Updated on November 26, 2024 12:29:50 PM
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.
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.
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.
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: 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.
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:
TAX SLAB | TAX RATES |
---|---|
0 - ₹2.5 Lakhs 0 - ₹3 Lakhs (for resident senior citizens) 0 - ₹5 Lakhs (for resident super senior citizens) |
0% |
₹2.5 Lakhs - ₹5 Lakhs | 5% |
₹5 Lakhs - ₹10 Lakhs | 10% |
Above ₹10 Lakhs | 30% |
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:
TAX SLAB | TAX RATES |
---|---|
0 - ₹3 Lakhs | 0% |
₹3 Lakhs - ₹7 Lakhs | 5% |
₹7 Lakhs - ₹10 Lakhs | 10% |
₹10 Lakhs - ₹12 Lakhs | 15% |
₹12 Lakhs - ₹15 Lakhs | 20% |
Above ₹15 Lakhs | 30% |
The process of deducting TDS on Salary involves the following steps:
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 |
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?
Particulars | Amount (₹) |
Gross salary | ₹12,00,000 |
Less: Standard deduction | ₹50,000 |
Gross Taxable Income | ₹11,50,000 |
Chapter VI A Deductions | ₹1,50,000 |
Taxable income | ₹10,00,000 |
Tax as per applicable slab rates 0 to ₹2.5 lakh – Nil ₹2.5 lakh to ₹5 lakh – 5% ₹5 lakh to ₹10 lakh – 20% Above ₹10 Lakhs - 30% ( 0 +12500 + 100000) |
₹1,12,500 |
Add: Cess @ 4% | ₹4,500 |
Income Tax Payable | ₹1,17,000 |
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.
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.
Particulars | Amount (₹) |
Income from salary | |
Pension | ₹3,60,000 |
Less: Standard deduction | ₹50,000 |
Net Income From Salary | ₹3,10,000 |
Income From Other Sources | |
Interest on Savings Bank Account | ₹12,000 |
Gross Total Income | ₹3,22,000 |
Chapter VI A Deductions | Nil |
Taxable Income | ₹3,22,000 |
Income Tax as per applicable slab rates 0- ₹3,00,000 - Nil ₹3,00,000 - ₹3,22,000 - 5% |
₹1,100 |
Less: Rebate u/s 87A (up to ₹12,500) |
₹1,100 |
Income Tax Payable | Nil |
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.
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:
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.
Quarter | Due Date |
---|---|
April - June | 31st July |
July - September | 31st October |
October - December | 31st January |
January - March | 31st May |
Failure to deduct or deposit TDS on salary can lead to penalties and interest. Some of the consequences include:
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:
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.
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.
Form 16 is a certificate issued by your employer that summarizes the TDS deducted on your salary during the financial year. It includes details of your salary, TDS deductions, and other relevant information. Form 16 is essential for filing your income tax return.
If you have income from sources other than salary (such as interest income or rental income), you must inform your employer. This ensures that your total income is considered while calculating TDS on salary, which helps in avoiding under-deduction or over-deduction of tax.
If your employer fails to deduct TDS from your salary, you are still liable to pay the tax directly to the government. You may need to pay the tax in the form of advance tax or as a lump sum when you file your tax return. Additionally, you may be penalized for not paying the tax on time.
Yes, if the TDS deducted is higher than your final tax liability (calculated based on your actual income), you can claim a refund. This is typically done when filing your income tax return, and the excess amount will be refunded by the Income Tax Department after processing your return.