Who is deduct TDS u/s 192
- Any employer who pays salary to an employee(resident or non-resident) is required to deduct TDS every month under section 192
- The important condition for TDS deduction under section 192 is the presence of Employer-Employee relationship.
- If the employee intend to opt section 115BAC & submitted declaration to employer then employer shall deduct TDS considering provisions of section 115BAC.
- If employer bear the tax on Non- perquisites, then this need not be deducted from the salary of employee . Amount borne shall not allowed to employer u/s 40(a)(v) and same will be exempted in the hands of employee u/s 10(10CC). Also the tax so borne by the employer treated as TDS and credit of the same can be availed by employee.
Employer here means :
- Individual
- HUF
- Firm
- Company
- Trusts
- AOP, BOI
- Local Authority
- Every Artificial judicial person
When is TDS on salary deducted u/s 192?
- TDS is required to be deducted by the employer at the time of payment of salary income when taxable income (i.e Gross Total Income less Deductions under Chapter VIA) of an employee exceeds basic exemption limit which is
– Rs. 2,50,000/- in case age is below 60 years
– Rs. 3,00,000/- in case age is 60 years or more but below 80 years
– Rs. 5,00,000/- in case age is 80 or above
- In case of advance salary and arrear of salary, TDS is required to be deducted by the employer at the time of payment.
- TDS on salary is required to deduct even if the employee does not have PAN if salary exceeds the basic exemption limit.
Rate of TDS u/s 192:
- TDS under this section is calculated on the estimated income earned during the year at an average tax rate. Unlike other sections of TDS under Income Tax, there is no fixed rate of TDS under section 192.
- To compute the rate of TDS, the estimated total tax liability on such estimated income is divided over the period of employment i.e. months.
TDS on salary = Estimated Total Tax Liability / 12 Months Period
For the purpose of calculation of TDS on salary, following points shall be considered :
- Income other than salary like rent income etc shall also be considered by the employer for calculation of TDS on salary if details of such income submitted by the employee.
- Interest on home loan (if any) up to Rs. 2,00,000/- will be set off from salary income to arrive at estimated income for the purpose of TDS calculation if evidence is given in Form 12BB by the employee.
- It also happens that many employees make investments to enjoy tax benefits i.e. to reduce their tax liability.
- But, as the employer does not know about such investment, TDS amount increases than the actual tax liability. In such cases, you can declare information about all your tax saving investments to the employer using Form 12BB. When an employer sees this, he/she will consider these investments and calculate your TDS amount accordingly.
Example
A resident employee Santosh (aged 40), who works for Onlinesolves.com, is fixed as Rs 1,00,000 per month as salary during the FY 2022-23. Santosh has investment in Rs 50,000 in ELSS funds, Rs 60,000 in PPF, Rs 40,000 in NSC. What will be the monthly TDS deducted u/s 192?
His total income would be estimated as Rs 12,00,000.
Standard deduction of Rs 50,000 is allowed on salary income.
Deduction (as declared by employee) under Chapter VI A would be Rs 1,50,000.
Ans: Calculation of TDS from Monthly Salary
| Particulars | Amount (Rs) |
|---|---|
| Gross Salary | 12,00,000 |
| Less: Standard deduction | 50,000 |
| Gross Taxable income | 11,50,000 |
| Less: Chapter VI-A deductions | 1,50,000 |
| Taxable income | 10,00,000 |
| Tax as per applicable slab rates (working) | 1,12,500 |
| Cess @ 4% | 4,500 |
| Total tax | 1,17,000 |
If there are 12 months remaining for TDS deduction in the financial year the employer will deduct TDS u/s 192 = Rs 1,17,000 / 12 = Rs 9,750.
Working
Tax computation on Rs: 10,00,000
| Particulars | Amount (Rs) |
|---|---|
| 0 to Rs 2.5 lakh | 0 |
| Rs 2.5 lakh to Rs 5 lakh – 5% | 12,500 |
| Rs 5 lakh to Rs 10 lakh – 20% | 1,00,000 |
| Total Tax | 1,12,500 |
Case-2 With above example if Santosh opted for new Tax Regime
In the new tax regime, standard deduction of Rs 50,000 and deduction for investment in ELSS, PPF, NSC will not be allowed as a deduction. And tax will be calculated as per the new slab rate of individual resident for calculation of TDS on salary u/s 192 , i.e. Rs 1,05,000.
Education and higher education cess of 4% on the income tax = Rs 4,200.
Therefore, the net tax payable = Rs 1,09,200.
Accordingly, TDS u/s 192 to be deducted per month = Rs 1,09,200 / 12 = Rs 9100.
Change of job during the year:
There may be a situation where there is more than one employer in one particular financial year. If the employee resigns and joins another employer during the FY then the details of his previous employment is required to be given in Form 12B to his new employer to deduct TDS properly. Accordingly, the next employer will consider his previous salary and TDS deducted while calculating TDS for the remaining months of the financial year.
Engaged with two or more employers simultaneously:
Similarly, when an employee is engaged with more than one employer simultaneously. In such a case, he should provide details about his salary and TDS in Form 12B to any one of the employers. And one of the employers is required to deduct TDS on aggregate salary.
NOTES
- Where firm pays salary to partners, Section 192 is not apllicable as it is taxable in hands of partner under the head Business/Profession.
- Remuneration paid to directors by the company is not covered under section 192. Generally, TDS on remuneration paid to the director shall be deducted under section 194J provided there is no employee employer relationship exist.
- In such a case, first of all salary will be converted into Indian currency. The rate of exchange will be the last day of the month immediately preceding the month in which the salary is due, or is paid in advance or in arrears. After conversion, calculate TDS as per normal provisions of TDS deduction.
- For example, if salary is paid in the month of October in foreign currency then the rate of exchange shall be taken which prevail on 30th September.
- TDS deducted from salary by the employer is required to be deposited to the government within given below timeline to avoid interest :
- TDS deducted for April-Feb : 7th of subsequent month.
- TDS deducted for March : 30th April
- When TDS is deducted by the employer, he is responsible to provide TDS certificate to the employee. Form 16 is provided to the employee which contains Part-A & Part-B. Form 16 contains the information related to tax deducted by the employer, salary details & deductions.
