Section 192 | TDS on Salary

Overview

Tax Deducted at Source (TDS) is a system introduced by the Government of India to collect tax at the time of income generation. The concept of TDS u/s 192, TDS on Salary aims to reduce tax evasion and ensure that tax is paid regularly. If you're a salaried individual, it's crucial to understand how TDS on salary works, how it is calculated, and the factors that can affect it.

This article will break down the concept of TDS on salary u/s 192, explain its calculation process, when to deduct & deposit TDS on salary, and provide tips on how to manage your tax liabilities.

What is TDS on Salary?

TDS on salary, which is required to be deducted under section 192, is the amount of tax deducted by an employer from an employee's salary “at the time of payment” of salary to the employee. It's important to note that TDS on Salary is always deducted at the time of payment only whether (in advance or on time or in arrears). The employer is responsible for deducting this tax and remitting it to the government on behalf of the employee. The amount deducted depends on the employee's income and applicable tax slabs.

Section 192 of the Income Tax Act 1961, TDS on Salary mandates every employer to calculate income tax on salary in case salary of the employee exceeds the basic exemption limit and deduct TDS on salary.

In simple terms, TDS is a form of advance tax payment that is deducted at regular intervals (usually monthly) to ensure that taxes are paid timely on salary income.

Who can Deduct TDS u/s 192, TDS on Salary

As per section 192 of the Income Tax Act, Every person responsible for paying any income chargeable to tax under the head ‘Salaries’ is required to deduct income-tax at the time of payment on the amount payable. This Tax is known as Tax Deducted at Source (TDS). All the employers are required to deduct TDS on salary every month and deposit it with the government within a specific time period. The employer’s status such as HUF, firm or company is irrelevant for the deduction of tax at source under section 192.

Applicability of Section 192, TDS on salary

It is of utmost importance that for the purpose of deducting TDS under section 192, TDS on Salary, There should be relationship of employer and employee between ‘payer and payee’. It doesn't matter whether the employee is a full time / part time employee. Also, salary can be from present, former or prospective employer.

This section also mandates to deduct TDS on “Advance Salary Payments”, which is taxed in the year of receipt. Remember advance salary is taxable but advance against salary is not taxable as it is like a loan.

Threshold limit and TDS rate u/s 192, TDS on salary

Threshold limit: If the employee salary income exceeds the “basic exemption limit”, TDS on Salary under section 192 is required to be deducted by the employer at the time of actual payment of salary.

TDS Rate: Under section 192 of the Income Tax Act, TDS on Salary, no TDS rate has been specifically mentioned for the purpose of deducting tax on salary payments. TDS under this section is deducted as per the applicable income tax slab rates to the taxpayer of the Financial year for which the salary is paid.

After the introduction of the new tax regime under section 115 BAC, employees will be provided with an option to choose the tax regime, old or new tax regime, at the beginning of the financial year accordingly, the income tax shall be calculated on the total income after consideration of applicable exemptions, deductions etc., If the employee fails to choose the tax regime, the default tax regime shall be applied, and taxes shall be calculated accordingly. From FY 2023-24 and onwards, the new tax regime is the default tax regime.

How to calculate TDS on Salary u/s 192?

The calculation of TDS on salary is based on the income tax slabs defined by the government for the relevant financial year. To calculate the TDS on salary, the following factors are considered:

1. Gross Salary: This includes your basic salary, allowances (house rent allowance, special allowances, etc.), bonuses, and other perks provided by the employer.
2. Deductions: Deductions under various sections of the Income Tax Act (such as 80C, 80D, etc.) reduce your taxable income. These deductions may include contributions to the Employees' Provident Fund (EPF), life insurance premiums, and investments in specified tax-saving instruments.
3. Income other than salary: If the employee has provided the information about other incomes such as rental income from house property or bank deposits, etc. In that case, such amounts should be added to the net taxable salary.
4. Taxable Income: After considering the deductions, the taxable income is calculated. Then Tax applied based on the applicable tax slab.
5. Rebates & Exemptions: Certain income may be available for exemptions from tax, such as HRA (House Rent Allowance), travel allowances, children education allowance etc, and some tax exemptions apply for specific categories, like senior citizens. Tax rebates, such as those under Section 87A, also reduce the tax liability.
6. Tax Slabs: India follows a progressive tax system where the tax rate increases with income. The tax slabs for individual taxpayers are revised every year in the Union Budget.
7. Old Tax Regime: The Table given below shows the slab rates for Old Tax Regime

However, From FY 2023-24, the new tax regime is the default tax regime and your tax calculation will be done as per the new regime tax rates.

Here’s a brief look at the tax slabs for individual taxpayers under the new tax regime (default regime) for FY 2024-25:

What is the Process of TDS deduction u/s 192?

