Is there any TDS Category where retrospective tax calculation is done?

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Atiqure Rahman (Querist)
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12 February 2024 Can anyone help to clarify one TDS concept. Like I want to know that is there any TDS category where retrospective calculation is done in Cumulative Threshold?

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Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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09 July 2024 Yes, there are certain TDS categories where retrospective calculation is done based on cumulative thresholds. One common example of this is **Section 192** of the Income Tax Act, which deals with TDS on salaries. Here’s how retrospective calculation works in this context:

1. **Cumulative Threshold:** TDS on salaries (Section 192) is calculated based on the cumulative income of the employee from the beginning of the financial year (April to March). The employer is responsible for deducting TDS on salary payments considering the aggregate income of the employee up to the current month.

2. **Retrospective Calculation:** If the aggregate income of the employee up to the current month exceeds the threshold limit for TDS deduction, the employer may need to retrospectively calculate and deduct TDS for the earlier months where it was not deducted or was deducted at a lower rate.

3. **Adjustment in Remaining Periods:** Once TDS is deducted retrospectively, adjustments are made in subsequent salary payments to ensure that the correct amount of TDS is deducted by the end of the financial year.

This retrospective calculation ensures that TDS on salaries is deducted accurately throughout the financial year, considering the employee's total income up to that point.

It's important to note that retrospective calculation based on cumulative thresholds may apply to other TDS categories as well, depending on specific provisions under the Income Tax Act or other tax regulations. For any specific TDS category or scenario, consulting with a tax advisor or chartered accountant familiar with Indian tax laws would provide the most accurate guidance.

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