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New circular dtd 16th Jan on IT Deduction from salaries for FY 2019-20

Guest 
on 18 January 2020


Reference is invited to Circular No. 1/2019 dated 01.01.2019 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 2018-19, were intimated. The present Circular 4/2020 dtd 16th January contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2019-20 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, 2019:

As per the Finance (No.2) Act, 2019, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head "Salaries" for the financial year 2019- 20 (i.e. Assessment Year 2020-21) at the following rates:

Rates of tax

A. Normal Rates of tax:

 

Sl No

Total Income

Rate of tax

1

Where the total income does not exceed Rs. 2,50,000/-.

Nil

2

Where the total income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-.

5 per cent of the amount by which the total income exceeds Rs. 2,50,000/-

3

Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-.

Rs. 12,500/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.

4

Where the total income exceeds Rs. 10,00,000/-.

Rs. 1,12,500/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-

B. Rates of tax for every individual, being a 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:

 

Sl No

Total Income

Rate of tax

1

Where the total income does not exceed Rs. 3,00,000/-

Nil

2

Where the total income exceeds Rs. 3,00,000 but does not exceed Rs. 5,00,000/-

5 per cent of the amount by which the total income exceeds Rs. 3,00,000/-

3

Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-

Rs. 10,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.

4

Where the total income exceeds Rs. 10,00,000/-

Rs. 1,10,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-

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:

 

Sl No

Total Income

Rate of tax

1

Where the total income does not exceed Rs. 5,00,000/-

Nil

2

Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000/-

20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-

4

Where the total income exceeds Rs. 10,00,000/-

Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-

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 or section 112A of the Income-tax Act, shall be increased by a surcharge for the purposes of the Union, calculated, 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,—

(a) "having a total income" "(including the income under the provisions of section 111A and section 112A)"exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent. of such income-tax;

(b) "having a total income income" "(including the income under the provisions of section 111A and section 112A)" exceeding one crore rupees but not exceeding two crore rupees, at the rate of fifteen per cent. of such income-tax;

(c) "having a total income" "(excluding the income under the provisions of section 111A and 112 A)" exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent. of such income-tax; and

(d) "having a total income" "(excluding the income under the provisions of section 111A and 112 A)" exceeding five crore rupees, at the rate of thirty-seven per cent of such income-tax:

(e) having a total income (including income under the provisions of section 111A and 112 A) exceeding two crores rupees, but is not covered under clauses (c) and (d), shall be applicable at the rate of fifteen percent of such income tax:

Provided that in case where total income includes any income chargeable under section 111A and 112 A of the Income Tax Act, the rate of surcharge on the amount of income tax computed in respect of that part of income shall not exceed fifteen percent.

Provided that in the case of persons mentioned above having total income exceeding,-

(a) fifty lakh rupees but not 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 fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees;

(b) one crore rupees but does not exceed two crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees;

(c) two crore rupees but does not exceed five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of two crore rupees by more than the amount of income that exceeds two crore rupees;

(d) five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of five crore rupees by more than the amount of income that exceeds five crore rupees.

2.3.1 Health and Education Cess

“Health and Education Cessâ€ï¿½ shall be levied at the rate of four percent of income tax including surcharge wherever applicable, No marginal relief shall be available in respect of such cess.

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

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 2019-20. 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 or Aadhaar number, as the case may be, 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 a 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).

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.

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.

Illustration:

The income chargeable under the head "salarie" of an employee below sixty years of age for the year inclusive of all perquisites is Rs. 6,00,000/-, 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.

STEPS:

 

Income Chargeable under the head "Salaries" inclusive of all perquisites

Rs. 6,00,000/-

Tax on Total Salary (including Cess)

Rs. 33,800/-

Average Rate of Tax [(33, 800/6,00,000) X 100]

5.63/%

Tax payable on Rs.50,000/= (5.63% of 50,000)

Rs. 2815

Amount required to be deposited each month

Rs. 235= 2815/12

The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee.

 

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. It provides for deduction of tax at source by such employer (as the tax payer 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 therefrom, 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).

Relief When Salary Paid in Arrear or Advance:

Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under Section 89 he may furnish to the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E duly verified by him, and thereupon the person responsible, as aforesaid, shall compute the relief on the basis of such particulars and take the same into account in making the deduction under Para(3.1) above. Further, such assessee shall upload the aforesaid Form 10E electronically in the e-Filing portal along with the return of income.

Here "university" means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under Section 3 of the University Grants Commission Act, 1956 to be a university for the purpose of that Act.

 

With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.

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