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Section 192 of the Income Tax Act, 1961 deals with tax deducted at source (TDS) on salary. Your employer will deduct TDS from the salary payable to you. The salary you receive from your employer is categorised in ‘Income’ under the head ‘Salary’ and the employer will be responsible for deducting TDS at normal income tax rates applicable to you on your estimated income
for the relevant financial year. The TDS deducted u/s 192 is reflected in Form 16, which is issued by the employer to the employee.
The employer’s can be-
All these employers are required to deduct TDS monthly and deposit it to the government within the specific time period. 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. Moreover, the number of employees employed by the employer does not matter while calculating and deducting TDS.
Under Section 192, TDS is deducted at the time of actual payment of salary and not during the accrual of salary. It means tax will be deducted if your employer pays salary in advance or at the time of salary payment in arrears.
In case your estimated salary is not more than the basic exemption limit, tax amount will be zero and hence, TDS will not be deducted.
This rule is applicable even to those who do not have a PAN. To know the income tax rates applicable to you, click here.
The table below shows the basic exemption limit as per the age that does not require TDS to be deducted:
|Resident in India below 60 years||Rs 2.5 lakh|
|Senior Citizens between 60 years and below 80 years||Rs 3 lakh|
|Super Senior Citizens above 80 years||Rs 5 lakh|
At first, the employer estimates employee’s salary for the relevant financial year. This should include basic pay, dearness allowance, perquisites granted by the employer, other allowances granted by the employer like HRA, LTA, meal coupons, etc., EPF contributions, bonus, commissions, gratuity, salary from the previous employer, if any, etc.
In the next step, the employer calculates exemptions under Section 10 of the Income Tax Act. The exemptions can be applicable on allowances like HRA, travel expenses, uniform expenses, children’s education allowances, etc. Also, reduce the amount of professional tax paid, entertainment allowance and standard deduction of Rs 50,000.
The employer reduces such exemption from the gross monthly income and the net amount will be treated as the taxable salary income.
If the employee has provided the information about other incomes such as rental income from house property or bank deposits, etc. In that case, such amounts should be added to the net taxable salary. Further, the interest paid on housing loans are deducted from the house property income, but if there is no income from house property, there will be a negative figure under the head ‘income from house property’. After adding or reducing the said amounts, the calculated figure will be the employee’s gross total income.
Now, the employer reduces the investments for the year, which fall under Chapter VI-A of the Income Tax Act declared by the employees as per the investment declaration submitted. The declaration may include the amounts of investments such as PPF, employee’s provident fund, ELSS mutual funds, NSC, Sukanya Samridhi account. It may also income expenditures such as home loan repayment, life insurance premiums, NSC, Sukanya Samridhi account, etc. Similarly, the employer allows deduction under various other sections such as Section 80D, 80G, etc.
Note: If the employee wishes to opt for a new tax regime, he/she may intimate the same to the employer about exercising the option each year. And the employer may deduct his/her income tax according to the new tax regime.
Also, if the employee has declared to calculate income tax as per the new tax regime, then the Income Tax act does not allow 70 specified exemptions and deductions allowed in the old tax regime. Hence, the employer will calculate the net taxable income as per the income tax regime chosen by the employee.
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 taxpayer for the relevant financial year for which the salary is paid.
The tax calculation is usually done by the employer at the beginning of the financial year. The TDS to be deducted by dividing the estimated tax liability of the employee for the financial year by the number of months of his employment under the particular employer.
However, if there is no PAN of employee, TDS shall be deducted at the rate of 20% plus 4% cess.
The employer adjusts any excess or deficit arising out of any earlier deduction by increasing or decreasing the number of subsequent deductions during the same financial year.
If the employee has made any payment as an advance tax, then the same can be adjusted for calculation of TDS. The employee needs to intimate the same to the employer.
A resident employee Nikhil (aged 40), who works for ClearTax, is fixed as Rs 1,00,000 per month as salary during the FY 2022-23. Nikhil has investmented Rs 50,000 in ELSS funds, Rs 60,000 in PPF, Rs 40,000 in NSC. What will be the monthly TDS deducted u/s 192?
