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TDS on Salary under Section 192 of the Income Tax Act

Updated on: 03 May, 2023 03:29 PM

Haven't you filed taxes yet? Be on time - File your taxes today. Section 192 deals with the TDS on salary. It mandates every employer to deduct TDS on salary payments, in case the salary of the employee exceeds the basic exemption limit.

This section impacts the in-hand salary of most salaried people in India. In this guide, we will explain all the important provisions of TDS under section 192.

Who is required to deduct TDS u/s 192 of the Income Tax Act?

Any employer who pays salary to an employee(resident or non-resident) is required to deduct TDS every month under section 192

Employer here means:

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

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 deduction under section 192

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 fewer Deductions under Chapter VIA) of an employee exceeds the 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

Basic exemption limit under the new regime as per Union Budget 2023 is Rs. 3,00,000 for all the individuals.

In the case of 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.

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 tax deduction under section 192?

For calculation of TDS on salary, the 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 are submitted by the employee.
  • Interest on home loan (if any) will be set off from salary income to arrive at estimated income for TDS calculation if the evidence is given in Form 12BB by the employee.
  • It also happens that many employees make investments to avail tax benefits i.e., to reduce their tax liability. But, as the employer does not know about such investment, the 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 to explain section 192 deduction:

Particulars Amount
Income from salary 4,00,000
Other income 20,000
Interest on a home loan on self-occupied property 2,15,000
Taxable Income (Interest upto Rs. 2 lakh will be set off from salary income) 2,20,000

In the above case, no TDS is required to be deducted by the employer, as the income is below the basic exemption limit.

We will understand TDS calculation on salary with one example

Particulars Amount
Estimated Salary Income 9,60,000
Less :- Standard Deduction 50,000
Estimated Gross Total Income 9,10,000
Less : Deduction under Chapter VI-A
Section 80C 1,50,000
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

How is TDS deducted in case of multiple employers?

There may be two situations:

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

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.

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

How to calculate TDS in case salary is payable in foriegn currency?

In such a case, first of all, the 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 arrears.

After conversion, calculate TDS as per normal provisions of TDS deduction.

For example, if a salary is paid in October in foriegn currency, then the rate of exchange shall be taken, which prevails on 30th September.

What is the time limit to deposit TDS under Section 192?

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 is TDS Statement issued and by whom?

When the employer deducts TDS, he is responsible for providing a 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.

What are the consequences of non-compliance under section 192 result into?

  1. Levy of Interest: If the employer does not deduct the TDS on salary or deduct the TDS but is not deposited to the government, then interest is required to be paid on such amount.
  2. Disallowance of expenses: Also, the employer is only eligible to claim the deduction of salary expense from PGBP income if TDS is deducted on time.
    The amount of disallowed salary expenses shall be
    1. - 30% of the Salary payment to the Resident.
    2. - 100% of Salary payment to Non-Resident.

Some Important Points

  1. If tips are paid to the waiter directly or through the employer (which may be paid by the customers in the form of a service charge), in that case, the employer is not responsible for deducting TDS from the tip amount since it does not become part of salary income.
  2. 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.
  3. Payment made to doctors by the hospital is considered as professional fees hence TDS u/s 192 shall not be deducted. But, if it is a contract of service then TDS u/s 192 shall be deducted.
  4. If tax on non-monetary perquisites is borne by the employer then no TDS is required to be deducted from salary to that extent.

Frequently Asked Questions

Q- Is TDS deducted every month from salary?

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 must be deducted monthly from the salary if the estimated salary income exceeds the basic exemption limit.

Q- What is the section for TDS on salary?

The section for TDS on salary is Section 192 of The Income Tax Act, 1961.

Q- What percentage of TDS is deducted from salary?

There is no fixed rate of TDS to be deducted from salary. TDS on salary is deducted at the average income tax rate for that financial year. The average rate of income tax has to be calculated based on income tax slab rates in force for that year.

Q- What is section 192 of the income tax act?

Section 192 of the Income Tax Act deals with the deduction of TDS on salary income by the employer. This section only covers TDS on salary income.

Q- What is the Standard Deduction for salaried employees?

In budget 2018, a 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

  1. Transport Allowance of Rs. 19,200/-
  2. Medical Reimbursement of Rs. 15,000/-

Q- What is Relief under section 89?

Relief under section 89 is available when you receive any arrears of salary or advance salary.

Arrear salary is the salary in the 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.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.