TDS on Salary under Section 192 of the Income Tax Act

Who can Deduct TDS under Section 192 ?

Any employer who pays salary to an employee(resident or non-resident) is required to deduct TDS every month under section 192. TDS deduction under section 192 is must the presence of Employer-Employee relationship.

The employer’s can be-

Individual
HUF
Firm
Company
Trusts
AOP, BOI
Local Authority
Every Artificial judicial person

When is TDS on salary deducted u/s 192?

AS per section 192 of Income Tax Act, TDS is required to be deducted by the employer at the time of payment of salary.

Salary income is taxable ( (i.e, Gross Total Income fewer Deductions under Chapter VIA )

• 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

For advance salary and arrears 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 the salary exceeds the basic exemption limit.

 

Read Also : Income tax scrutiny on International transactions above Rs 50,000

 

What is the 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 throughout employment, i.e., months.

TDS on salary = Estimated Total Tax Liability/Period of Employment (months)

How to calculate TDS on Salary under section 192?

Step 1:

At first, the employer estimates employee’s salary for the relevant financial year. This should include basic pay, dearness allowance, perquisites granted by the employer, other allowances granted by the employer like HRA, LTA, meal coupons, etc., EPF contributions, bonus, commissions, gratuity, salary from the previous employer, if any, etc.

Step 2:

In the next step, the employer calculates exemptions under Section 10 of the Income Tax Act. The exemptions can be applicable on allowances like HRA, travel expenses, uniform expenses, children’s education allowances, etc. Also, reduce the amount of professional tax paid, entertainment allowance and standard deduction of Rs 50,000.

Step 3:

The employer reduces such exemption from the gross monthly income and the net amount will be treated as the taxable salary income.

Step 4:

If the employee has provided the information about other incomes such as rental income from house property or bank deposits, etc. In that case, such amounts should be added to the net taxable salary. Further, the interest paid on housing loans are deducted from the house property income, but if there is no income from house property, there will be a negative figure under the head ‘income from house property’. After adding or reducing the said amounts, the calculated figure will be the employee’s gross total income.

Step 5:

Now, the employer reduces the investments for the year, which fall under Chapter VI-A of the Income Tax Act declared by the employees as per the investment declaration submitted. The declaration may include the amounts of investments such as PPF, employee’s provident fund, ELSS mutual funds, NSC, Sukanya Samridhi account. It may also income expenditures such as home loan repayment, life insurance premiums, NSC, Sukanya Samridhi account, etc. Similarly, the employer allows deduction under various other sections such as Section 80D, 80G, etc.

How to calculate TDS if Salary from More Than One Employer in a Financial year?

There may be two situations:

• Change of job during the year
• Engaged with two or more employers simultaneously

 

Read Also : Section 192A of Income Tax Act: TDS on EPF Withdrawal

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.

What is the time limit for depositing TDS u/s 192 ?

What is the due dates for TDS returns u/s 192 ?

The employer has to file a salary TDS return in Form 24Q. The said form is to be submitted every quarter. Details of salary paid to the employees and TDS deducted on such payment is to be reported in 24Q. They shall file quarterly returns in Form 24Q within the following due dates:

How many annexures consists Form 24Q ?

• consists of 2 – Annexure I and Annexure II
• While Annexure I has to be submitted for all four quarters of a FY, Annexure II is not required to be submitted for the first three quarters. Annexure-II has to be submitted in the last quarter, i.e. Jan – Mar quarter only.
• Besides, if the employer doesn’t deduct TDS or deducts TDS at a lower rate, he’ll have to provide the reasons for such non-deduction or lower deduction

What is the format of TDS certificate under section 192?

• The employer is responsible for providing a TDS certificate to the employee for tax deducted from the salary.
• After filing the TDS return, the TDS certificate (Form 16) is generated in a specified format and it can be downloaded from the TRACES utility. Form 16 contains Part-A & Part-B.
• Part A of Form 16 mainly contains the details of quarterly TDS deducted and deposited and details of PAN and TAN of the employer, and other information.
• Part B of Form 16 is an Annexure to Part A. Part B is to be prepared by the employer for their employees. It contains salary breakup, exemptions, deductions approved under Chapter VI-A and the income tax amount.

Example

A resident employee Santosh (aged 30), who works for Onlinesolves LTD, is fixed as Rs 1,00,000 per month as salary during the FY 2022-23. Santosh has invested 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?

Calculation of TDS from monthly salary

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.

If Employee Selects New Tax Regime

the employee makes a declaration to the employer for opting new tax regime, the employer shall deduct tax at source as below

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 (given below table), 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.

 

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