Section 192: Section 192 of the Income Tax Act, 1962 pertains to the tax deduction at source (TDS) for salaried individuals. It lays down the rules for the tax deduction from the salary income of employees and the responsibilities of the employer in this regard.
The tax is deducted at the rates in force, as specified in the Finance Act of the relevant year. The employee is required to provide the necessary details, such as PAN number and any other information as required by the tax authorities, for the employer to deduct tax at source.
Who can Deduct TDS under Section 192?
As per Section 192 of the Income Tax Act, 1962, any person who is responsible for paying salary to an employee is required to deduct Tax Deducted at Source (TDS) from the salary paid or payable. This includes employers from both government and private sectors.
The following entities are liable to deduct TDS under Section 192:
- Central government, State government, and local authorities
- Public sector undertakings
- Private sector companies and organizations
- Any other person responsible for paying salary
This means that if an individual or organization is paying salary to an employee, they are liable to deduct TDS as per the provisions of Section 192, provided the salary income is above the basic exemption limit.
It’s important to note that the liability to deduct TDS under Section 192 is on the payer, not on the employee. The employee can claim credit for the tax paid through TDS while filing their income tax returns.
When is TDS Deducted under Section 192?
The Tax Deducted at Source (TDS) is to be deducted at the time of credit of salary or at the time of payment of salary, whichever is earlier.
This means that if an employer credits the salary of an employee into their bank account, TDS has to be deducted before crediting the salary. If the employer pays the salary in cash, cheque, or any other mode, TDS has to be deducted before making the payment.
It’s important to note that TDS under Section 192 is to be calculated on the estimated salary income for the financial year and not on the salary paid for each month. The employer should take into account any other income that the employee may have and accordingly calculate the TDS.
What is the rate of TDS u/s 192?
The rate of TDS (Tax Deduction at Source) under Section 192 of the Income Tax Act, 1962 varies depending on the amount of income earned by the employee and the financial year. The TDS rate is determined by the government through the Finance Act of the relevant year.
For the Financial Year 2021-22 and 2022-23 the slab rates for TDS deduction under section 192 are as follows:
- For income up to Rs. 2,50,000, the TDS rate is 0%.
- For income above Rs. 2,50,000 and up to Rs. 5,00,000, the TDS rate is 10%.
- For income above Rs. 5,00,000 and up to Rs. 10,00,000, the TDS rate is 20%.
- For income above Rs. 10,00,000, the TDS rate is 30%.
It’s important to note that, these rates are subject to change in the future and for different financial years. Employers should check the current TDS rates before calculating and deducting TDS under Section 192.
How to calculate tax deductions under section 192?
To calculate the tax deduction under Section 192 of the Income Tax Act, 1962, the employer needs to follow these steps:
1. Estimate the total income of the employee for the financial year: The employer should take into account the salary income, as well as any other sources of income the employee may have, such as income from house property or interest income, to estimate the total income of the employee for the financial year.
2. Calculate the taxable income: The taxable income is calculated by subtracting the exemptions and deductions available under the Income Tax Act from the total income. These include the basic exemption limit, investment under Section 80C, premiums paid for health insurance under Section 80D, interest paid on education loan under Section 80E, rent paid for self-occupied house property under Section 80GG, and House Rent Allowance (HRA).
3. Use the income tax slab rates to calculate TDS: The employer should use the income tax slab rates specified in the Finance Act of the relevant year to calculate TDS. The slab rates are different for different ranges of income.
4. Deduct TDS: Once the TDS is calculated, the employer should deduct it from the salary paid or payable to the employee.
5. Deposit TDS with the government: The employer should deposit the TDS so deducted with the government within the specified due date.
6. Furnish Form 16 to employee: The employer should also furnish the employee with a statement of tax deducted at source, known as Form 16, which the employee can use to file their income tax returns.
It’s important to note that, the employer should take into account the employee’s PAN number and any other information as required by the tax authorities for the TDS deductions and deposit the same with the government within the specified time limit. Also, the employer must ensure that the TDS calculation is done correctly and the employee’s other income and exemptions and deductions are also taken into account.
Illustrations
Illustration 1: Mr. Ram is a resident employee, who works for XYZ company, and his fixed salary is Rs 40,000 per month during the FY 2022-23. Home Loan EMI per month 10,000 [ Principle amount 50,000 and +Investment u/s 80C LIC 50,000. PF Per Month 1500, 50,000 in NSC What will be the monthly TDS deducted u/s 192?
The total estimated income of Mr. Ram is Rs 4,80,000 (40,000 *12)
A standard deduction of Rs 50,000 is permitted on salary income.
Deduction u/s 80C LIC, PF and NSC ( 50,000 + 18,000 + 50,000) = Rs. 1,18,000
Calculation of TDS from monthly salary
| Particulars | Amount |
| Gross Salary | 4,50,000 |
| Less: Standard deduction | 50,000 |
| Less: Interest on Housing Loan [EMI interest portion] | 2,00,000 |
| Gross Total Income | 2,00,000 |
In the above case, TDS will not be deducted by the employer, as the income is below the basic exemption limit.
