We all know that the income earned by an assessee in the previous year is taxable in the assessment year. However to collect tax from the assessee in the previous year itself the government collects it in the form of TDS.
TDS on Salary under Section 192:
Any employer who pays income to his/her employee under the head salary is liable to deduct tax at source on the amount payable. Section 192 of the Income Tax Act, 1961 contains provisions with respect to TDS on Salary.
When is TDS on salary under section 192 deducted?
TDS on salary under section 192 is deducted at the time of making payment of the salary to the employee.
What is the rate of deducting TDS on salary under section 192?
TDS under section 192 is to be deducted at the average rate of Income Tax. The average rate of Income tax is computed by dividing the amount of income-tax calculated on the total estimated income of the employee by the total estimated income of the employee
The average rate of Income Tax= Amount of income-tax calculated on the estimated income of the employee/ Total estimated income of the employee
Tax on the estimated income is to be calculated at the Income Tax rates in force in the financial year in which the payment of salary is made.
While computing TDS on salary the employer has to take into consideration the following:
(1) Income other than salary if any
(2) TDS under any other section
(3) Loss under the head "Income from house property';
(4) Deductions under Chapter VI A
(5) Relief under section 89(1) wherever applicable
Let us understand this through an illustration:
A person is employed in an organization called ABC Limited and earns an annual salary of Rs 24,00,000 and has made an investment of Rs 1,00,000 that qualifies as a deduction in Chapter VI A u/s 80C to 80 U. In such a case TDS under section 192 will be calculated as follows:
|
Particulars |
Amount |
|
Gross Total Income |
24,00,000 |
|
Less- Deductions under section 80C to 80U |
(1,00,000) |
|
Net Taxable Income |
23,00,000 |
|
Tax Payable |
5,02,500 |
|
Add health and education cess |
20,100 |
|
Total Tax Liability |
5,22,600 |
|
Average Income Tax Rate Total Estimated Tax Liability / Total Estimated Income of the employee |
5,22,600/24,00,000*100 = 21.775% |
|
TDS under Section 192 on salary |
2,00,000*21.775/100 = 43,550 pm |
To know about the computation of estimated salary under Section 192: click here
Employer to obtain evidence of claims from the employee:
For computing, the estimated income of the assessee and tax-deductible under section 192 the employer has to collect the proof of claims from the employee in Form 12 B. The employer shall receive evidence for the following claims:
- House Rent Allowance
- Leave travel Concession
- Deduction under chapter VI A
- Interest under the head house property
TDS on the salary received from more than one employer:
When an employee switches his job in such a case he shall furnish to his subsequent employer the details of the salary received and TDS deducted therefrom from the other employer under Form 12B and his current employer take such details into consideration while computing his TDS for the relevant Financial Year.
Due date to deposit TDS under Section 192:
The due date to deposit tax is on the 7th of the next month and if the returns are filed quarterly the returns are to be filed on the 7th of the next quarter.
Consequences of Failure to Deduct TDS under Section 192:
The consequences of failure to deduct TDS is covered in Section 201:
Interest Deduction:
|
Interest on TDS |
Period for which interest is to paid |
|
1.5% per month |
From the date of deduction to the date of payment |
When is TDS under section 192 not required to be deducted:
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.
TDS deduction under section 192 under the New Tax Regime - Section 115 BAC
The Department of Income released a notification that if an employee wishes to opt for concessional tax rates under the new concessional rates under the new tax regime. In such a case the employee will have to intimate his employer about the same for the purpose of TDS deduction under section 192. If there is no intimation on behalf of the employee than the employer shall compute the TDS on the basis of the existing tax rates. Also, once the intimation is made the computation of TDS will be done on that basis only it cannot be changed. However, the department also notified that such intimation has nothing to do with the filing of Income Tax Return, which means that an employee can file his return under the old tax regime.
Read the official notification: here
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