08/06/2020
TDS on Salary under Section 192
Section 192 of the Income Tax Act, 1961 deals with tax deducted at source (TDS) on salary. Your employer will deduct TDS from the salary payable to you. The salary you receive from your employer is categorised in ‘Income’ under the head ‘Salary’ and he/she will be responsible for deducting TDS on an average rate of income tax based on the current slab rate during the relevant financial year by considering your estimated income.
The TDS deducted u/s 192 is reflected in Form 16, which is issued by the taxpayer at the end of the financial year.
1. Who can Deduct TDS under section 192
These employers include:
Companies (Private or Public)
Individuals
HUF
Trusts
Partnership firms
Co-operative societies
All these employers are required to deduct TDS at a specific time period and deposit it to the government.
According to section 192 of the income tax act, there must be an employer-employee relationship for the deduction of tax at source.
The employer’s status such as HUF, firms or company is irrelevant for the deduction of tax at source under this section. Moreover, the number of employees employed by the employer does not matter while calculating and deducting TDS.
2. When is TDS Deducted under section 192
Under Section 192, TDS is deducted at the time of actual payment of salary and not during the accrual of salary. Tax will also be deducted if your employer pays salary in advance to you or you receive arrears from him.
In case your estimated salary is not more than the basic exemption limit, TDS will not be deducted. This rule is applicable even to those who do not have a PAN.
3. Rate of Tax Deduction for FY 2019-20
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.
At first, the salary of the employee is calculated after taking into consideration all the deductions applicable and then tax is calculated according to the tax rate applicable to you. The tax calculation is usually done by the employer at the beginning of the financial year. The TDS to be deducted by dividing the estimated tax liability of the employee for the financial year by the number of months of his employment under the particular employer.
However, if you do not have PAN, TDS shall be deducted at the rate of 20% (excluding education cess and higher education cess).
Any excess or deficit arising out of any earlier deduction can be adjusted by increasing or decreasing the number of subsequent deductions during the same financial year. If you have made any payment as an advance tax, then the same can be adjusted for calculation of TDS.
4. TDS Statements
The employer is required to 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.
5. Time limit to deposit the tax under section 192
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 –
a. If the salary is credited and TDS is deducted in the month of march – On or before 30 April
b. 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
Joshi | Jaju & Associates
Chartered Accountant
