Tax Deducted at Source (TDS) on Salary - Section 192

Introduction:

Section 192 of the Income Tax Act, requires that every person responsible for paying income chargeable under the head salary shall deduct tax on the estimated income of the payee. To deduct the TDS, tax is required to be calculated at the average rate. However there is no requirement to deduct the TDS, If the income not exceed the amount not chargeable to tax applicable in the case of an individual in the relevant financial year. In this article, we understand the provision relating to section 192.

1. Responsibility to Deduct Tax:

Any person responsible for paying income chargeable under the head "Salaries" (typically, the employer) is required to deduct tax at source.
Conditions :
TDS should be deducted only if the employee falls under below conditions:
• The employer-employee relationship must exist between the deductor and the deductee.
• The employer makes payment to the employee.
• The nature of payment must be salary.
• The income under the head salary is above the maximum amount not chargeable to tax.

2. Timing of TDS:

As per the provision of this section, tax is required to be deducted at the time of making the payment of salary to the employee.

3. Rate of TDS:

TDS is deducted at the average rate of tax computed based on the prescribed rates applicable for the financial year in which the payment to the employee is made.
Tax is calculated at the estimated income chargeable to tax under the head salary.

4. Exempted Limit:

Taxes need not be deducted if the taxable salary is below the basic exemption limit.

5. Payment of Tax by Employer:

Tax on non-monetary perquisites without deducting it from the employee's salary, can be paid by the employer. The tax on these non-monetary perquisites is also calculated at the average income tax rate for the relevant financial year.

6. Particulars of Perquisites:

Employers must provide a statement containing detailed particulars and the value of perquisites or profits in lieu of salary in Form 12BA, to employees (whose salary exceeds a certain limit).

7. Salary from Multiple Sources:

If an individual is employed with more than one employer simultaneously, then he can furnish details of taxable income from all employers, and one employer can deduct tax on the aggregate salary.

8. Treatment of Other Income:

When an employee also has income under other heads like income under house property, or income from another source, he may choose to furnish particulars of such income and tax deductions to the employer to calculate the correct tax liabilities. Under Section 192 of the income tax act, tax deducted is determined based on specific rules, considering other income and losses.

9. Evidence of Claim:

To calculate the correct income of the employee, the employer must obtain evidence, proof, or particulars of prescribed claims. He should also obtain evidence of claims for set-off of losses, from the employee. Like House loan interest certificates, rent receipts etc.

Conclusion:

Section 192 of the Income Tax Act deals with the provisions to deduct tax on salary income. Employers and employees for both compliance is essential. Employers must deduct the correct TDS on the income of the employee and the employee must have knowledge of TDS deduction out of his income.

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