ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE :: KADAPA Circular .No.28-2006-BC-STF ...

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ANDHRA PRAGATHI GRAMEENA BANK
HEAD OFFICE :: KADAPA

Circular .No.28-2006-BC-STF Date: 14-7-2006

INCOME TAX – DEDUCTION OF TAX AT SOURCE ON SALARIES -
FINANCIAL YEAR 2006-07

Finance Act 2005 had brought in major changes in the computation of income tax liability for
salaried class from F.Y 2005-06. Besides raising the basic exemption limit from Rs.50,000/- to
Rs.1,00,000/- from the F.Y 2005-06, deduction for eligible investments upto Rs.1 lac has been
provided by reintroduction of section 80C. The Finance Act 2006 has made only very few changes
as noted below.
1. Investments in term deposits from 01.04.2006 with a Scheduled Bank for a fixed period of not less
than 5 years will also qualify for deduction u/s 80C subject to overall ceiling of Rs.1.00 lack.

2. Deduction u/s 80CCC – Finance Act 2006 has enhanced the eligible amount of contribution to
certain Pension Funds such as Annuity Plan of LIC- Jeevan Suraksha etc. for the F.Y 2006-07 up to a
maximum amount of Rs.1.00 lack. However, aggregate limit for deduction u/s 80CCE (put together
u/s 80C and 80CCC ) is kept at Rs.1.00 lack only.

The salient features applicable for the Financial Year 2006-2007 are given in Annexure - A. List of
approved hospitals, various formats/requirements for claiming eligible deductions u/s 80DD, 80DDB,
80U etc., are furnished in Annexures B to J . A chart on TDS related matters is furnished in
Annexure -K. Perquisites on motor cars will not arise during the current financial year. However,
perquisite value on interest free loans/concessional loans is to be computed as CBDT has prescribed
the rate charged by State Bank of India for the general public as the applicable rate of interest for the
valuation of the perquisites.

Under Section 192 of the Income Tax Act, TDS is to be made from “salary” payable to an employee
if the annual estimated income under the head exceeds the basic exemption limit of Rs.1,00,000/-(not
liable for tax). This obligation to deduct the tax at source at the applicable rates lies on the employer
or the person responsible for payment of such salary.

The calculation and deduction of Income Tax at source is being dealt differently at three erstwhile
RRBs i.e. RGB, SAGB & PGB. RGB and PGB have centralised the system and were deducting
Income Tax at source at Head Office level for all staff members of respective Banks. Whereas at
SAGB it was delegated to individual Branches/Offices.

In view of Amalgamation of 3 RRBs it has been decided to delegate the calculation, deduction
and remitting of Income Tax on salaries to Govt. and e-filing of 24Q Returns to individual
Branches/Offices with effect from the month of July 2006.

Need for obtaining fresh TAN in view of change in the name of the Bank by each branch/Office:

TAN : All Branches/Offices are now immediately required to obtain fresh TAN as there is change
in the name of the Bank. The erstwhile branches / Offices of RGB, SAGB and PGB shall take the
guidance of Head Office / RO Anantapur / RO Nellore respectively in obtaining fresh TANs.

Every Branch/Office deducting TDS should have a Tax Deduction Account Number (TAN) and
quoting TAN in e-TDS returns is mandatory. Branches/Offices shall obtain TAN afresh by applying
in Form No.49B immediately along with requisite payment to the TIN-FCs. Failure to obtain TAN
will attract penalty of Rs.5,000/-. Form No.49B is available with Income-Tax Department/TIN-FCs.

Contd…….2
Circular No.28-2006-BC-STF Dt. 14.7.2006

-2-

Accordingly all Branches/Offices are here by advised to deduct Income Tax from the salaries of staff
as they are salary disbursing authorities from the month of July 2006 and comply all provisions of
Income Tax Act 1961.

