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Haven't filed taxes yet? Don't be late - File your taxes today. Section 192 deals with the TDS on salary income. It mandates every employer to deduct TDS on salary payment, in case the salary of the employee exceeds the basic exemption limit.
This section impacts most of the salaried people in India. In this guide, we will explain all the important provisions of 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 192Employer here means :
The important condition for TDS deduction under section 192 is the presence of Employer-Employee relationship (irrespective of the government employee, private or other).
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.
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 ____________________________ Period of Employment
For the purpose of calculation of TDS on salary, following points shall be considered :
|Income from salary||4,00,000|
|Interest on home loan||2,15,000|
|Taxable Income (Interest upto Rs. 2 lakh will be set off from salary income)||2,20,000|
We will understand TDS calculation on salary with one example
|Estimated Salary Income||9,60,000|
|Less :- Standard Deduction||50,000|
|Estimated Gross Total Income||9,10,000|
|Less : Deduction under Chapter VI-A|
|Estimated Total Income||7,60,000|
|Estimated Tax Liability||64,500|
|Add : Health & education cess @ 4% on Rs. 64,500||2,580|
|Estimated Total Tax Liability (A)||67,080|
|TDS per month (A/12)||5,590|
|Monthly in hand salary of Mr. Win|
|Salary per month||80,000|
|Less :- TDS per month||5,590|
|Net salary in hand||74,410|
There may be two situations :
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.
Example : A is employed simultaneously by A Ltd and B Ltd on a part time basis. Salary income from A Ltd. is Rs. 55,000 per month and Rs. 50,000 per month from B Ltd. A may select any of two companies for TDS deduction on aggregate salary.
Let’s assume A selected B Ltd for TDS calculation on aggregate salary income
|Particulars (A Ltd)||Amount (Rs.)|
|Taxable salary from A Ltd after standard deduction (55,000*12 - 50,000)||6,10,000|
|TDS deducted by A Ltd||35,880|
|Particulars (B Ltd)||Amount (Rs.)|
|Aggregate taxable salary after standard deduction (55,000*12 + 50,000*12) - 50,000||12,10,000|
|Tax on total income||1,82,520|
|Less : TDS deducted by A Ltd||35,880|
|TDS to be deducted by B Ltd||1,46,640|
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 foriegn 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.
As per Section 192, tax is required to be deducted at source from salary at the time of its payment. Hence, we can say that TDS has to be deducted every month from salary if estimated salary income exceeds basic exemption limit.
The section for TDS on salary is Section 192 of The Income Tax Act, 1961.
There is no fixed rate of TDS to be deducted on salary. TDS on salary is deducted at the average rate of income tax for that financial year. The average rate of income tax has to be calculated on the basis of income tax slab rates in force for that year.
Section 192 of the Income Tax Act deals with deduction of TDS on salary income by the employer. This section only covers TDS on salary income .
In budget 2018, standard deduction of Rs. 40,000/- (Interim Budget 2019 Standard deduction increased to Rs. 50,000/- for FY 2019-20) was introduced in place of
Relief under section 89 is available when you receive any arrears of salary or advance salary.
Arrear salary is salary in dispute or increase of salary retrospectively. To claim this relief, you need to show the relief calculation in your return along with it you also need to file Form 10E online.
TDS on salary is deducted at the average rate of income tax for that financial year. The average rate of income tax has to be calculated on the basis of income tax slab rates in force for that year.
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