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Overview of Section 192: TDS on Salary

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DEDUCTION OF TAX AT SOURCE ON SALARY: SECTION 192

Applicability of TDS under section 192

This section casts an obligation on every person responsible for paying any income chargeable to tax under the head ‘Salaries’ to deduct income-tax on the amount payable.

Manner of deduction of tax

(i) Such income-tax has to be calculated at the average rate of income-tax computed on the basis of the rates in force for the relevant financial year in which the payment is made, on the estimated total income of the assessee. Therefore, the liability to deduct tax at source in the case of salaries arises only at the time of payment.

However, in case an employee intends to opt for concessional rate of tax under section 115BAC and he intimates to the deductor, being his employer, of such intention, then, the employer shall compute his total income, and deduct tax thereon in accordance with the provisions of section 115BAC.

If such intimation is not made by the employee, the employer shall deduct tax at source without considering the provision of section 115BAC of the Act.

(ii) Average rate of income-tax means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income.

(iii) The concept of payment of tax on non-monetary perquisites has been provided in sections 192(1A) and (1B). These sections provide that the employer may pay this tax, at his option, in lieu of deduction of tax at source from salary payable to the employee. Such tax will have to be worked out at the average rate applicable to aggregate salary income of the employee and payment of tax will have to be made every month along with tax deducted at source on monetary payment of salary, allowances etc.

(iv) An employer, being an eligible start up, responsible for paying any income to the assessee by way of perquisite being any specified security or sweat equity shares allotted or transferred free of cost or at concessional rate to the assessee, has to deduct or pay, as the case may be, tax on the value of such perquisite provided to its employee within 14 days from the earliest of the following dates –

– after the expiry of 48 months from the end of the relevant assessment year; or

– from the date of the sale of such specified security sweat equity share by the assessee; or

– from the date of the assessee ceasing to be the employee of the employer who allotted such shares

Such tax has to deducted or paid on the basis of rates in force for the financial year in which said specified security or sweat equity share is allotted or transferred.

(v) In cases where an assessee is simultaneously employed under more than one employer or the assessee takes up a job with another employer during the financial year after his resignation or retirement from the services of the former employer, he may furnish the details of the income under the head “Salaries” due or received by him from the other employer, the tax deducted therefrom and such other particulars to his current employer. Thereupon, the subsequent employer should take such information into consideration and then deduct the tax remaining payable in respect of the employee’s remuneration from both the employers put together for the relevant financial year.

(vi) In respect of salary payments to employees of Government or to employees of companies, co-operative societies, local authorities, universities, institutions, associations or bodies, deduction of tax at source should be made after allowing relief under section 89(1), where eligible.

(vii) A tax payer having salary income in addition to other income chargeable to tax for that financial year, may send to the employer, the following:

(a) particulars of such other income and particulars of any tax deducted under any other provision;

(b) loss, if any, under the head ‘Income from house property’.

The employer shall take the above particulars into account while calculating tax deductible at source.

(viii) It is also provided that except in cases where loss from house property has been adjusted against salary income, the tax deductible from salary should not be reduced as a consequence of making the above adjustments.

Furnishing of statement of particulars of perquisites or profits in lieu of salary by employer to employee

Sub-section (2C) provides that the employer shall furnish to the employee, a statement in Form No. 12BA giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof. The statement shall be in the prescribed form and manner. This requirement is applicable only where the salary paid/payable to an employee exceeds ` 1,50,000. For other employees, the particulars of perquisites/profits in lieu of salary shall be given in Form 16 itself.

Circular issued by CBDT

Every year, the CBDT issues a circular giving details and direction to all employers for the purpose of deduction of tax from salaries payable to the employees during the relevant financial year. These instructions should be followed.

Requirement to obtain evidence/ proof/ particulars of claims from the employee by the employer

Sub-section (2D) casts responsibility on the person responsible for paying any income chargeable under the head “Salaries” to obtain from the assessee, the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in the prescribed form and manner, for the purposes of –

(1) estimating income of the assessee; or

(2) computing tax deductible under section 192(1).

Rule 26C requires furnishing of evidence of the following claims by an employee to the person responsible for making payment under section 192(1) in Form No.12BB for the purpose of estimating his income or computing the tax deduction of tax at source:

S. No. Nature of Claim Evidence or particulars
1. House Rent Allowance Name, address and PAN of the landlord(s) where the aggregate rent paid during the previous year exceeds ` 1 lakh.
2. Leave Travel Concession or Assistance Evidence of expenditure
3. Deduction of interest under the head “Income from house  property” Name, address a n9.d 9 PAN of the lender
4. Deduction under Chapter VI-A Evidence of investment or expenditure.

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