INCOME TAX

Main changes relating to tax deduction/collection at source and ``advance tax''--Regarding

Circular No. 593

Dated 5/2/1991

Reference is invited to Board's Circular No. 583 [F.No.275/ 171/90-IT(B)] dated 23rd October, 1990 (see [1990] 186 ITR (St.) 154), wherein the increase in the rate of surcharge on income-tax in the case of domestic companies, as brought about by the Finance (Second Amendment) Ordinance, 1990, was intimated. The Taxation Laws (Amendment) Act, 1991 (hereinafter referred to as the "Amending Act, 1991"), which was passed by both the Houses of Parliament during the Winter Session and which has received the assent of the President on 15th January, 1991, has replaced the aforesaid Ordinance, and has also provided for certain other matters.

2. The provisions of the Amending Act, 1991, have already been explained in Board's Circular No.591 [F.No.133/495/90- TPL] dated 30th January, 1991. The main changes relating to tax deduction/collection at source and "advance tax" are as follows:--

A. Surcharge on income-tax deducted at source:

(i) In the case of a domestic company.--Where tax is to be deducted at source under the Income-tax Act, 1961, in accordance with the provisions of section 193 relating to interest on securities, section 194 relating to dividends, section 194A relating to interest other than interest on securities, section 194B relating to winnings from lottery or cross-word puzzles, section 194BB relating to winnings from horse races, section 194C relating to payments to contractors or sub-contractors, section 194D relating to insurance commission and section 195 relating to other sums, the amount of tax was earlier required to be increased by a surcharge of 8 per cent. The Amending Act, 1991, provides that while making deduction of tax under any of the provisions mentioned above, the amount of income-tax deducted shall be increased by a surcharge of 15 per cent., where such deduction is made on or after the 15th October, 1990.

(ii) In the case of a non-corporate resident assessee.--Where tax is to be deducted at source under the provisions of sections 192, 193, 194, 194A, 194B, 194BB, 194C, 194D and 195 of the Income-tax Act, the amount of tax was earlier required to be increased by a surcharge of 8 per cent. The Amending Act, 1991 provides that while making deduction of tax under any of the provisions mentioned above, the amount of income-tax shall be increased by a surcharge of 12 per cent., where such deduction is made on or after 15th January, 1991.

(iii) Adjustment of surcharge in cases of deduction at source from salaries.--The Amending Act, 1991, provides that the person responsible for making the payment referred to in sub-section (1) or sub-section (2) or sub-section (2A) or sub-section (2B) of section 192 of the Income-tax Act, relating to deduction at source from salary income shall, at the time of making such payment after 15th January, 1991, adjust any deficiency arising out of any previous deduction resulting on account of the increase in the rate of surcharge.

B. Surcharge on income-tax collected at source:

(i) In the case of a domestic company.--Where income-tax has to be collected at source in the case of a domestic company under the provisions of section 206C of the Income-tax Act, the amount of income-tax collected was earlier required to be increased by a surcharge at the rate of 8 per cent. The Amending Act, 1991, provides that income-tax collected at source under the aforesaid provision on or after 15th October, 1990, shall be increased by a surcharge of 15 per cent.

(ii) In the case of a non-corporate resident assessee.-- Where income-tax has to be collected at source in the case of a non-corporate resident assessee, the amount of income- tax collected was earlier required to be increased by a surcharge at the rate of 8 per cent. The Amending Act, 1991 provides that income-tax collected under the aforesaid provisions on or after 15th January, 1991, shall be increased by a surcharge of 12 per cent.

C. Surcharge on income-tax in the case of a domestic company and its payment in respect of instalments of "advance tax" :

A domestic company, having taxable income exceeding Rs.75,000, was earlier required to pay surcharge on income- tax at the rate of 8 per cent. but the Amending Act, 1991, has increased the rate of surcharge from 8 per cent. to 15 per cent. However, as the increase in the rate of surcharge was announced after the date of payment of the first instalment of "advance tax", the Amending Act, 1991 provides that the additional liability in respect of the instalment of "advance tax", payable on or before 15th September, 1990, arising as a result of increase in the rate of surcharge, shall be payable on or before 15th November, 1990. The subsequent two instalments of "advance tax", due on 15th December, 1990, and 15th March, 1991, respectively, will be inclusive of the surcharge at the enhanced rate.

D. Surcharge on income-tax in the case of non-corporate resident assessee and its payment in respect of instalments of "advance tax"

A non-corporate resident assessee, having taxable income exceeding Rs.75,000, was earlier required to pay surcharge on income-tax at the rate of 8 per cent. The Amending Act, 1991, has increased the rate of surcharge from 8 per cent. to 12 per cent. However, as the increase in the rate of surcharge was announced after the dates for payment of the first two instalments of "advance tax" the Amending Act, 1991, provides that the additional liability in respect of the instalments of "advance tax" payable on or before 15th September, 1990, and 15th December, 1990, arising as a result of increase in the rate of surcharge, shall be payable on or before 15th March, 1991. The instalment of "advance tax" due on 15th March, 1991, will be inclusive of the surcharge at the enhanced rate.

3. The Amending Act, 1991, has also amended section 32 of the Income-tax Act, 1961, to provide that in the case of all companies the deduction on account of depreciation in relation to any block of assets in respect of the previous year relevant to the assessment year commencing on 1st April, 1991, shall be restricted to seventy five per cent. of the amount calculated at the percentage, on the written down value of such block of assets, prescribed under the Income- tax Act, 1961, immediately before the commencement of the Amending Act, 1991. The extra advance tax arising on account of restriction of depreciation should be paid, as part of the instalment of "advance tax" payable on or before 15th March, 1991.

4. All Ministries, State Governments and other organisations are requested to inform such persons who may be working under them or who may be associated with them and who are responsible for deducting/collecting income-tax at source or for payment of "advance tax" under the Income-tax Act.

5. Hindi version will follow.

(Sd.) V.K. Bhatia,

Director (Budget),

Central Board of Direct Taxes.