The process of deducting TDS on Salary involves the following steps:

1. Estimate Total Income: The employer estimates your total taxable income for the financial year based on your salary details.
2. Calculate Deductions and Exemptions: The employer takes into account your eligible deductions (such as EPF contributions, insurance premiums, etc.) and exemptions (like HRA or LTA) that apply.
3. Apply Tax Slabs: After accounting for deductions and exemptions, the taxable income is computed. The applicable tax is then determined based on the income tax slabs.
4. Deduct TDS Monthly: Once the employer calculates the tax liability, the TDS amount is deducted from your salary every month. TDS is always deducted at the time of payment of salary.
5. Deposit the TDS with the Government: The Time limit to Deposit TDS u/s 192, TDS on salary is given below:
   
   

   Employer Type	Time of Deposition
   Government employer	Deposit TDS on the same day
   Non Government employer: April - February	By 7th of the following month
   Non Government employer: For the month of March	On or before 30th April

6. Provide Form 16: At the end of the financial year, the employer issues Form 16, a certificate of TDS deducted, which includes details of your salary, tax deducted, and other relevant information. This is essential for filing your income tax returns.

Illustrations

Case 1

A resident employee Pankaj (aged 24), who works for Bizfoc, has a salary of ₹1,00,000 per month during the FY 2024-25. Nikhil has invested ₹50,000 in ELSS funds, ₹60,000 in PPF, ₹40,000 in NSC. What will be the monthly TDS deducted u/s 192?

• His total income would be estimated as ₹1,00,000.
• Standard deduction of ₹50,000 will be allowed on salary income.
• Chapter VI A Deductions allowed (as declared by employee) would be ₹1,50,000.

Calculation of TDS on monthly salary as per Old Tax Regime:

TDS u/s 192 (For 12 months) = ₹1,17,000 / 12 months = ₹9,750

Therefore, the employer is required to deduct ₹9,750 as TDS u/s 192 from the monthly salary of Pankaj.

Calculation of TDS from monthly salary as per New Tax Regime

In the new tax regime deduction for investment in ELSS, PPF, NSC will not be allowed as a deduction. And tax will be calculated as per the new slab rate = ₹82,500.

Add: 4% Health and Education Cess of the tax = ₹82,500 * 4% = ₹3,300

Income Tax Payable = ₹85,800

TDS u/s 192 (For 12 months) = ₹85,800 / 12 months = ₹7,150

Therefore, the employer is required to deduct ₹7,150 as TDS u/s 192 from the monthly salary of Pankaj.

Case 2

Mr Rony receives a pension of ₹30,000 per month and income from interest on pension account (savings account) is ₹12,000 during the FY 2024-25. What will be the monthly TDS amount deducted from the pension?

As per Section 192, TDS on Salary, TDS is required to be deducted on all the monetary amounts paid by the employer under the head ‘Salary’. Since, ‘Salary’ also includes pension, TDS on the same is required to be deducted under Section 192.

Computation of TDS on Salary as per Old Tax Regime

As Income Tax payable is nil, Therefore no TDS u/s 192 is required to be deducted by the employer from the monthly pension of MR.Rony.

TDS returns and Due dates?

On TDS on Salary, which is required to be deducted under section 192 by the employer from the monthly salary paid to the employees, the employer has to furnish TDS returns on Salary in Form 24Q. The said is Form is to be submitted every quarter. This Form contains:

• Details of salary paid to the employees, and
• TDS deducted on such salary payments.

Note: Even if the employer has not deducted the TDS from salary or deducted TDS at a very lower rate, he has to provide the reasons for such Non-Deduction or Lower deduction of TDS.

Due Dates of Form 24Q:

Consequence of Non-compliance u/s 192?

Failure to deduct or deposit TDS on salary can lead to penalties and interest. Some of the consequences include:

• Disallowance (Resident): 30% of expenditure shall be disallowed if TDS is not deducted from salary to any resident person/ not paid within the due date of 139(1), that is the due date of filing return. It shall be allowed in the year of payment.
• Disallowance (Non-Resident): 100% of expenditure shall be disallowed if TDS is not deducted from salary of NRIs/ not paid within the due date of 139(1), that is the due date of filing return. It shall be allowed in the year of payment.
• TDS is not deducted: If a deductor has not deducted the TDS on Salary, it charges interest of @1% per month till the date TDS is deducted.
• TDS is deducted but not deposited: If a deductor has deducted the TDS from Salary payments but has not deposited the collected tax to the government, then it charges interest @1.5% from the date when tax is deducted to the date of deposition.

Why Choose Bizfoc for TDS?

At Bizfoc, we specialize in providing you the best accounting services in filing your TDS. Here are the reasons why we are known for our services to our clients on filing TDS:

• Assist in suggesting the right documents for TDS filing.
• Providing valuable insights on sections of TDS computations
• Prescribe forms as per the necessity
• Helps in accurate computations for TDS computations and returns
• Tailored advice and guidelines for TDS filing

In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.

Conclusion

TDS on salary plays an essential role in ensuring timely tax collection and minimizing tax evasion. It is crucial for salaried individuals to understand how TDS works, how it's calculated, and the various exemptions and deductions that can help reduce their tax liability. Regularly reviewing your salary structure and keeping track of your investments and deductions will ensure that you are not overtaxed, and can also help you avoid any last-minute tax shocks.

It is always beneficial to seek advice from professionals like CAs, Lawyers, CSs to avoid penalties and fines.

FAQs