As per Section 192 of Income Tax Act, any person responsible for paying any income chargeable under the head “Salaries” shall at the time of payment deduct income tax (TDS) on the amount payable at the average rate of income tax computed on the basis of rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year.
This means, every employer is required to deduct tax at source on the amount payable to employee chargeable under the head “salaries” if estimated salary income including value of perquisite exceeds the basic exemption limit.
Tax is to be calculated at the rates prescribed along with surcharge and education cess for the financial year in which the payment to employees is made.
In this article we have listed few important points to be kept in mind while deducting tax at source from employee’s salary U/S 192.
Section 192 is applicable on all persons, whether individual, HUF, Firm or a company irrespective of the fact whether the concern person is carrying on business or not.
HRA, LTA, Medical Reimbursement – Documents to be obtained
To calculate HRA exemption, employer is required to collect written statement from employee specifying rent paid, name of the landlord and address of the property along with rent receipt given by the house owner.
PAN of the landlord is required to be collected in addition to all these details only if rent paid for the whole year is more than 1 Lakh rupees.
As per CBDT, rent receipt is not required to be collected if HRA is Rs 3000 per month or less.
If employee is claiming medical reimbursement then allow exemption up to Rs 15,000 in submission of original bills.
To claim leave travel concession or assistance, employee is required to submit expenditure details and evidence pertaining to those expenditure.
Previous Employer’s Salary
If employee has declared his/her salary received from previous employer and tax deducted thereon then it’s required to be considered while deducting tax at source.
TDS has to be calculated by taking previous employer’s and present employer’s salary.
If it’s not declared then employer can not deduct TDS on it’s own. Employee is required to disclose it while filing return.
Income other than salary
Employee has option to declare all other income chargeable to tax and tax deducted thereon. If it’s declared then employer is required to consider while calculating tax to be deducted at source.
However, the resultant tax deductible at source cannot be less than the amount that would have been deductible if such other income and tax deducted thereon has not been taken into account.
The employer shall not consider any other loss other than the loss under the head “Income from House Property”.
To claim deduction of interest under the head income from house property, employee is required to provide name, address, PAN of the lender and interest paid/payable. Statement from bank by showing principal and interest component separately is required to be given to employer.
Deduction to be allowed
Deduction by employee under section 80C, 80CCC, 80CCD, 80CCG, 80D, 80DD, 80DDB, 80E, 80EE, 80GG, 80GGA, 80TTA and 80U can be claimed only when such evidence of such investment or expenditures are submitted to employer.
Employee can be allowed tax deduction under section 80G only if money has been donated to Government scheme like the Prime Minister’s national relief fund, Jawaharlal Nehru Memorial Fund, National defence fund, Prime Minister’s drought relief fund, Earth quake relief fund, the National children’s fund etc in submission of receipt copy.
This means, employer should not give any deduction under section 80G in respect of donation given by an employee to a notified public charitable institute. Tax relief for donation to the notified public charitable institute should be claimed by the employee at the time of filing income tax return with the tax department.
Relief can be considered while arriving at tax to be deducted only if it’s furnished by the employee in Form No 10E to the employer.
In case of No PAN
If employee does not have Permanent Account Number (PAN), tax has to be deducted at the rate of 20% without including education cess or SHEC if normal tax rate in this case is less than 20%. This means, tax has to be deducted either at the normal rate or at the rate of 20%, whichever is higher.
Time Limit for deposit of TDS
As discussed above tax has to be deducted from employee’s salary every month. After deducting tax, employer needs to deposit the same with tax department.
If tax is deducted by the office of the government then it has to be deposited:
- On the same day where the tax is paid without production of an income-tax challan.
- On or before 7 days from the end of the month where tax is paid accompanied by an income-tax challan.
If tax is deducted by anyone other than the office of the government (i.e. in all other cases) then it has to be deposited:
- On or before 30th April where the income or amount is credited or paid in the month of march; and
- In any other case, on or before 7 days from the end of the month in which the tax has been deducted.
TDS statement to be submitted with tax department
After deducting tax at source, employer need to submit statement of tax deducted on a quarterly basis to income tax department electronically along with the verification of the statement in Form 27A.
Here are the dates and forms to be submitted;
|TDS statement For the period||Last date of filing||TDS statement Form|
|April to June||31st July of the financial year||24Q|
|July to September||31st October of the financial year||24Q|
|October to December||31st January of the financial year||24Q|
|January to March||31st May of the financial year immediately following the financial year in which the deduction is made.||24Q|
After filing these TDS statements, employee can check the amount of tax deducted from his salary in form 26AS.
Documents to be provided by Employer to Employee
As per section 192(2C) and rule 26A (2), employer is required to furnish a statement giving correct and complete particulars of perquisite or profits in lieu of salary provided to him and the value there of in Form No 12BA along with Form No 16 to the respective employee on or before 31st May of the assessment year or following financial year.
Employer can at the time of making any deduction, increase or reduce the amount to be deducted under section 192 for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.