TDS on salary (Section 192) | AY 2019-20 onwards

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.

In simple words, TDS is to be deducted by every employer who are paying salaries to employees.

How TDS is calculated on salary?

• TDS is to be deducted only if employee has to pay income tax as per normal provisions of Income Tax Act, by considering his total income.
• Example - If salary of Mr A, employee, is Rs 4,00,000/- Deductions in respect of LIC are Rs 50,000/- So, total income is Rs 3,50,000/- For financial year 2018-19, tax has to be paid if total income exceeds Rs 2,50,000/- So, in this case, as he has to pay tax. TDS provisions are applicable, and employer has to deduct TDS on his salary at the time of making payment.
• TDS should be deducted every month from his salary.
• 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.
• 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.
• 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.
• 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.
• For purposes of deduction of tax out of salaries payable in a foreign currency, the value of salaries in terms of rupees should be calculated at the prescribed rate of exchange as specified in Rule 26 of the Income-tax Rules, 1962.
• 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.
• 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:
  • particulars of such other income;
  • particulars of any tax deducted under any other provision;
  • particulars of the 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.
  • 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.

Compliance with 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.

Does employer has to obtain evidence/proof/particulars of claims from the employee?

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 –

• estimating income of the assessee; or
• computing tax deductible under section 192(1)

Rule 26C has been inserted in the Income-tax Rules, 1962, with effect from 1^st June, 2016, to require 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:

Notes:

Section 192(1) requires any person responsible for paying any income chargeable under the head “Salaries” to deduct tax at source at the time of payment. If an employee receives income chargeable under a head other than “Salaries”, section 192 does not get attracted at all..