TDS on Salary under Section 192

Section 192 Income Tax Act stipulates that TDS must be deducted at the time of actual payment of salary. Here is all about how to calculate TDS deduction on salary.

Jan 02, 2020 11:01 IST India Infoline News Service

Salary payment happens when there is a relationship of employer and employee between two parties. While the employee has to be an individual, the employer can be a private company, public limited company, an individual, HUF, trust, partnership or even a cooperative society. When, any of these employers pay salary as per a fixed contract or otherwise exceeding a certain threshold level, deduction of TDS on salary is mandatory.

When is TDS deducted under Section 192 Income Tax Act?

Section 192 Income Tax Act stipulates that TDS must be deducted at the time of actual payment of salary. TDS is not applicable when salary accrues but only when it is actually paid. TDS is also applicable in the case of salary advance or even in case of salary arrears paid. It is always better that you apply for and get a PAN card in your name and also map it to your Aadhar account. The TDS will be deducted against your PAN number and deposited with the government so that you can view the details in your Form-16 as well as Form 26AS on the Income Tax website. Remember that TDS is also deducted if you don’t have PAN. TDS has to be deducted as long as your estimated salary for the full year is above the exemption limit. Here are the basic exemption limits above which TDS needs to be deducted.

Age Group Income Cut Off Comment
Resident below 60 years Rs250,000 TDS mandatory above Rs.2.50 lakhs
Senior Citizen (60 – 80 years) Rs300,000 TDS mandatory above Rs.3.00 lakhs
Super Senior Citizens (above 80) Rs500,000 TDS mandatory above Rs.5.00 lakhs

Rates of TDS deduction
Unlike in the case of vendor payments and investments, Section 192 does not specify a TDS rate. TDS will be deducted as per the income tax slab and the rates thereof applicable to the relevant financial year for which the salary is paid. The process is as follows:

Step 1: Salary is calculated for the full year assuming the same salary structure will sustain for the full year.
Step 2: Exemptions like Standard Deductions and exempt portion of House Rent Allowance (HRA) is segregated and the taxable component is calculated.
Step 3: The declarations given by employee pertaining to investments under Section 80C, Section 80D, Section 24, etc. are factored into the calculations.
Step 4: Please note that Section 192 specifies what declarations can be considered as eligible deduction. For example, donations are not eligible to be considered.
Step 5: Based on all this information, the total tax is calculated for the full year and it is apportioned over a period of 12 months.
Step 6: Actual proofs of eligible investments are required to be submitted by January, failing which the full tax will be apportioned in the last 3 months.

The tax calculation is usually done by the employer at the beginning of the financial year. However, if you do not have PAN, TDS will be deducted at the rate of 20% (excluding surcharge and higher education cess).

What if you change your job in the middle of the year?
This normally becomes quite cumbersome. But that is not too difficult. Ask your old employer to issue the complete tax calculations and you can also download the copy of tax paid from Form 26AS. Based on this information, your new employer can recalculate the tax and decide how much to deduct for the rest of the financial year.

If you choose not to provide details of income of other employment, each employer will deduct TDS only from the salary paid by them.

TDS Statements and depositing tax under Section 192
The employer will provide Form 16 to you containing the details of salary such as the amount paid and tax deducted. This can also be accompanied by Form 12BA, to show particulars of perquisites and profits in lieu of salary. You can also get the IT version from Form 26AS. Let us now turn to the time limit for depositing the TDS amounts.
  • If the TDS is deducted by any government employer – It has to be deposited on the same day.
  • If the TDS is deducted by any employer other than the government:
  1. If the salary is credited and TDS is deducted in the month of march – On or before 30 April
  2. If the salary is credited and TDS is deducted in any month other than March- Within seven days from the end of the month in which the deduction is made.

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