G.Srinivasan v. Union of India –  122 taxmann.com 46 (Madras)
Assessee was an employee of NTPC. He worked as an engineer and retired after serving the organisation for about 33 years. Upon retirement, his gratuity was paid in two tranches of Rs. 10 lakhs each.
The second tranche was paid after deducting tax at source. Assessee contended that amount received by him should have been completely exempted from tax.
Assessee contended that entire gratuity amount of Rs. 20 lakhs would have been exempt if he has retired on or after 29-03-2018 because the amendment to Section 4(3) of the Payment of Gratuity Act, whereby the maximum gratuity was modified as Rs. 20 lakhs, came into effect on 29-03-2018.
The consequential amendment to Section 10(10) of the Income-tax Act was made on 08-03-2019 with effect from 29-03-2018. If these provisions had come into effect on 01-01-2016, which was the date when the gratuity ceiling limit was increased from Rs 10 lakh to Rs 20 lakh by the Govt, persons such as assessee would have the benefit of complete exemption from Income tax. According to assessee, Notification S.O.1213 (E) dated 8-3-2019 was unconstitutional in as much as employees who retired before 29-03-2018 are being discriminated against.
On writ, Madras HC held that Section 10(10) of the Income-tax Act exempts amount received as a gratuity to the extent specified under Section 4(3) of the Payment of Gratuity Act. The date on which assessee was retired limit specified under Section 4(3) of the Payment of Gratuity Act was Rs. 10 lakhs. This limit was increased to Rs. 20 lakhs by an amendment which came into force only on 29-03-2018. As a corollary, the exemption limit was raised to Rs. 20 lakhs by an amendment to the Income-tax Act only in respect of persons who retired or died on or after 29-03-2018.
When there was no ambiguity either in Section 10(10) of the Income-tax Act, as it stood as on the date of retirement of the assessee, or in the amendment Notification S.O.1213(E), the amendment limit of Rs. 20 lakhs couldn’t be implemented with retrospective effect from 1-1-2016.
CBDT issues circular on TDS from salaries for Financial Year 2020-21
Circular No. 20/2020, dated 03-12-2020
The Central Board of Direct Taxes (CBDT) has issued circular for deduction of tax at source from salaries. CBDT has explained the obligation of employers with regard to deduction of tax at source from salaries under section 192 of the Income-tax Act, 1961 for the Financial Year 2020-21 in a comprehensive manner.
Section 192 of the Income-tax Act, 1961 deals with the deduction of tax at source TDS on salary paid by an employer to employee. Circular explains the income-tax rates including concessional tax regime of section 115BAC applicable to individuals as per the Finance Act, 2020.
Circular also contains 10 examples relating to computation of taxable salary, Form no. 12BA, Form no. 12BB, Form No. 10BA and important notifications & guidelines issued by the board in the past.