Tds on salary. section 192 of the i.t.act, 1961

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Guest

Guest (Querist)

15 January 2013 Suppose Rs.20000/- monthly net salary,than yr salary (20000x12)=240000/- & tax on salary is Rs.4120/-. My question is, can I charge TDS on the salary from 11th month instated of starting month of salary?? because Non Taxable limit(200000) is cross at 11th month .

Guest

Guest (Expert)

16 January 2013 Tax should be deducted from first month itself.

Guest

Guest (Querist)

17 January 2013 Suppose net salary Rs.6000/- p.m (Fixed) but incentive per month 0-15000/-(Variable)in that case (1)when TDS charge? (2)TDS Charge on Salary(192) or Commission(194H), because Incentive is a part of salary of employee??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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27 July 2025 You're raising **two key questions** regarding TDS under **Section 192** of the Income Tax Act, 1961:

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## 🔹 **Question 1:**

> Can I deduct TDS only from the 11th month onward, since total salary exceeds exemption limit only at that point?

### ✅ Answer:

**No, TDS must be deducted from the beginning of the financial year**—not just after taxable limit is exceeded.

### Why?

* Under **Section 192(1)**, the employer must estimate **total salary income** of the employee **for the entire year** and deduct TDS **every month proportionately**.
* So even if the tax becomes applicable due to income crossing the ₹2,00,000 limit (for FY 2012–13), **TDS has to be spread evenly across all 12 months**.

📌 **What if you start late?**

* You'll have to **recover the balance TDS** in the remaining months, which could create a **cash flow issue** for the employee.

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## 🔹 **Question 2:**

> If an employee gets fixed salary + variable incentive (₹0–₹15,000/month), then:

### (1) When should TDS be deducted?

✅ **TDS should be deducted every month**, **on estimated total annual income**, including both:

* Fixed salary, and
* Likely/average incentives (based on historical or projected data).

📌 Adjustments can be made **monthly or quarterly** as better estimates of incentives become available.

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### (2) Under which section should TDS be deducted—**192 (Salary)** or **194H (Commission)**?

✅ **TDS under Section 192 (Salary)**, **not 194H**.

### Why?

* **Incentives/commissions paid to employees** as part of their **employer–employee relationship** are **treated as salary**, **not commission**.
* Section **194H** applies to **independent agents**, not to employees.

> So even if the incentive is performance-linked, if the person is on payroll, **entire payment (fixed + variable)** is considered **salary** and taxable under **Section 192**.

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## ✅ Final Summary:

| Issue | Treatment |
| ------------------------------------- | ------------------------------------------------------ |
| Delay TDS until income crosses limit? | ❌ No – Deduct from beginning of year |
| Salary + variable incentive? | ✅ Include in total income estimate |
| TDS section for variable incentive? | ✅ Section **192** (not 194H) |
| TDS method | Based on **estimated annual salary**, deducted monthly |

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Let me know if you’d like a monthly TDS calculation template or Excel sheet.

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