Direct Tax

Tax Deducted At Source

Whether Employer is legally bound to deduct tax at source from income / receipts which are prima – facie exempt from tax:

S.10 deals with certain receipts which enjoy exemption from income-tax. In other words, the receipts falling u/s 10, do not form part of “total income“. Therefore, if certain allowances / payments by the employer, are prima facie exempt u/s 10, they will not form part of “ total income“ and hence there will be no obligation on the employer to deduct tax at source u/s 192(1).

Some of the examples of such allowances / payments, may be as follow:

  • A special allowances or benefit granted to meet expenses in the performance of duties – S.10(1 4).
  • Leave travel concession / assistance – S.1 0(5)
  • House rent allowance – S. 10(13A)
  • Death-cum-retirement gratuity – S.10(10) etc.
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