The particulars of Income Tax deducted at source and remitted to Govt. during the months from April
06 to June 06 pertaining to the Financial Year 2006-07 of the erstwhile RGB staff will be
communicated by Head Office to the concerned branches/offices. In the case of erstwhile PGB Staff ,
R.O. Nellore will be communicating to the concerned Branches/Offices. In the case of erstwhile
SAGB Staff members the concerned Branches/Offices are already having the particulars with them

The individual Assesse staff members are required to submit the proposed or already made
investment particulars for the Current Financial Year in the Proforma given in Annexure-P
immediately ie., before the disbursement of July 2006 salaries to the concerned Branch/Office
besides the declaration for HRA exemption, if any, as per proforma given in Annexure-L. In case of
non submission of above investment particulars by the staff member to the concerned Branch/Office,
it will be treated that the concerned staff member has no proposal of making any investments for
exemption etc. and tax will be calculated by the Branches / Offices on the basis of the data available
with Branch / Office and 1/9 th of the Tax will be deducted from the month of July 2006 salaries on
wards.

All Assessee staff members are advised to note that the system of obtaining the information
regarding the investments already made/proposed is intended to give an opportunity to the Assessee
staff members to phase out their investments during the financial year and not intended for
postponing of tax till the end of the Financial Year.

All Branches / Offices shall calculate taxable income and arrive tax liability of each assassee in the
proforma given in Annexure-R. The Branches/ Offices are advised to comply with the Income Tax
Provisions strictly.

The concerned Assessee staff member/Salary disbursing authority will be held responsible for
any interest, penalty levied by Income Tax department for non compliance of statutory
provisions.

All Assessee staff members seeking exemption of tax payment, if any, are advised to submit the
investment particulars as per Annexure – P to concerned Branch / Office supported by proof of
investments i.e. Xerox copies of NSC VIII Issue Certificates, Premium paid receipts, Receipts of
payments made into Mutual Funds/Pension Funds, PPF Pass Book copy, HRA Declaration as per
Annexure L, Loss from House Property declaration/statement as per Annexure –M, Certificates in
the proforma given in Annexure-N towards the payment of Principal and Interest issued by concerned
Branch of our Bank/ Coop. Credit Society Ltd./other Bank/Financial institutions for the housing loan,
additional housing loan, DL New etc. investments made during the financial year 2006-07.

All Assessee staff members are also advised to submit the value of perquisites in respect of loans
and advances including Festival Advance as per Annexure – O to concerned Branch / Office.
Otherwise the concerned Branch / Office will calculate the Income Tax based on information
available as on 10.2.07 with them in respect of staff members working in concerned Branch /
Office.

Contd…….3
Circular No.28-2006-BC-STF Dt. 14.7.2006

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All Branches/Offices may please note that the Circular issued by the Bank on the income tax should
not be treated as comprehensive guidelines applicable for all times. The guidelines now
communicated are as per latest information available with us to help the employees and
Branches/Offices to understand the relevant provisions and where there is a difference of opinion a
reference should always be made to the provisions of Income Tax Act 1961 and relevant Finance Act
under which the changes in the tax structure are made.
Clarifications required, if any, to this Circular, may be sought from Personnel Department, Head
Office.

This circular shall be circulated among all staff working at Branch/Office against their
acknowledgement.

Clarification, if any, to this Circular may be sought from Personnel Department, Head Office, Kadapa.

(M. OBULESU)
CHAIRMAN

Encls: Annexures:-

A –--- Salient features of Finance Act-2005
B –--- List of Hospitals recognised under Central Govt. Health Scheme
C ---- Reimbursement for treatment of specified diseases not to be treated as perquisites .
D ---- Form No. 12BA Statement showing particulars of perquisites and other fringe benefits.
E ----- Claiming deduction u/s 80DD and 80U – Medical treatment for self for specified diseases
(80DD) and physical disability (80U).
F----- Certificate for the persons with disabilities.
G----- Certificate of Mental Retardation for Govt. benefits
H----- Declaration of the employee about Self/Dependent disability of permanent nature (u/s
80DD/80DDB).
I----- Prescribed medical authority to certify the specified nature of disease/ailment under
Rule-11 DD
J----- Certificate of prescribed authority for the purpose of Section 80 DDB (medical treatment to
self/dependent in respect of specified diseases).
K----- TDS chart for F.Y. 2005-06
L----- Declaration for claiming HRA exemption.
M----- Declaration/Statement under Rule 26B (1) and (2) for arriving Loss from House Property
N----- Certificate to be issued by the Branch with regard to the payment of principal and interest
pertaining to Housing Loan, Additional Housing Loan, DL (New) Housing purpose including
repairs and renovations.
O----- Calculation Sheet for arriving perquisite value on interest free (or) concessional loans.
P------ Details of proposals/Proof of investment made for claiming exemption/deduction for tax
calculation for the Financial Year 2005-06.
Q----- Form No-10E for claiming relief U/S 89 (1) on salary arrears.
R----- Proforma for calculation of taxable income and tax.

