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Allowance of rebate u/s 87a for tds

Ankan Mohanty (INTERNAL AUDITOR) (97 Points)

19 March 2014

Hello,

I'm facing an ambiguity regarding deduction of tax at source u/s 192 for the employees. The thing is our company has taken a stand to deduct tax at source before allowing rebate u/s 87A. However, many employees are arguing that we should take into consideration the rebate u/s 87A.

I have read many articles and also the circular no.8/2013 dtd 10th October, 2013 issued by CBDT,relating to INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2013-14 UNDER SECTION 192 OF THE INCOME-TAX ACT,1961 nowhere in that circular it has been mentioned regarding the consideration of rebate u/s 87A.

Please Advise in what measures should be adopted.

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5 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 19 March 2014

Para 9.2 of the abovementioned circular says that,
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“Income-tax on such income shall be calculated at the rates given in para 2.1 of this Circular keeping in view the age of the employee and subject to the provisions of sec. 206AA, as discussed in para 4.8. Rebate as per Section 87A upto Rs 2000/- to eligible persons (see para 6) may be given. Surcharge shall be calculated in cases where applicable (see para 2.2).”

Ankan Mohanty (INTERNAL AUDITOR) (97 Points)
Replied 19 March 2014

But it says 'May Be Given' , we can deduct by not allowing the Rebate u/s 87A.

CA Ankit Mittal (Charterd Accountant) (118 Points)
Replied 19 March 2014

Right on man! Why give the benefit of rebate. Let employees file their IT return and wait unnecessarily for 2-3 months to get the refund.

Ankan Mohanty (INTERNAL AUDITOR) (97 Points)
Replied 19 March 2014

If an employee has other income, which he has not disclosed, then we will be liable for lower deduction as he may or may not get the benefit of rebate.

Also the rebate is not fixed at a certain rate, it may be 2000/- or less, which can only be assessed when return is being filed.

Also the chapter of tds comes before chapter of rebate, so the sections are being applied accordingly.

Sathya Sankeerth K N (Chartered Accountant) (429 Points)
Replied 19 March 2014

Dear Ankan,

TDS deduction will normally based on the details of income provided by the employee.

As you said deduction can be 2000 or less than that.

In your case if he has not disclosed the income, then the tax shall be low accordingly deduction shall also be low. In that case, employee shall file his return of income inorder to disclose the other income and he will pay the differential tax after considering rebate.

As Ankit said, it is better to give rebate and then deduct TDS otherwise few employees may unnecssarily for refund.

Circular has said rebate may given. Why not take it in favour of assessee