TDS on salary calculation under section 192 for FY 2021-22 and previous years is presented here in question wise format for easy understanding.
It is very easy to calculate the TDS on salary if you have full salary structure with you.
As they present proof at the end of year, we need to calculate the TDS on salary on estimate basis based on their declaration, in the beginning of the year.
Any adjustment for shortfall can be made in the year end when they present actual proof of payment.
WHO IS LIABLE TO DEDUCT TDS ON SALARY SECTION 192
Any person responsible for payment of salary is liable to deduct tax at the slab rates of tax applicable to individual employees, for the financial year in which payment is made, in respect of income chargeable under the head ‘salaries’.
STATUS OF EMPLOYER FOR TDS ON SALARY SECTION 192
The status of the employer is not relevant for the purpose of TDS on salary under section 192. So there is no distinction whether the employer is an individual, HUF, firm or a corporate entity.
It does not matter as to whether the individual employer is carrying on business or professional or claiming such salary as deduction or not.
NUMBER OF EMPLOYEES FOR TDS ON SALARY SECTION 192
Number of employees engaged by employer is not the relevant factor. It is applicable even in a case where the employer has engaged only one employee.
CALCULATION OF SALARY INCOME FOR TDS ON SALARY SECTION 192
Income from salary is calculated after considering all the allowances (U/s 10) and deduction (Chapter VI-A). The estimated taxable salary for the entire year is calculated in the beginning of the year.
Please note that the annual circular on TDS, restricts deduction u/s 80G to donations to certain specific funds u/s.80G.
WHEN TO DEDUCT TDS ON SALARY UNDER SECTION 192
Tax deduction under this section is required only at the time of actual payment of salary.
Therefore, in case where an employer follows mercantile system of accounting and provides for salary on actual basis, tax shall not be deducted for under section 192 till such time salary is paid.
U/s 15, salary income of employee shall be chargeable to tax on due or receipt basis, whichever is earlier.
Still, for the purposes of TDS salary under section 192 , tax deduction shall always be made only on actual payment of salary irrespective of the method of accounting followed by the employer.
You may face technical difficulty while filing TDS return in case where salary for Particular financial year is paid in the next financial year and TDS is deducted in the next financial year on payment basis.
For example Salary for F.Y 2020-21 is paid in September 2021 and if you deduct salary on payment basis, then for filing return, TDS for Quarter Two of F.Y 2021-2022, you will have to show salary income of F.Y 2020-21, which is not possible in current software of TDS.
Second issue you may face is related to TDS certificate.
How can you issue TDS certificate for F.Y 2020-21 when you file the TDS return in F.Y 2021-22?
So it is advisable to deduct TDS on salary at the time of credit itself.
INCLUSION OF INCOME FROM OTHER HEADS FOR TDS ON SALARY SECTION 192
The employer can consider income from any other head based on a declaration statement duly verified and filed by the employee but he should not consider any loss other than loss under the head ” House Property”.
TWO OR MORE EMPLOYERS FOR TDS ON SALARY SECTION 192
Where an employee is working with more than one employer simultaneously, he may give information about his salary, TDS etc. in form 12B to any one of the employers as per his choice.
The employer receiving such information shall be responsible to take this information also in account while estimating salary income of the employee for the purpose of tax deduction at the source.
Similarly, in case where the employee resigns and joins another employer, he may furnish the detail of his previous employment in form 12B to his subsequent employer.
The subsequent employer shall be bound to consider this information for the purpose of TDS salary under section 192.
In case, the employee chooses not to furnish the detail of income of other employment, the employer shall deduct tax only in respect of salary paid by him –sec. 192(2).
RELIEF U/S 89 (1) FOR TDS ON SALARY SECTION 192
An employee who is entitled to relief u/S 89(1), when the salary is paid in arrears or in advance, may avail the same though the employer at the time of TDS under section 192 by furnishing form 10E-sec. 192(2A).
INCOME FROM OTHER SOURCES FOR TDS ON SALARY SECTION 192
An employee may furnish the particulars of other income derived by him during the previous year and the tax deducted on such income to the employer for aggregating along with the salary income for the purpose of tax deduction at source sec 192(2B).
It may be noted that furnishing of any other source of income is optional on part of the employee.
DETAILS OF LOSSES FOR TDS ON SALARY SECTION 192
The employee may furnish the detail of the losses, if any, under the head “Income from house property” which shall be taken into account for the purpose of computing the amount of tax deductible from salaries after giving effect to set off of such loss.
Except on account of the loss from house property, no loss under any other heads of income, furnished by the employee shall be considered for the purpose of TDS salary under section 192.
FORM 12BA FOR TDS ON SALARY SECTION 192
Sec192(2C) makes mandatory for every employer to furnish to the employee a statement giving correct and complete particular of perquisites or profits in lieu of salary and the value thereof in form 12BA .
