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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.
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:
The important condition for TDS deduction under section 192 is the presence of an 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, and the salary income is taxable (i.e., Gross Total Income fewer Deductions under Chapter VIA) of an employee exceeds the basic exemption limit, which is
The basic exemption limit under the new regime as per Union Budget 2023 is Rs. 3,00,000 for all 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 be deducted even if the employee does not have PAN if the 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 throughout employment, i.e., months.
TDS on salary = Estimated Total Tax Liability
____________________________
Period of Employment (months)
For the calculation of TDS on salary, the following points shall be considered:
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.
Let us 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 |
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There may be two situations:
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 are 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, 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 two companies for a 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 |
If an employee has any other income (except a loss) in the same financial year, which is taxable under a different head, he can give the details of such income and tax deducted from it to his employer. The employer will then consider them while deducting tax from his salary. However, the tax deducted at source should not be lower than what it would have been without considering such other income and tax deducted on it.
Adjustment of loss from house property (Rule 26B):
The employee cannot declare the loss under any other head, but he can declare the loss from house property. If he gives the statement of such loss to his employer, the tax deducted at source can be lower than what it would have been without considering such loss.
TDS is a tax that your employer deducts from your salary every month. But that’s not the end of your tax story. You still need to file your ITR online and claim the credit for the TDS paid. Filing your ITR can be a hassle, especially if you have other incomes or deductions. Our eCA service is a quick and easy way to file your ITR online with the help of our Chartered Accountants. They will check your TDS, income, and deductions and file your ITR precisely and on time. File your ITR before the deadline is over.
When the salary is paid in foreign currency, the tax deduction amount is computed by converting the salary amount into Indian currency using the telegraphic transfer buying rate on the date of the tax deduction. This is as per Rule 26 and Section 192(6) of the Act. This rule is only for TDS calculation. For salary income calculation, the conversion rate to be used is the telegraphic transfer buying rate on the last day of the immediately preceding month in which the salary is due or paid in advance or arrears. This is as per Rule 115.
For instance, If your monthly salary is $10,000 USD, and you are paid on the last day of each month. The telegraphic transfer buying rate for USD to INR on July 31, 2023, is 75.23, and the rate on June 30, 2023, is 74.86.
For instance, salary is due or paid for the month of July
For TDS calculation, you need to convert your salary amount into INR using the rate on the date of tax deduction, which is July 31, 2023. So, your salary in INR for TDS purposes is $10,000 x 75.23 = ₹752,300.
For salary income calculation, you need to convert your salary amount into INR using the rate on the last day of the previous month in which the salary is due or paid in advance or arrears, which is June 30, 2023. So, your salary in INR for income tax purposes is $10,000 x 74.86 = ₹748,600.
TDS deducted from salary by the employer is required to be deposited to the government within the given below timeline to avoid interest :
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.
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.
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 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.
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.
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
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.
