Sec 195A

 please any body  explain the provision of Sec 195A of Income tax Act 1961????

 

Pleasse>>>

Replies (4)

 Income payable “net of tax”.39

195A. 40[In a case other than that referred to in sub-section (1A) of section 192, where under an agreement] or other arrangement, the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then, for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement.]

 
     

 

Originally posted by :kapil kumar agrawal
"  please any body  explain the provision of Sec 195A of Income tax Act 1961????
 
Pleasse>>>
"

Dear Kapil,

Sec.195A says that if the employer has paid the tax from his own pocket, then the tax that the employer pay on behalf of the employee shall be treated as income of the employee and he has to pay tax on such income too(i.e. tax for employee).........

 

For eg.....income of resident individual is Rs.6 lacs, tax comes out to be Rs.87550/-......, now the employer will be paying this tax from its pocket....but u/s 195A, the employer has to pay tax on this also as it shall be deemed income of employee, it is calculated as under;

                  Tax on income given by employer

                                  ( 1 - Tax rate)

                       87550                     =           87550             =             Rs. 126700/-

                    (1-30.9%)                                69.1%

 

This is known as grossing up..........

U can check the result by adding the tax amount in the income of the employee and then calculating the tax, viz;

 

         employee income = 600000 + 126700   =  Rs. 726700/-         Tax on this income is Rs...126700/-

 

But this Section excludes income of Sec.192(1A), which is tax on the perquisites as it shall not be grossed up and such tax can be paid by the employer by himself without adding it in income of the employee as stated above...........

 

thanx........

This section doesn't apply for employer payments

kindly,explain the provision of sec 195A regarding grossing up of income

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