TDS on Salary u/s 192: An Overview of Tax Deduction at Source for Salary Payments

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?

TDS (Tax Deducted at Source) should be deducted from the salary by the employer at specific instances as per the provisions of the Income Tax Act. The timing of TDS deduction is an important aspect to ensure compliance with the tax regulations. Generally, TDS on salary should be deducted by the employer at the time of payment or credit, whichever occurs earlier.

According to Section 192 of the Income Tax Act, when the employer credits the salary to the employee’s account or pays it in cash, the TDS amount should be deducted at that very moment. This means that the employer must calculate and withhold the applicable tax amount before disbursing the salary to the employee.

It’s important to note that TDS on salary is not deducted on the entire salary amount, but rather on the portion that is taxable after considering various exemptions, deductions, and allowances available under the Income Tax Act. The employer should consider the employee’s income, investment declarations, and other relevant factors while calculating the TDS amount.

In addition to the monthly salary payments, TDS should also be deducted when any additional payments or benefits are given to employees, such as bonuses, commissions, arrears, or any other form of remuneration. The TDS should be calculated and deducted at the time of such payments as well.

Employers are required to deposit the TDS amount with the income tax department within the specified due dates. They also need to provide the employee with Form 16, which summarizes the TDS details for the financial year. This form is essential for employees while filing their income tax returns as it provides the necessary information about the tax deducted by the employer on their behalf.

It is crucial for employers to adhere to the timing of TDS deduction to fulfill their obligations as per the Income Tax Act. Failure to deduct or delay in depositing the TDS amount may attract penalties and interest charges. Employees should also ensure that the TDS has been deducted correctly and reflected in their Form 16 to avoid any discrepancies while filing their tax returns.

It’s worth mentioning that the timing and regulations related to TDS on salary are subject to change. Employers and employees should stay updated with any amendments or notifications issued by the income tax department to ensure accurate compliance with the TDS provisions. Seeking guidance from tax professionals can also be helpful in understanding and managing TDS obligations effectively.

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

• The tax calculated on the basis of such rates will be subject to a 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:

•  Option to be exercised on or before the due date of filing return of income for AY 2021-22
•  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.
•  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

The time limit to deposit TDS (Tax Deducted at Source) depends on whether the deductor is the government or a non-government entity. Here are the general timelines for depositing TDS:

For Government Deductors:
Government deductors, such as government departments and offices, are required to deposit the TDS amount on the same day of deduction. This means that the TDS amount should be deposited with the government treasury or authorized bank immediately after deducting it from the payment.

For Non-Government Deductors:
For non-government deductors, the TDS amount should be deposited within the specified due dates. The due dates for depositing TDS are as follows:

• TDS on Salary:

If the deductor is the Central Government or State Government, the TDS should be deposited on the same day of deduction.
For other deductors, the due dates for TDS on salary are usually as follows:
For the months of April to February: 7th of the following month.
For the month of March: 30th or 31st of March, depending on the financial year-end.

• TDS on Non-Salary Payments:

The due dates for depositing TDS on non-salary payments, such as interest, rent, professional fees, etc., are generally as follows:
For the months of April to February: 7th of the following month.
For the month of March: 30th or 31st of March, depending on the financial year-end.
It’s important to note that the above due dates are subject to periodic revisions by the government, so it’s advisable to stay updated with any changes announced by the income tax department.

Delayed deposit of TDS beyond the due dates can attract penalties and interest charges as per the Income Tax Act. Therefore, deductors should ensure a timely deposit of the TDS amount to avoid any compliance issues.

Deductors are also required to file TDS returns, such as Form 24Q for TDS on salaries and Form 26Q for TDS on non-salary payments, on a quarterly basis. These returns provide details of TDS deducted and deposited during the respective quarters.

It’s recommended to consult with a tax professional or refer to the official guidance provided by the income tax department for specific and up-to-date information regarding the time limit to deposit TDS.

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.