Item
No.
Category of employer Further sums to be deducted
(1) (2) (3)
1. 2
[Company, other than a banking
company]
(i) The dividends payable on its preference
share capital for the accounting year
calculated at the actual rate at which such
dividends are payable;
(ii) 8.5 per cent. of its paid up equity share
capital as at the commencement of the
accounting year;
(iii) 6 per cent. of its reserves shown in its
balance-sheet as at the commencement of
the accounting year, including any profits
carried forward from the previous
accounting year:
Provided that where the employer is a foreign
company within the meaning of
section 591 of the Companies Act, 1956
(1 of 1956), the total amount to be deduced
under this Item shall be 8.5 per cent. on the
aggregate of the value of the net fixed assets
and the current assets of the company in
India after deducting the amount of its
current liabilities (other than any amount
shown as payable by the company to its
Head Office whether towards any advance
made by the Head Office or otherwise or
any interest paid by the company to its
Head Office) in India.
3
[2. Banking company (i) The dividends payable on its preference
share capital for the accounting year
calculated at the rate at which such
dividends are payable;
(ii) 7.5 per cent. of its paid up equity share
capital as at the commencement of the
accounting year;
(iii) 5 per cent. of its reserves shown in its
balance sheet as at the commencement of
the accounting year, including any profits
carried forward from the previous
accounting year;
1. The Second Schedule renumbered as the Third Schedule by Act 66 of 1980, s. 20 (w.e.f. 21-8-1980).
2. Subs. by s. 20, ibid., for “Company” (w.e.f. 21-8-1980).
3. Ins. by s. 20, ibid. (w.e.f. 21-8-1980).
27
Item No. Category of employer Further sums to be deducted
(1) (2) (3)
(iv) any sum which, in respect of the accounting
year, is transferred by it—
(a) to a reserve fund under sub-section (1)
of section 17 of the Banking Regulation
Act, 1949 (10 of 1949); or
(b) to any reserves in India in pursuance of
any direction or advice given by the
Reserve Bank of India.
whichever is higher:
Provided that where the banking company is a
foreign company within the meaning of
section 591 of the Companies Act, 1956
(1 of 1956), the amount to be deducted
under this Item shall be the aggregate of—
(i) the dividends payable to its preference
shareholders for the accounting year at the
rate at which such dividends are payable
on such amount as bears the same
proportion to its total preference share
capital as its total working funds in India
bear to its total world working funds;
(ii) 7.5 per cent. of such amount as bears the
same proportion to its total paid up equity
share capital as its total working funds in
India bear to its total world working funds;
(iii) 5 per cent. of such amount as bears the
same proportion to its total disclosed
reserves as its working funds in India bear
to its total world working funds;
(iv) any sum which, in respect of the accounting
year, is deposited by it with the Reserve
Bank of India under sub-clause (ii) of
clause (b) of sub-section (2) of section 11
of the Banking Regulation Act, 1949 (10
of 1949), not exceeding the amount
required under the aforesaid provision to
be so deposited.]
3. Corporation (i) 8.5 per cent. of its paid up capital as at the
commencement of the accounting year;
(ii) 6 per cent. of its reserves, if any, shown in
its balance-sheet as at the commencement
of the accounting year, including any
profits carried forward from the previous
accounting year.
28
Item No. Category of employer Further sums to be deducted
(1) (2) (3)
4. Co-operative society (i) 8.5 per cent. of the capital invested by such
society in its establishment as evidenced
from its books of accounts at the
commencement of the accounting year;
(ii) such sum as has been carried forward in
respect of the accounting year to a reserve
fund under any law relating to cooperative societies for the time being in
force.
5. Any other employer not falling
under any of the aforesaid
categories.
(iii) 8.5 per cent. of the capital invested by him
in his establishment as evidenced from his
books of accounts at the commencement
of the accounting year:
Provided that where such employer is a person
to whom Chapter XXIIA of the
Income-tax Act applies, the annuity deposit
payable by him under the provisions of that
Chapter during the accounting year shall
also be deducted:
Provided further that where such employer is a
firm, an amount equal to 25 per cent. of the
gross profits derived by it from the
establishment in respect of the accounting
year after deducting depreciation in
accordance with the provisions of clause
(a) of section 6 by way of remuneration to
all the partners taking part in the conduct of
business of the establishment shall also be
deducted, but where the partnership
agreement, whether oral or written,
provides for the payment of remuneration
to any such partner, and—
(i) the total remuneration payable to all such
partners is less than the said 25 per
cent., the amount payable, subject to a
maximum of forty-eight thousand rupees
to each such partner; or
(ii) the total remuneration payable to all such
partners is higher than the said 25 per cent.,
such percentage, or a sum calculated at the
rate of forty-eight thousand rupees to each
such partner, whichever is less, shall be
deducted under this proviso:
29
Item No. Category of employer Further sums to be deducted
(1) (2) (3)
Provided also that where such employer is an
individual or a Hindu undivided family,—
(i) an amount equal to 25 per cent. of the
gross profits derived by such employer
from the establishment in respect of the
accounting year after deducting
depreciation in accordance with the
provisions of clause (a) of section 6; or
(ii) forty-eight thousand rupees,
whichever is less, by way of remuneration to
such employer, shall also be deducted.
6. Any employer falling under Item No.
1 of Item No. 3 or Item No. 4 or
Item No. 5 and being a licensee
within the meaning of
the Electricity (Supply) Act,
1948 (54 of 1948).
In addition to the sums deductible under any
of the aforesaid Items, such sums as are
required to be appropriated by the
licensee in respect of the accounting
year to a reserve under the Sixth
Schedule to that Act shall also be
deducted.
Explanation.—The expression “reserves” occurring in column (3) against Item Nos. 1
[1(iii), 2(iii)
and 3(ii)] shall not include any amount set apart for the purpose of—
(i) payment of any direct tax which, according to the balance-sheet, would be payable;
(ii) meeting any depreciation admissible in accordance with the provisions of clause (a) of
section 6;
(iii) payment of dividends which have been declared,
but shall include—
(a) any amount, over and above the amount referred to in clause (i) of this Explanation, set
apart as specific reserve for purpose of payment of any direct tax; and
(b) any amount set apart for meeting any depreciation in excess of the amount admissible in
accordance with the provisions of clause (a) of section 6.