TDS ON SALARY U/S 192

TDS ON SALARY U/S 192

TDS on salary basically means that tax has been deducted by the employer at the time of depositing the salary into the employee’s account. And the amount deducted from the employee’s account is deposited with the government by the employer.

When TDS should be deducted from the salary

Under Section 192, TDS is deducted at the time of actual payment of salary and not during the accrual of salary. Tax will also be deducted if the employer pays salary in advance to the employee and the employee receive arrears from him. In case of employees estimated salary is not more than the basic exemption limit, TDS will not be deducted. The condition of deduction of tax is also applicable for a person not having a pan.

Rate of Tax Deduction for FY 2020-21

Section 192 does not specify a TDS rate. TDS will be deducted as per the income tax slab and the rates thereof applicable to the relevant financial year for which the salary is paid.

For deduction of Tax at source (TDS), the tax has to be calculated according to slab wise rate. The applicable slab wise rate for deduction of tax at source will be notified through the Finance Act.

Which is as follows :

Existing tax regime and New tax regime:

There are three categories of individual taxpayers:

  • Individuals (below the age of 60 years), which includes residents as well as non-residents
  • Resident senior citizens (60 years and above but below the age of 80 years)
  • Resident super senior citizens (above 80 years of age)

There are different slabs for each category of taxpayers. The latest income tax slabs for AY 2021-22 are discussed below . Such tax slabs tend to undergo a change after every budget.

Budget 2020 has announced another regime which is new tax regime which gives taxpayers an option to pay taxes as per the new tax slabs from FY 2020-21 onwards.

Income-tax rates under the new tax regime v/s the old tax regime

Income slabs (Rs) Tax Rate(Old Regime) Tax Rate(New Regime)
Up to 2.5 lakh Nil Nil
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 25%
Above 15 lakh 30% 20%

 

  • The tax calculated on the basis of such rates will be subject to health and education cess of 4%.
  • Any individual opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions.
  • Here is the list of exemptions and deductions that a taxpayer will have to give up while choosing the new tax regime.
  1.  Leave Travel Allowance (LTA)
  2.  House Rent Allowance (HRA)
  3.  Conveyance
  4.  Daily expenses in the course of employment
  5.  Relocation allowance
  6.  Helper allowance
  7.  Children education allowance
  8.  Other special allowances [Section 10(14)]
  9.  Standard deduction
  10.  Professional tax
  11.  Interest on housing loan (Section 24)
  12.  Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)

Points to remember while opting for the new tax regime:

  1.  Option to be exercised on or before the due date of filing return of income for AY 2021-22
  2.  In case a taxpayer has a business income and exercised the option, he/she can withdraw from the option only once. A business taxpayer withdrawing from the optional tax regime has to follow the regular income tax slabs.
  3.  The New Tax Regime is optional, the assessee can choose between the New Tax Regime and the Old Tax Regime depending on what is best suitable from a tax planning point of view.

Deduction of Tax

  • Employees will be able to choose between the old and new tax regimes only once in a financial year for the purpose of tax deduction at source by employers. Said by CBDT
  • Employers will be able to deduct taxes on salaries paid to employees from the beginning of a financial year, basis the individual’s choice of opting for the old or the new taxation regime though a declaration, the Board said in a circular.
  • “In order to avoid genuine hardships, the Board clarifies that an employee having income other than the income under the head of ‘profit and gains of business or profession’ and intending to opt for the concessional rate under section 115BAC of the Act, may intimate the employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC of the Act,

Who can Deduct TDS under section 192

These employers include:

  • Companies (Private \ or Public)
  • Individuals
  • HUF
  • Trusts
  • Partnership firms
  • Co-operative societies

All these employers are required to deduct TDS at a specific time period and deposit it to the government.

According to section 192 of the income tax act, there must be an employer-employee relationship for the deduction of tax at source.

The employer’s status such as HUF, firms or company is irrelevant for the deduction of tax at source under this section.

The number of employees employed by the employer does not matter while calculating and deducting TDS.

IMPACTS OF TDS WHEN Salary from more than one employer:

  • Section 192(2) deals with situations where an individual is working under more than one employer or has changed from one employer to another.
  • In Such circumstances it provides for deduction of tax at source by such employer (as the taxpayer may choose) from the aggregate salary of the employee who is or has been in receipt of salary from more than one employer.
  • The employee is now required to furnish to the present/chosen employer details of the income under the head “Salaries” due or received from the former/other employer and also tax deducted at source there from, in writing and duly verified by him and by the former/other employer
  • The present/ chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

IN SIMPLE WORDS

If you are engaged with two or more employers simultaneously, you can provide details about your salary and TDS in Form 12B to any one of the employers. Once the employer receives all kinds of information from you, he/she will be responsible in computing your gross salary to deduct TDS.

Subsequently, if you resign and join a different employer, you can provide details of your previous employment in Form 12B to your new employer. This employer will consider your previous salary and TDS will be deducted for the remaining months of the financial year.

If you choose not to provide details of income of other employment, each employer will deduct TDS only from the salary paid by him respectively.

Time limit to deposit the TDS

If the TDS is deducted by any government employer – It has to be deposited on the same day.

If the TDS is deducted by any employer other than the government –

  • If the salary is credited and TDS is deducted in the month of march – On or before 30 April
  • If the salary is credited and TDS is deducted in any month other than March- Within seven days from the end of the month in which the deduction is made.

TDS Statements

The employer is required to file TDS Return and provide Form 16 to employee containing the details of salary such as the amount paid and tax deducted.

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