Tds - employee salary
This query is : Resolved
04 June 2012
While deducting TDS from Salary of employee should company ensure that :
a) 30% of employee tax liability is settled before Sep 15th
b) 60% of employee tax liability is settled before Dec 15th
c) 100% of employee tax liability is settled before Mar 15th
Kindly quote Sections / Rules wherever possible.
a) 30% of employee tax liability is settled before Sep 15th
b) 60% of employee tax liability is settled before Dec 15th
c) 100% of employee tax liability is settled before Mar 15th
Kindly quote Sections / Rules wherever possible.
04 June 2012
There is no such requirement. This provision is applicable for advance tax and not for TDS.
The only thing to be ensured is that TDS is deducted on a monthly basis and 100% of the tax payable is deducted by way of TDS throughout the year.
The only thing to be ensured is that TDS is deducted on a monthly basis and 100% of the tax payable is deducted by way of TDS throughout the year.
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04 June 2012
Thanks for your response Sir.
Note that if an employee's salary tax liability is deducted equally over 12 months period the advance tax requirement will be automatically met.
Please let me know which section of Income tax makes it mandatory to deducted TDS on salary every month.
If there is no such rule or section I presume it is possible to deduct total tax liability of employee on 31 March.
Note that if an employee's salary tax liability is deducted equally over 12 months period the advance tax requirement will be automatically met.
Please let me know which section of Income tax makes it mandatory to deducted TDS on salary every month.
If there is no such rule or section I presume it is possible to deduct total tax liability of employee on 31 March.
04 June 2012
Section 192 provides that TDS is required to be deducted at the time of PAYMENT.
Since payment of salary is made on a monthly basis, TDS is also required to be deducted on a monthly basis.
Since payment of salary is made on a monthly basis, TDS is also required to be deducted on a monthly basis.
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04 June 2012
Thanks again Sir.
Is it possible to delay deduction of TDS till the month total salary of monthly salary paid reaches the tax exemption limit and then onwards to deduct TDS every month?
If not, What is the reason?
Is it possible to delay deduction of TDS till the month total salary of monthly salary paid reaches the tax exemption limit and then onwards to deduct TDS every month?
If not, What is the reason?
04 June 2012
Not possible.
As I said, TDS has to be deducted at the time of payment. At the time of payment you have to calculate the estimated annual income and calculate estimated tax liability on the same.
This tax liability has to be deducted on monthly basis as TDS.
As I said, TDS has to be deducted at the time of payment. At the time of payment you have to calculate the estimated annual income and calculate estimated tax liability on the same.
This tax liability has to be deducted on monthly basis as TDS.
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04 June 2012
Thank you Sir.
It is possible for the employee to take a stand that he may not continue beyond the month in which total salary paid to him during a particular year exceeds exemption limit and request for non TDS deduction.
Please let me know which section / Rule of Income Tax Act says - TDS has to be deducted from Estimated Salary of Complete one year.
It is possible for the employee to take a stand that he may not continue beyond the month in which total salary paid to him during a particular year exceeds exemption limit and request for non TDS deduction.
Please let me know which section / Rule of Income Tax Act says - TDS has to be deducted from Estimated Salary of Complete one year.
04 June 2012
Section 192(1).
04 June 2012
Thanks. I have few more doubts
1) Is TDS deduction under all relevant section always on ESTIMATED payment and NOT on ACTUAL amounts?
2) Supposing the accountant forgets to deduct TDS from the salary of employee OR short deducts the TDS, should the employee pay advance tax to ensure that he is not hit by penal provisions for non payment of advance tax at applicable slabs?
1) Is TDS deduction under all relevant section always on ESTIMATED payment and NOT on ACTUAL amounts?
2) Supposing the accountant forgets to deduct TDS from the salary of employee OR short deducts the TDS, should the employee pay advance tax to ensure that he is not hit by penal provisions for non payment of advance tax at applicable slabs?
05 June 2012
1. TDS is deducted on estimated income only u/s 192.
Under all other sections, TDS is deducted on the actual amount.
2. If TDS is short deducted by employer, interest is NOT levied on the employee.
He will pay the balance as self assessment tax at the time of filing the return.
Under all other sections, TDS is deducted on the actual amount.
2. If TDS is short deducted by employer, interest is NOT levied on the employee.
He will pay the balance as self assessment tax at the time of filing the return.
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05 June 2012
Thanks. My doubts does not seem to end. Here are few more doubts
1) If TDS on salary is to be deducted on ESTIMATED basis why is - On Bonus payable to employee under Bonus Act, TDS is deducted on payment basis ? In this regard kindly refer below link :
https://www.caclubindia.com/experts/actual-bonus-payable-as-per-bonus-act-and-tds-payable-on-it-982980.asp
2)Please let me know which section says penalty for non payment of advance tax in time is NOT applicable for salaried employee.
1) If TDS on salary is to be deducted on ESTIMATED basis why is - On Bonus payable to employee under Bonus Act, TDS is deducted on payment basis ? In this regard kindly refer below link :
https://www.caclubindia.com/experts/actual-bonus-payable-as-per-bonus-act-and-tds-payable-on-it-982980.asp
2)Please let me know which section says penalty for non payment of advance tax in time is NOT applicable for salaried employee.
