Deduction of Income-Tax at Source

(Vide G. O. No. S-3-260/X-79 dated January 23, 1979)

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Accounting system of direct taxes, receipts and refunds up to 1st April, 1977.

Prior to 1st April, 1977 payment of direct taxes were accepted only by (1) Reserve Bank of India (RBI), (2) Branches of the State Bank of India (SBI) (3) Subsidiaries of the State Bank of India in certain places and (4) Government Treasuries/Sub-Treasuries.

In this system af accountal of direct taxes which has ceased to operate from 1st April 1977, the Treasuries and the Accountants General were intimately involved in compilation of the figures of collections of Direct Taxes.

Accounting system of direct taxes, receipts and refunds from 1st April, 1977.

From 1st April, 1977 the work of receipts and refunds of the direct taxes has been departmentalised. The basic feature of the new scheme is that with effect from 1st April, 1977, all payments of direct taxes are received by Reserve Bank of India, State Bank of India and nominated Public Sector Banks. All such payments into Government Treasuries/Sub-Treasuries have been stopped.

The accounting of direct taxes, receipts and refunds has now to be done by zonal accounts office which combines the role of Treasuries and Accountants General in the earlier scheme.

However, there is one exception to this general procedure as explained below where Treasuries, Pay and Accounts office, Other Departmental Offices or State Government and Accountants General have still a role to play.

Tax deducted at source on U. P. Government Account from salary and other bills of the State Government—procedure regarding

Treasuries/Pay and Accounts Offices/other Departmental Offices rendering compiled accounts to A. G. are required to deduct tax at source on the following items:

( i ) Deductions of Income-tax paid from salaries (u/s 192)

( ii ) Deductions of Income-tax paid from Interest on securities (u/s 193)

( iii ) Deductions of Income-tax from Dividends (u/s 194)

( iv ) Deductions of Income-tax from interest other than Interest on Securities (u/s 194A)

( v ) Deductions of Income-tax from Lottery prizes (u/s 194B)

( vi ) Deductions of Income-tax from payments made to Contractors (u/s 194C)

( vii ) Deductions of Income-tax from commissions paid to Insurance Agents (u/s 194 D)

The procedure to be adopted for credit of such tax to Central Government Account has been detailed in the Letter No. F. 2 (112)/76/SC/Vol. II, dated 2nd September, 1977 of Government of India, Ministry of Finance, Department of Expenditure (copy enclosed as per annexure).

As per instructions contained in above referred letter, recoveries of tax deducted at source from the bills paid by these offices will be incorporated in the State Section of Accounts under separate Suspense Heads ‘TDS Suspense’ subordinate to the Head ‘858-Suspense Account.’ These offices should maintain details of Credits to this Suspense Head under the various major, minor and detailed heads connected with deduction of tax at source as per details given in annexure ‘A’. At the end of the month, each of these offices/Treasuries should prepare detailed statement showing the analysis of the tax deducted at source under the relevant major, minor and detailed heads which should tally with the total amount shown under Suspense Head ‘TDS Suspense’. One copy of this statement of account should be sent by Treasuries/Offices to the Accountants General and two copies forwarded directly to the zonal Accounts Officer, Allahabad, nominated for final accountal of these deductions.

It may be noted that w. e. f. 1. 4. 1977, Treasuries/Pay and Accounts Offices/other Departmental Offices rendering compiled Account to A. G. should not make direct Account to Income Tax Offices by depositing money through chalans in Banks. Instead, as explained above, monthly compiled Accounts should be rendered to the Accountants General and the money should be paid to him by Book transfers. Two copies of these accounts should be sent to Zonal Accounts Officer, Allahabad, Office of the Commissioner of Income Tax, 5 Ashok Marg, Allahabad.

Some Do’s and Don’ts.


(1) The tax on all payments falling within the purview of Section 192 to Section 194 D should be regularly deducted before disbursing the amount.

(2) The tax so deducted should be paid by Book adjustment to A. G., U. P.-II, Allahabad, under intimation to Zonal Accounts Officer, Allahabad, Office of the Commissioner of Income-Tax, Allahabad.

(3) The provisions of Income-Tax Act relating to payment of interest and penalty u/s 201 and 276 B may always be kept in view. Default in this regard will attract these provisions and attendant rules.

(4) Do instruct all officers, subordinate to you, to follow this procedure as ignorance on their part will attract penal provisions which should be avoided.

(5) In case of any difficulty please write directly to Zonal Accounts Officer, Office of the Commissioner of Income-tax. 5 Ashok Marg, Allahabad.


(1) Do not credit TDS directly in the local treasuries or banks as payment in through the book adjustments with A. G., U. P.-II as per instructions.

(2) No payment is to be made in any local Income-Tax Office as all tax deducted at Source on the Government Account has to be credited and paid in Account centralised at Allahabad in the manner aforesaid.

(3) Do not wait for deduction of tax in the closing months of the year as apart from being an irregular practice, it will attract penal provisions including offence within the meaning of Section 276 B of I. T. Act.