Calculation of TDS from monthly salary
|Less: Standard deduction||50,000|
|Gross Taxable income||11,50,000|
|Chapter VI-A deductions||1,50,000|
|Tax as per applicable slab rates|
0 to Rs 2.5 lakh – Nil
Rs 2.5 lakh to Rs 5 lakh – 5%
Rs 5 lakh to Rs 10 lakh – 20%
|Cess @ 4%||4,500|
If there are 12 months remaining for TDS deduction in the financial year the employer will deduct TDS u/s 192 = Rs 1,17,000 / 12 = Rs 9,750.
In above case, if the employee makes a declaration to the employer for opting new tax regime, the employer shall deduct tax at source as below:
In the new tax regime, standard deduction of Rs 50,000 and deduction for investment in ELSS, PPF, NSC will not be allowed as a deduction. And tax will be calculated as per the new slab rate of individual resident for calculation of TDS on salary u/s 192 , i.e. Rs 1,05,000.
Education and higher education cess of 4% on the income tax = Rs 4,200.
Therefore, the net tax payable = Rs 1,09,200.
Accordingly, TDS u/s 192 to be deducted per month = Rs 1,09,200 / 12 = Rs 9100.
Mr Soni receives a pension of Rs 30,000 per month and income from interest on pension account (savings account) is Rs 12,000 during the FY 2021-22. What will be the monthly TDS amount deducted from the pension?
As per Section 192, TDS is required to be deducted on all the monetary amounts paid by the employer under the head ‘Salary’. Since, ‘Salary’ also includes pension, TDS on the same needs to be deducted as per Section 192.
Computation of TDS
|Income from salary|
|Less: standard deduction||50,000|
|Net income from salary||3,10,000|
|Income from other sources|
|Interest on savings account||12,000|
|Gross total income||3,22,000|
|Income tax thereon|
0 – Rs 3,00,000 – Nil
Rs 3,00,000 – Rs 3,22,000 – 5%
|Less: Rebate under Section 87A (up to Rs 12,500)||1,100|
|Income tax payable||Nil|
Hence, since the income tax payable is zero, no TDS will be deducted by the employer from the monthly pension.
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 for 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.
There are several deductions you can claim from your total income to bring down the taxable income and thereby reduce the tax outgo.
Section 89, the tax deducted in respect of salary paid to employees of the government, companies, co-operative societies, local authorities, universities, association or bodies, etc. should be adjusted for marginal relief as per Section 89 of the Income Tax Act, if applicable. Marginal relief is provided in respect of salary or arrears of salary being subject to a higher rate of tax due to change in the slab rates.
To get this relief, you must fileForm 10E on the official income tax portal. In the absence of this form, you will not receive relief under Section 89.
The employer is required to provide Form 16 to you containing the details of salary such as the amount paid and tax deducted. This can also be accompanied by Form 12BA, to show particulars of perquisites, and profits in lieu of salary.
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 that is other than the government office–
a. If the salary is credited and TDS is deducted in March – On or before 30 April
b. 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 TDS deducted.
The employer has to file a salary TDS return in Form 24Q. The said form is to be submitted every quarter. Details of salary paid to the employees and TDS deducted on such payment is to be reported in 24Q.
Employer’s can easily file TDS returns through ClearTax software, i.e. ClearTDS.
Form 24Q consists of 2 annexures – Annexure I and Annexure II
While Annexure I has to be submitted for all four quarters of an FY, Annexure II is not required to be submitted for the first three quarters. Annexure-II has to be submitted in the last quarter, i.e. Jan – Mar quarter only.
Besides, if the employer doesn’t deduct TDS or TDS at a lower rate, he’ll have to provide the reasons for such non-deduction or lower deduction.
To know more about Form 24Q, refer here.
The employer is responsible for providing a TDS certificate to the employee for tax deducted from the salary.
After filing the TDS return, the TDS certificate (Form 16) is generated in a specified format and it can be downloaded from the TRACES utility. Form 16 contains Part-A & Part-B.
Part A of Form 16 mainly contains the details of quarterly TDS deducted and deposited and details of PAN and TAN of the employer, and other information.
Part B of Form 16 is an Annexure to Part A. Part B is to be prepared by the employer for their employees. It contains salary breakup, exemptions, deductions approved under Chapter VI-A and the income tax amount.
To know more about Form 16, click here.