27 July 2025
Great questions! Let’s take them one by one with clarity and relevant legal backing:
---
### **1) Why is TDS on Bonus deducted on *payment* basis and not on *estimated* basis?**
#### ✅ **Legal Context:**
* TDS on salary (including bonus) is governed by **Section 192** of the Income Tax Act, 1961.
* Section 192 requires **TDS on "income chargeable under the head Salaries"** on an **estimated basis** during the financial year.
#### ✅ **Why bonus is taxed on *payment* basis:**
* **Bonus under the Payment of Bonus Act, 1965** is often **uncertain in amount and timing** at the beginning of the year.
* Hence, even though TDS on salary is to be made monthly based on estimation, **bonus gets taxed only when the amount becomes certain and is paid or credited.**
#### 💡 **CBDT Circular No. 08/2013**, dated 10 October 2013 (latest salary TDS guidance as per Rule 26):
> *“Any other payment like bonus, commission, etc., which forms part of salary, should also be taken into account for computing total income and TDS, at the time when it is paid or credited, whichever is earlier.”*
So, **bonus TDS is deducted on actual payment/credit**, not estimated unless already included in monthly TDS computation.
---
### **2) Is penalty for non-payment of advance tax applicable to salaried employees?**
#### ✅ **Relevant Section:**
* **Section 207 and Section 208** deal with liability to pay advance tax.
* **Section 234B & 234C** deal with interest for default in payment of advance tax.
#### ✅ **Exemption for salaried individuals (with no other income):**
* As per **proviso to Section 207(2)**:
> *“An individual resident in India, who does not have any income chargeable under the head ‘Profits and gains of business or profession’, is not liable to pay advance tax if the tax payable is less than ₹10,000.”*
#### ✅ **Implication:**
* **Salaried employees usually do not need to pay advance tax**, because:
* Their employer **deducts TDS under section 192**.
* They do **not have business/professional income**.
* But if a salaried employee has **other significant income** (e.g., rental income, interest, capital gains), and **TDS is insufficient**, then **advance tax is applicable**.
#### ❌ **There is no blanket exemption from interest under Sections 234B/234C** for salaried individuals with other income.
---
### ✅ **Summary Table:**
| Topic | Explanation |
| ----------------------- | -------------------------------------------------------------------------------------------------------------------------------- |
| **TDS on Bonus** | Deducted on **payment/credit basis**, not monthly estimate, due to uncertain amount/timing |
| **Advance Tax Penalty** | **Not applicable** if employee has only salary income and tax < ₹10,000; otherwise, penalty under **Sections 234B/234C** applies |
---
Let me know if you want sample formats or detailed circulars for reference.
---
### **1) Why is TDS on Bonus deducted on *payment* basis and not on *estimated* basis?**
#### ✅ **Legal Context:**
* TDS on salary (including bonus) is governed by **Section 192** of the Income Tax Act, 1961.
* Section 192 requires **TDS on "income chargeable under the head Salaries"** on an **estimated basis** during the financial year.
#### ✅ **Why bonus is taxed on *payment* basis:**
* **Bonus under the Payment of Bonus Act, 1965** is often **uncertain in amount and timing** at the beginning of the year.
* Hence, even though TDS on salary is to be made monthly based on estimation, **bonus gets taxed only when the amount becomes certain and is paid or credited.**
#### 💡 **CBDT Circular No. 08/2013**, dated 10 October 2013 (latest salary TDS guidance as per Rule 26):
> *“Any other payment like bonus, commission, etc., which forms part of salary, should also be taken into account for computing total income and TDS, at the time when it is paid or credited, whichever is earlier.”*
So, **bonus TDS is deducted on actual payment/credit**, not estimated unless already included in monthly TDS computation.
---
### **2) Is penalty for non-payment of advance tax applicable to salaried employees?**
#### ✅ **Relevant Section:**
* **Section 207 and Section 208** deal with liability to pay advance tax.
* **Section 234B & 234C** deal with interest for default in payment of advance tax.
#### ✅ **Exemption for salaried individuals (with no other income):**
* As per **proviso to Section 207(2)**:
> *“An individual resident in India, who does not have any income chargeable under the head ‘Profits and gains of business or profession’, is not liable to pay advance tax if the tax payable is less than ₹10,000.”*
#### ✅ **Implication:**
* **Salaried employees usually do not need to pay advance tax**, because:
* Their employer **deducts TDS under section 192**.
* They do **not have business/professional income**.
* But if a salaried employee has **other significant income** (e.g., rental income, interest, capital gains), and **TDS is insufficient**, then **advance tax is applicable**.
#### ❌ **There is no blanket exemption from interest under Sections 234B/234C** for salaried individuals with other income.
---
### ✅ **Summary Table:**
| Topic | Explanation |
| ----------------------- | -------------------------------------------------------------------------------------------------------------------------------- |
| **TDS on Bonus** | Deducted on **payment/credit basis**, not monthly estimate, due to uncertain amount/timing |
| **Advance Tax Penalty** | **Not applicable** if employee has only salary income and tax < ₹10,000; otherwise, penalty under **Sections 234B/234C** applies |
---
Let me know if you want sample formats or detailed circulars for reference.
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