For claiming rebate under Section 88, it will no longer be required that the investment be made "out of income chargeable to tax".

This means the investment need not essentially be made out of income chargeable to tax, but could come out of the assessee's other incomes that includes exempt income as well.

Taxable dividends with TDS

Now dividend income is exempt in the hands of shareholders. Similarly, income distributed in respect of units of the Unit Trust of India or other mutual funds are exempt in the hands of unit holders. This was because companies and mutual funds were required to pay a tax on the distributed profits/income at the time of such distribution. It is proposed that the companies and mutual funds will not pay the tax on distributed profits/income and that the same will be taxed in the hands of the shareholder/unit holder at the rates applicable to the shareholder/unit holder.

Relief on family pension

It is proposed to insert a new Section 89(1) to allow a relief in respect of arrears or advance of family pension on the same lines as for arrears or advance of salary. This section is introduced with retrospective effect from the assessment year 1996-97.

Some relief on perks

For those affected by the taxing of perquisites, these will be borne by the employer. If the employer chooses to pay the tax arising out of a perquisite not provided by way of a monetary payment, then such perquisite and tax paid be the employer (which is a perquisite) thereon will be exempt from tax in the hands of the employee. A new Section 10(10CC) is to be introduced to benefit the executive community in this regard.

However, this Section uses the language "any perquisite, not provided for by way of monetary payment within the meaning of Section 17(2)".

It appears that perquisites in monetary form such as membership fees for clubs or gift vouchers are outside the purview of this Section. Therefore, if the employer pays the tax on such perquisites in monetary form, the tax so paid will be treated as a perquisite.

A corresponding amendment is to be made in Section 192 with effect from June 1 2002, which empowers the employer to bear the entire amount of taxes on the perquisites. This also covers those not provided for by way of monetary payment, and the employer may refrain from deducting such taxes from the salaries payable to the employee.

Perks not taxable

Section 17 is to be amended to provide that from the assessment year 2002-03, no value of perquisites shall be assessed in the hands of the employees whose salary excluding the value of perks does not exceed Rs1 lakh.

This limit applies to all the salaries, due or paid from one or more employers.

Rates of taxes

While the rates of tax remain the same, the surcharge has been increased from 2 per cent to 5 per cent. Surcharge is leviable only where the total income exceeds Rs 60,000. Surcharge is to be computed on the tax arrived at after allowing rebate under Section 88, 88B and 88C.

Casual income taxable: Presently, under Section10(3) of the I-T Act, an exemption is available for casual and non-recurring income such as lotteries, crossword puzzles, and so on, to the extent of Rs 5,000 and Rs 2,500 for winnings from races, such as horse races. This Section is to be omitted with effect from assessment year 2003-04.

TDS by individuals/HUFs

Amendments are proposed to Sections 194A, 194C, 194H, 194I, 194J dealing with the tax deduction at source for payment of interest other than interest on securities, payments to contractors, payment of commission, rent and professional charges.

At present these provisions do not require an individual or HUF to deduct tax at source. The proposal is to cast the responsibility on individuals and HUFs as well to deduct tax at source.

This, however, is required only where the individual or HUF is subjected to tax audit under Section 44AB during the financial year immediately preceding the financial year in which the sum of money is

The amendment is proposed to take effect from June 1, 2002.

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