***
Annexure-A to Circular No.28-2006-BC-STF Dt. 14.7.2006

ANNEXURE-A
INCOME TAX ON SALARIES– F.Y 2006-2007 – SALIENT FEATURES

Basic Exemption limit is Rs.1,00,000/- for Individuals. Further, for women employees, basic
exemption limit is Rs.1,35,000/- and for Senior Citizens of 65 years and above it is Rs.1,85,000/-.

Total Taxable Income Range Rates of Income-tax

Upto Rs.1,00,000/- .. .. .. .. .. .. .. Nil

Rs.1,00,000/- to Rs.1,50,000/- .. @ 10% of the amount by which the total income exceeds
Rs.1,00,000/-.

Rs.1,50,000/- to Rs.2,50,000/- ... Rs.5000/- + 20% of the amount by which total income exceeds
Rs.1,50,000/-

Above Rs.2,50,000/- … … Rs.25,000/- + 30% of the amount by which total income exceeds
Rs.2,50,000/-

SURCHARGE: Surcharge is not applicable for individuals, HUF, Association of persons and Body
of Individuals for taxable income upto Rs.10,00,000/-. 10% surcharge is applicable where income
exceeds Rs.10,00,000/-. However, surcharge @ 10% is applicable for Firms, Companies etc. on
various payments as detailed in the Table at the end.

EDUCATION CESS: 2% Education Cess is applicable on all taxes including Income Tax.
Accordingly, Net Tax Payable on salaries is to be increased by Education Cess @ 2% for TDS
purpose.

1. DEDUCTION FOR PROFESSIONAL TAX:

1.1 U/s 16 (1) (iii) –Professional Tax: Professional Tax paid during the financial year is to be
deducted fully.

1.2 Standard deduction is withdrawn w.e.f. 01.04.2005.

2. VALUATION OF PERQUISITE:

For the purpose of computing the income chargeable under the head “Salary”, Rule 3 of the Income
Tax Rules 1962 stipulates the valuation of perquisites provided by the employer directly or indirectly
to the employee or to any member of his household by reason of his employment in respect of the
following.

a. Rent free leased unfurnished/furnished accommodation.
b. Services of Sweeper, Gardner, Watchman or Personal Attendant.
c. Supply of gas, electric energy or water for household consumption.
d. Free or concessional educational facilities to members of employee’s household.
e. Free Meals
f. Interest Free or Concessional Loans
g. Gifts by Employer
h. Expenditure incurred on Credit Card
i. Expenditure incurred in a Club
j. Transfer of Movable Assets to the employees

NOTE: However perquisites detailed above will not arise for our employees except in the cases
detailed in 2.04 onwards.
Annexure-A to Circular No.28-2006-BC-STF Dt. 14.7.2006

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2.1 For the purposes of valuation of perquisites as per Rule 3 of Income Tax Rules, the explanations
given are:

A. “Salary” includes the pay, allowances, bonus or commission payable monthly or otherwise or any
monetary payment, by whatever name called from one or more employers, as the case may be, but
does not include the following, Viz;

(a) dearness allowance or dearness pay unless it enters into the computation or superannuation or
retirement benefits of the employee concerned;
(b) employer’s contribution to the provident fund account of the employee;
(c) allowances which are exempted from payment of tax
(d) the value of perquisites specified in sub-section (2) of section 17 of the Income Tax Act; Eg.
LFC, reimbursement of medical/hospitalisation expenses.
(e) any payment or expenditure specifically excluded under proviso to sub-clause (iii) of clause
(2) or proviso to clause (2) of section 17; Eg. Allotment of Shares, Debentures or Warrants
under Employees’ Stock Option Plan.