Illustration 2:
| Particulars | Amount |
| Gross Salary | 12,00,000 |
| Less: Standard deduction | 50,000 |
| Less: Interest on Housing Loan [EMI interest portion] | 2,00,000 |
| Gross Total Income | 9,50,000 |
| Less: Deduction under Chapter VI-A 1. LIC 2. PF amount deducted from salary 3. Housing Loan Repayment [ EMI Principle portion] 4. National Saving Certificate [NSC] | 50,000 18,000 32,000 50,000 ________ |
| Taxable Income | 8,00,000 |
| Tax as per applicable slab rates 0 to Rs 2.5 lakh – Nil Rs 2.5 lakh to Rs 5 lakh – 5% = 12,500 Rs 5 lakh to Rs 10 lakh – 20% = 60,000 | 72,500 |
| Cess @ 4% | 2900 |
| Total Tax | 75,400 |
For e.g. If there are 12 months remaining for TDS deduction in the financial year the employer will deduct TDS u/s 192 = Rs 75,400 / 12 = Rs 6,283
Salary from More than one Employer
In case an individual is receiving salary from more than one employer, the total salary income from all sources is considered while calculating the tax liability.
Each employer is responsible for deducting TDS on the salary paid by them, based on the tax liability of the employee and the prevailing tax rates. The employers are required to issue Form 16 to the employee, which contains the details of TDS deducted by each employer during the financial year.
The employee can use this information to file their income tax returns and claim credit for TDS paid, if applicable. If the total TDS deducted by multiple employers exceeds the total tax liability of the employee, the excess TDS can be claimed as a refund while filing the income tax returns.
Claim Tax Relief on Salary Arrears under Section 89?
Section 89 of the Income Tax Act, 1961, provides for relief in case of arrears of salary, advance salary, bonus, commission or similar income. This section is applicable when an employee receives arrears of salary or similar income, which is taxable in the year in which it is received, but was earned in an earlier year or years.
Under Section 89, the taxpayer can claim relief by reducing the amount of tax payable on the arrears, by the amount of tax that would have been paid in the earlier year or years, had the arrears been received in those years. The calculation of tax relief under Section 89 is based on the difference between the tax liability on the arrears and the tax that would have been paid in the earlier year or years.
In order to claim relief under Section 89, the taxpayer must provide the employer with a declaration in the prescribed form, claiming the relief and indicating the computation of the relief. The employer must then deduct the appropriate amount of tax, taking into account the relief under Section 89, and deposit it with the government.
It is important to note that the relief under Section 89 is only applicable in case of arrears of salary, advance salary, bonus, commission or similar income and not in case of other forms of income such as interest or rent.
FAQs
Form 16 is a TDS (Tax Deducted at Source) certificate issued by an employer to an employee as proof of TDS deduction from the employee’s salary income. It is issued under Section 203 of the Income Tax Act, 1961.
Form 16 is a TDS (Tax Deducted at Source) certificate issued by an employer to an employee as proof of TDS deduction from the employee’s salary income. It is issued under Section 203 of the Income Tax Act, 1961.
An employee can know if TDS is deducted from his salary by checking his monthly salary slip, where the TDS amount is mentioned separately. Additionally, the employer is required to issue Form 16, which is a TDS certificate, to the employee at the end of the financial year.
Form 16 contains the details of the total salary paid, total TDS deducted, and the TDS credited to the government. An employee can also check the TDS credited in his name by logging into the e-filing portal of the Income Tax Department and checking the AIS (Annual Information Statement) or Form 26AS.
TDS on salary payable in foreign currency is calculated in the same way as TDS on salary payable in Indian currency.
The salary income in foreign currency needs to be converted to Indian currency on the date of payment, using the applicable exchange rate.
The converted amount will then be considered as the taxable salary income, and TDS will be calculated based on the prevailing tax rates and the tax liability of the employee.
TDS (Tax Deducted at Source) is not necessarily deducted every month, but it is deducted periodically, i.e., when the salary is paid or credited to the employee. The frequency of TDS deduction depends on the amount of salary received and the provisions of the Income Tax Act, 1961.
As per the Act, if the total salary received in a financial year by an employee exceeds the basic exemption limit, then the employer is required to deduct TDS on a monthly basis. If the salary received is less than the basic exemption limit, then TDS is not required to be deducted. It is important to note that TDS is calculated on the basis of the actual salary received during a financial year and not on the basis of the monthly salary.
There are two types of TDS certificates in India:
1. Form 16: It is a TDS certificate issued to salaried employees by their employer. Form 16 contains details of the salary paid, TDS deducted, and other taxable allowances received by the employee.
2. Form 16A: It is a TDS certificate issued for non-salary payments, such as rent, professional fees, commission, etc. Form 16A contains details of the non-salary payment received and TDS deducted on such payments.
TDS on salary may be refunded if the total tax liability of an employee, after considering TDS deductions and other eligible tax exemptions and deductions, is less than the total TDS deducted during the financial year.
If this is the case, the excess TDS deducted can be claimed as a refund when the employee files their income tax return. The refund can only be claimed by the employee after they have filed their income tax return.
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