding the procedure to be followed in cases where the separate amounts of tax payable or refundable under the various minor heads, e.g., income-tax, surcharge, etc., include fractions of a rupee. The Boards views in this matter are set forth in the following paragraphs.

3. Under the provisions of the Act, the rounding off is to be done in relation to total amount of tax finally payable or refundable, and not in relation to the amounts under the various minor heads, viz.,income-tax, surcharge, etc. If the total tax payable or refundable is comprised of amounts falling under different minor heads, the rounding off of these separate amounts should be done in such a manner that the aggregate amount of the tax as rounded off conforms to the sum of the separate amounts under the various minor heads as rounded off. This may be done notwithstanding that in some cases it may result in a rounded off amount under one or more heads not being strictly in conformity with the principle adumbrated in section 288B.

4. The following examples will make the position clear :

Tax payable/refund due under various heads		Amount of total tax payable/ refund due Rs.	Total tax/refund due after rounding off Rs.		Amounts as rounded off under separate heads Rs.
						Remarks Rs.
1		2	3		4	5
IT	SC		IT	SC
50.20	5.10	55.30	55.00	50.00	5.00	Rounding off of amount under minor heads in conformity with section 288B.
50.80	5.30	56.10	56.00	51.00	5.00	Rounding off of amount under minor heads in conformity with section 288B.
50.65	5.90	56.55	57.00	51.00	6.00	Rounding off of amount under minor heads in conformity with section 288B.
50.60	5.60	56.20	56.00	51.00	5.00	Rounding off of amount under surcharge has been made to adjust total amount to Rs. 56.
50.60	5.60	56.20	56.00	51.00	5.00	Rounding off of amount under surcharge has been made to adjust total amount to Rs. 56.
50.40	5.30	55.70	56.00	51.00	5.00	Rounding off of amount under income-tax has been made to arrive at the total demand of Rs. 56.

5. Tax payable/refund due will be shown in the assessment from before rounding off under the various heads, but the same will be shown in the Demand and Collection Register after rounding off, as illustrated above. The demand notice or refund order will be issued for the total tax payable/refundable as rounded off.

Letter: F. No. 12/40/66-IT(B), dated 25-1-1967.

CLARIFICATION 2

1. Attention is invited to the Boards Circular No. 4-P(LXXVI-61) of 1966, dated 21-7-1966 and Letter F. No. 12/40/66-IT(B), dated 25-1-1967 [Clarification 1] wherein instructions have been issued on the provisions of section 288B.

2. A copy of a letter No. Co. Dt. Admn. 45/65-66/2119, dated 4-10-1967 [printed here as Annex] received from the Reserve Bank of India, Bombay is printed below. The point raised in para 2 of the letter has been considered and the view expressed is correct. The rounding off process is applied when the tax is finally calculated and this is done at the time of deduction of tax at source by the person responsible for making such deduction. It is, therefore, no necessary to round off the figures again at the time of issue of sub-divided certificates, etc., which should be issued based on the actual figures of tax deduction.

3. The point mentioned in para 3 of the Reserve Banks letter is covered by the example in the Boards above-noted circular dated 25-1-1967 and the Banks presumption is confirmed.

Circular: No. 49 [F.No. 12/135/69-ITJ], dated 16-11-1970.

ANNEX - LETTER, DATED 4-10-1967 REFERRED TO IN CLARIFICATION

1. Please refer to your Circular letter F. No. 12/40/66-IT(B), dated 25-1-1967 on the above subject.

2. Our Public Debt Offices are often required to issue sub-divided income-tax deduction certificates in respect of deduction certificates already issued while paying interest on Government securities. This usually happens in the case of banks, who hold the securities on behalf of their customers and who do not disclose this fact while collecting interest. As, in terms of the instructions contained in your above circular, the rounding off of tax deducted from interest on Government securities is to be done in relation to the total tax deductible and the amounts under the minor heads, viz., income-tax, surcharge, etc., are to be rounded off in such a manner that their aggregate agrees with the total rounded off figure, once the tax is deducted and income-tax deduction certificate is issued, the issue of sub-divided deduction certificate, if requested by a bank or other holders of Government securities, present certain difficulties.

To cite an example, half-yearly interest on securities of 4 per cent Loan 1970 amounting to Rs. 2,000 is Rs. 40 and income-tax and surcharge chargeable thereon is Rs. 9 [Income-tax Rs. 7.20 + Surcharge Rs. 1.60 = Rs. 8.80, i.e., Rs. 9 (Rs. 7 + Rs. 2) after rounding off]. If the securities had actually belonged to two persons in amounts of Rs. 1,000 each the gross amount of interest payable to each would have been Rs. 20, and the amount of tax Rs. 4[Income-tax Rs. 3.60+Surcharge Re. 0.80 = Rs. 4.40, i.e., Rs. 4.00 (Rs. 3 + Re. 1) after rounding off]. Thus, for both holders, the amount of tax deducted would have been Rs. 8 as against Rs. 9 actually deducted. In some of other cases, splitting up of income-tax deduction certificate might reveal that deductible tax was more than the actually recovered on the basis that the holding belonged to one person. For example, half-yearly interest on securities of 5 per cent Loan 1982 for Rs. 2,000 would be Rs. 50 and the deduction of tax on the basis that they belong to only one person would be Rs. 11 [Income-tax Rs. 9 + Surcharcharge Rs. 2]. If the securities had actually belonged to two persons in equal shares deduction of tax for each (on gross amount of interest of Rs. 25) would have been Rs. 6 [Income-tax Rs. 4.50 + Re. 1.00 = Rs. 5.50, i.e., Rs. 6.50 (Rs. 5 + Re. 1) after rounding off] and total tax deduction for both the holder would have been Rs. 12 as against Rs. 11 actually deducted. We presume that such discrepancies may be ignored by the Public Debt Offices and that they may issue sub-divided deduction certificates on he basis of tax actually deducted and the amounts in such sub-divided certificates need not be in round figures. We shall be glad to have your concurrence to this proposal.

3. In the example cited above, where the income-tax is shown as Rs. 3.60 and surcharge Re. 0.80 both the broken amount exceed 50 paise and we have ignored the broken amount under income-tax and rounded off the surcharge to the next higher rupee. There may also be cases where the broken amount of surcharge is less than the broken amount of income-tax, and still it may be necessary to ignore the broken amount the income-tax and rounded off the surcharge to next higher rupee, as shown below :

Amount of interest: Rs. 13

Income-tax	Rs. 2.70
Surcharge	Re. 0.60
Total	Rs. 3.30
After rounding off	Rs. 3.00
Income-tax	Rs. 2.00
Surcharge	Re. 1.00

Further, where the total tax after rounding off amounts to Re. 1.00 only, surcharge need not be shown at all as in the example given below :

Amount of interest : Rs. 500	Re. 0.90
Income-tax	Re. 0.20
Surcharge	Re. 0.20
Total	Re. 1.10
After rounding off	Re. 1.00
Income-tax	Re. 1.00
Surcharge	Nil

We shall be glad if you will please examine the above proposals and let us have your instructions in the matter.