B. “member of household” shall include
(a) spouse
(b) children and their spouses
(c) parents
(d) servants and dependants

C. Rent paid by the employee means Standard Rent/DTQ recovered towards quarters and furniture
(if any).

D. “Maximum outstanding monthly balance” means the aggregate outstanding balance for each loan
as on the last day of each month.

2.2 Perquisites On Accommodation Provided:

a) Where the accommodation is owned by the Employer:

i) 20% (earlier 10%) of salary in Cities having population exceeding 4 lakhs as per 2001 census.
ii) 15% (earlier 7.5%) of salary in other Cities

is to be taken in respect of the period during which the said accommodation was occupied by the
employee during the year as reduced by the rent/DTQ, if any, actually paid by the employee to
arrive at perquisites.

b) Where the accommodation is taken on lease or rent paid by the employer:

Actual amount of lease rental paid or payable by the Employer or 20% (earlier 10%) of salary
whichever is lower as reduced by the rent/DTQ, if any, actually paid by the employee.
c) Where accommodation is taken on personal lease basis by Officer Employees for which
reimbursement is made to the Officers towards rent paid by them to the extent of their eligibility,
value of perquisite shall be calculated as given in (b) above. Rent paid by the Officer employee in
excess of eligible rent also shall be reduced along with DTQ.
d) Where Accommodation is furnished, Perquisite value is to be increased by 10% per annum of the
Original cost of the Furniture provided or actual hire charges and less recovery made towards
furniture is to be reduced.
Annexure-A to Circular No.28-2006-BC-STF dated 14.7.2006
-3-
e) Where furniture is provided by the Bank to an Officer employee who is not occupying the
accommodation provided/leased but claiming HRA only, perquisite value is to be considered for TDS
purposes by taking the value at 10% of the original cost of furniture less recovery made thereon.
2.3 Perquisites in respect of use of Motor Car is withdrawn w.e.f. 01.04.2005.
2.4 Value of Perquisites on Interest Free or concessional Loans:
For the purpose of valuation of perquisites in respect of interest free or concessional loans, the rate of
interest charged by State Bank of India for the general public for the same purposes as on 1st April of
the relevant financial year is required to be considered for the F.Y 2006-07 also. Accordingly,
valuation of perquisites in respect of loans and advances (including Festival Advance) extended to
employees shall be computed in the following proforma for the F.Y 2006-07.

Type of loan/Advance Rate of Product Interest Interest Interest as Value of
interest of charged to rate per SBI Perquisite
charged Monthly the charged by rate (Col. (6-4)
by the closing employee SBI for 3xCol.5)
Bank balance by the general
Bank public
1 2 3 4 5 6 7
1. Housing Loans:
a) Old scheme
irrespective of 8.5%
amount
b) New scheme upto
Rs.1.10 lakhs 5%
Above Rs.1.10
lakhs 11%
c) Addl. Housing 9.25%
loan old scheme 11.5%
d) Housing Loans on
par with public:
Upto 5 Years of
repayment: 8%
Above 5 years &
upto 10 years 8.5%
years
Above 10 years 9%

2. Vehicle Loan
a) Four wheeler:
Upto Rs.80000/- 8.5% 9.00%
Above Rs.80000/- 12%

b) Two wheeler upto 7.5%
Rs.15000/- 11.25%
Above Rs.15000/- 12%
3. OSL (CD) 11.5% 9%
DL (New) 11.5% 12.75%
Computer Loans 10% 9%
OD (AS) 11.5% 12.75%

4. Festival Advance Nil 12.75%

Annexure-A to Circular No.28-2006-BC-STF dated 14.7.2006

-4-
2.5 Perquisites will not arise under 2.04 where the aggregate amount of loans including Festival
Advance do not exceed Rs.20,000/- during the year.
2.6 Value of perquisites “if negative” in respect of a type of loan can be set off with perquisite on
other type of loans. However, if the net value of perquisites on interest free/concessional loans is
negative, it is to be ignored and should not be deducted from other perquisites on
accommodation/furniture etc. if any.

