IT deduction from salaries during FY 2015-16

CIRCULAR NO : 20/2015
F.No. 275/192/2015-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
******
North Block, New Delhi
Dated the 2nd December, 2015

SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE
FINANCIAL YEAR 2015-16 UNDER SECTION 192 OF THE
INCOME-TAX ACT, 1961.
 

Reference is invited to Circular No.17/2014 dated 10.12.2014 whereby the rates of deduction of income-tax from the payment of income under the head "Salaries" under Section 192 of the Income-tax Act, 1961 (hereinafter ‘the Act’), during the financial year 2014-15, were intimated. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2015-16 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department- www.incometaxindia.gov.in.

2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2015:

As per the Finance Act, 2015, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head "Salaries" for the financial year 2015-16 (i.e. Assessment Year 2016-17) at the following rates:

2.1 Rates of tax
 

A. Normal Rates of tax:

B. Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less than eighty years at any time during the financial year:

C. In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year:

2.2 Surcharge on Income tax:

The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section 111A or section 112 of the Income-tax Act, shall, in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, having a total income exceeding one crore rupees, be increased by a surcharge for the purpose of the Union calculated at the rate of twelve per cent of such income-tax:

Provided that in the case of persons mentioned above having total income exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.

2.3.1 Education Cess on Income tax:

The amount of income-tax including the surcharge if any, shall be increased by Education Cess on Income Tax at the rate of two percent of the income-tax.
2.3.2 Secondary and Higher Education Cess on Income-tax:

An additional education cess is chargeable at the rate of one percent of income-tax including the surcharge if any, but not including the Education Cess on income tax as in 2.3.1.

3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM "SALARIES":

3.1 Method of Tax Calculation:

Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial year 2015-16. The income-tax is required to be calculated on the basis of the rates given above, subject to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at the time of each payment. No tax, however, will be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs.2,50,000/- or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical illustrations of computation of tax are given at Annexure-I).

3.2 Payment of Tax on Perquisites by Employer:

An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at its option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. However, the employer will have to pay the tax at the time when such tax was otherwise deductible i.e. at the time of payment of income chargeable under the head “salaries” to the employee.

3.2.1 Computation of Average Income Tax:

For the purpose of making the payment of tax mentioned in para 3.2 above, tax is to be determined at the average of income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head "salaries", including the value of perquisites for which tax has been paid by the employer himself.

3.2.2 Illustration:

The income chargeable under the head “salaries” of an employee below sixty years of age for the year inclusive of all perquisites is Rs.4,50,000/-, out of which, Rs.50,000/- is on account of non-monetary perquisites and the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.

Please refer to the attached file for more details