This requirement is applicable only if the amount of salary paid or payable to employee is more than the basic exemption limit s to the respective employees.
In other cases, the particulars of perquisites or profits in lieu of salary shall be given in form 16 itself.
“Salary” for the purpose of this requirement shall have the same meaning as applicable for calculation of rent free accommodation.
NON MONETARY PERQUISITES FOR TDS ON SALARY SECTION 192
An employer has the option to pay tax in respect of non monetary perquisites on behalf of the employee.
In case such option is exercised, than the tax need not be deducted at source from the salary of the employee.
The employer shall pay tax on such non monetary perquisites on behalf of the employee on a monthly average basis to the government-sec 192 (1A).
While such tax borne by the employer is not taxable in the case of the employee in view of the exemption u/s. 10 (10CC), it is also not deductible in computing the income of the employer as the same is disallowable u/s 40(a)(v).
EXCESS /DEFICIENCY FOR TDS ON SALARY SECTION 192
The employer can adjust the amount of deduction on account of any excess /deficiency in previous deduction or failure to deduct in the same financial year.-sec 192(3).
PAYMENT FROM SUPERANNUATION FUND FOR TDS ON SALARY SECTION 192
The trustees of a recognized provident fund, or any person authorized by the regulation of the fund , who shall make payment of taxable accumulated balances due to employees, shall at the time payment, deduct there from the amount of tax payable on the taxable portion of such amount-sec. 192(4).
Where any contribution made by an employer, including interest, if any, are paid to an employee during his lifetime shall deduct at the average rate of tax at which the employee was liable to tax during the preceding 3 year or during the period, where it is less than 3 year, when he was a member of the fund and shall be paid by the trustees to the central government- sec. 192(5).
HRA FOR TDS ON SALARY SECTION 192
In the context of claim of deduction for HRA and consequent tax deduction at source, CBDT vide circular no. 17/2014 & Circular 20/2015 has clarified the following aspects:
- Where the annual rent paid by the an employee exceeds Rs 1,00,000 p.a, it is mandatory for the employee to report PAN of the land lord to the employer. In case the landlord does not have a PAN , a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee;
- Though incurring actual expenditure on payment of rent is a pre- requisite for claiming deduction under section 10(13A), it is clarified that salaried employees drawing HRA upto Rs 3,000/- per month will be exempted from production of rent receipt to the employer. It may, however, be noted that this concession is only for the purpose of tax deduction at source.
VALIDITY OF VOUCHERS PRODUCED FOR TDS ON SALARY SECTION 192
In case employee provides declaration /vouchers in respect of utilization of leave travel allowance u/s 10(5), it is for the assessing officer to scrutinize them during the course of assessment to decide finally on the allowability of exemption. In case the claim of any employee is found to be false due to which there is short deduction of TDS, employer cannot be held responsible and cannot be treated to be default CIT vs LARSEN AND TOURBO LTD (2009)313 ITR 1 (SC).
THIRD PARTY SALARY FOR TDS ON SALARY SECTION 192
Employer is liable to deduct tax only with regard to the amount paid by the Employer.
Employer is not liable to deduct tax at source from the salary received from third party unless declaration is filed by the employees. [CIT Vs Woodword Governor India (p) Ltd. 295 ITR 1 (Del.)]
INTEREST ON NON PAYMENT BY EMPLOYER AND EMPLOYEE FOR TDS ON SALARY SECTION 192
Where the Assessee’s Income is chargeable under the head Salaries, person responsible for paying any income chargeable under the head salaries shall at the time of paying, deduct tax at source and failure on his part entails an obligation to pay interest U/s 234B in order to compensate loss incurred to revenue and that upon failure on part of employer to deduct the tax at source, assessee only becomes liable to pay tax directly U/s 191 and does not become liable to pay interest U/s 234B [ DIT Vs Maersk Co. Ltd. (2011) 334 ITR 79 (Uttarakhand-FB)
Please refer CBDT circular 20/2020 for more detailed discussion on TDS salary under section 192 for F.Y 2014-15.
IMPORTANT CASE LAW ON TDS ON SALARY
Tax deducted on salaries but not deposited within due date is liable for late payment interest [Pentagon Engg P Ltd V CIT (1995) 212 itr 92 (Bom)]
Section 192 is not applicable to judgement debts (claims which emerge from the court decree) [Saroj Kumar Maheswari v Hindustan Motors Ltd (1985) 154 ITR 363 (Cal)]
Until and unless the recipient is liable to pay tax under the head salary, provision of section 192 will not apply [CIT v Coromandal Fertilizers Ltd (1991) 187 ITR 673 (AP)]
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