2.7 Valuation of the perquisites on reimbursement of Medical Expenses by the Bank:

(a) Reimbursement by Bank to the employee for medical treatment for self or any member of the
family (including annual medical reimbursement, paid on declaration basis) in excess of
Rs.15,000/- is to be treated as perquisite and added to salary subject to (b) below.

(b) Such Medical reimbursement will not be treated as perquisites provided –
i. the expenses have been incurred in any hospital (including dispensary/clinic/nursing home)
maintained by Government or any local authority or any other hospital approved by Government
for the purpose of medical treatment of its employees. The list of such hospitals is given in
Annexure-B. The list is only illustrative but not exhaustive. The concerned employees may be
advised to obtain the copy of Income Tax Approval Certificate issued by the Chief
Commissioner of Income Tax to the Hospitals where treatment is taken.
ii. the expenses incurred for treatment of prescribed diseases or ailments, in any hospital
(including dispensary/clinic/nursing home) approved by the Chief Commissioner of Income Tax
having regard to the prescribed guidelines. The employee shall attach a certificate from the
hospital specifying the disease or ailment and copy of Approval Certificate issued by the
Commissioner of Income Tax for the hospital along with Original Bills/Receipts for payments to
Hospital. List of the prescribed diseases is given in Annexure-C
2.8 Taxable portion of LFC is to be treated as Perquisites wherever applicable. However, Education
Benefit reimbursement of Rs.100/- per month per child is not to be treated as perquisite u/s 10( (14(ii).
2.9 Honorarium received from STC/SIBM/RBTC/SIRD etc., is taxable as Salary Income. Lumpsum
allowance paid such as Rotational Transfer Allowance is taxable.
2.10 Furnishing of particulars of Income under the Head “Salaries” in Salary Certificate – The 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 the perquisites or
profits in lieu of salary and the value thereof in -
a) relevant columns provided in Form No.16 if the amount of salary paid or payable to the employee
is less than Rs.1,50,000/- or
b) in Form No.12BA as Annexure to Form No.16, if the amount of salary paid or payable to the
employee is more than Rs.1,50,000/-.
Salary means as defined under para 2.01 (A). The format of Form 12 BA is furnished in
Annexure -D.

Contd…….5
Annexure-A to Circular No.28-2006-BC-STF dated 14.7.2006
-5-
3.EXEMPTIONS FROM TOTAL INCOME U/S 10 OF THE INCOME TAX ACT:
The following payments to employees though treated as establishment charges shall not be included
in individual salary income to the extent which are exempt u/s 10, wherever specified below:
3.1 Leave Fare Concession u/s 10(5)- Exemption on LFC will be calculated as under:
a. Exemption is available only where journey is performed. However, Encashment of LFC upto
75% of the eligible amount is fully taxable.

b. Exemption will be available in respect of two journeys performed in a block of four calendar
years, commencing from the calendar year 1986. If the employee has not availed L.F.C, during
any of the specified four years block on one of the two permitted occasions (or on both
occasions), exemption can be claimed in the first calendar year of the next block (but in respect of
only one journey) provided he avails the L.F.C. in the calendar year immediately following that
block. This is known as “Carry Over Concession”. In such case the exemption so availed will
not be counted for the purposes of claiming the future exemptions allowable in respect of 2
journeys in the subsequent Block. The quantum of exemption will be subject to the following
restrictions depending upon the mode of transport used or available.

Where journeys performed by Air Economy air fare of National Carrier (Indian
Airlines or Air India) by shortest route to the
place of destination or the amount spent,
whichever is less.

Where journey is performed by rail Air conditioned first class rail fare by the
shortest route to the place of destination or
amount spent/reimbursed, whichever is less.

Where the place of origin of journey and Air conditioned first class rail fare by the
destination are connected by Rail, and shortest route to the place of destination or
journey is performed by any mode of amount spent/reimbursed whichever is less.
transport other than by air.

Where the places of origin of journey
and destination (or part thereof) are not First class or deluxe class fare of such transport
connected by rail by the shortest route or the amount spent,
(i) Where a recognised public whichever is less.
transport system exists. Air conditioned first class rail fare for the
(ii) Where no recognised public distance of journey by shortest route (as if the
transport system exists. journey had been performed by rail) on the
amount actually spent/reimbursed, whichever
is less.

Contd….6