Salary TDS – Employee to inform Employer for concessional rate

Section 115BAC has been inserted in the Finance Act 2020 in the recent budget. This allows the option to Individuals & HUF to avail concessional rate of income tax with certain conditions pertaining to claiming deductions & other concessions. The other existing option will also continue.

This comes into effect from April 2020 (i.e. FY:2020-21 / AY:2021-22).

Since the Employers need to deduct tax (TDS) on salaries, CBDT vide its Circular No. C1 of 2020 dated 13/04/2020 has clarified the procedure and rules related exercising either of the two options for calculating TDS. This is summarized as under:

  • The Employee needs to inform the Employer that for the financial year, he would be opting for the computation as per the new Section 115BAC. On receiving this intimation, the Employee will deduct tax (TDS) on salary accordingly.
  • If no intimation is received from the Employee, the existing system of TDS on salary for that employee shall continue.
  • Once the intimation is made by the Employee to the Employer to opt for tax computation under Section 115BAC, this cannot be changed during the course of the financial year. However, this can be changed in the subsequent financial year.
  • At the time of filing tax returns, the employee has the option to select either of the two options to compute the tax liability. This is irrespective of the option used by the Employer for TDS purposes.

Click Here to view the original circular

The concessional tax slabs as per Section 115BAC is as under:

 

Income Slab

In Rupees (Lakhs)

Tax Rate (%)

Section 115BAC

Tax Rate (%)

Existing System

Less than 5.00 Exempted Exempted
5.00 – 7.50 10% 20%
7.50 – 10.00 15% 20%
10.00 – 12.50 20% 30%
12.50 – 15.00 25% 30%
Above 15.00 30% 30%

 Note: The taxable income as computed under the provisions of Section 115BAC is without Deductions and other Reliefs.

Click Here to view the original circular

 

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TDS Returns – Employee details to have breakup of earnings from current employer and previous employers during the Financial Year

From Financial Year 2013-14 (AY: 2014-15), while preparing the employee details to file TDS Returns (Form 24Q) in the 4th quarter (Jan-Mar), a provision has been made to separate out the salary earnings of the current and previous employer. This is applicable in case the employee has earned from more than one employer during the course of the year

This is not applicable for FY: 2012-13. Filing of Form 24Q pertaining the quarter ended March 2013, would be in the same way as before.

 

 

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Employers required to collect PAN of the lender banks from the employees to claim Interest in House Property in the salary return

The Finance Act, 2015 had introduced a new section 192(2D) of the Income-tax Act, wherein the employer was obliged to collect the necessary evidence or proof in Form 12BB  to allow any claim for any deduction and/or tax saving investments.

One of the requirements in Form 12BB for claiming the interest on house property is to provide the PAN of the lender i.e. the financial institutions, NBFC or others from where the loan is taken, if available. Though the same is not a mandatory requirement in Form 12BB, the same has been made mandatory in the Annexure-II required to be filed in the salary return – From 24Q for the last quarter of the financial year. The same was made effective from 1st June 2016 by the CBDT by way of its Notification No. 30/2016 dated 29 April 2016.

In case the PAN is not available, no deduction of interest shall be allowed and the total tax deduction of the employees shall be higher than previously deducted.

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Reduction in TDS / TCS Rates

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As part of the initiative in improving liquidity owing to the COVID crisis, it has been announced that TDS / TCS rates for non-salary payments will be reduced by 25% across the board. This would be for all payments from 14th May 2020 to 31st March 2021. 

The revised TDS / TCS chart is as under:

TDS Rate Chart for FY 2020-21 Pre & Post 14th May 2020

S. No Section of the Income-tax Act Nature of Payment Existing Rate of TDS Reduced rate from 14/05/2020 to 31/03/2021
1 193 Interest on Securities 10% 7.5%
2 194 Dividend 10% 7.5%
3 194A Interest other than interest on securities 10% 7.5%
4 194C Payment of Contractors and sub-contractors 1% (individual/HUF)
2% (others)
0.75% (individual/HUF) 1.5% (others)
5 194D Insurance Commission 5% 3.75%
6 194DA Payment in respect of life insurance policy 5% 3.75%
7 194EE Payments in respect of deposits under National Savings Scheme 10% 7.5%
8 194F Payments on account of re-purchase of Units by Mutual Funds or UTI 20% 15%
9 194G Commission, prize etc., on sale of lottery tickets 5% 3.75%
10 194H Commission or brokerage 5% 3.75%
11 194-I(a) Rent for plant and machinery 2% 1.5%
12 194-I(b) Rent for immovable property 10% 7.5%
13 194-IA Payment for acquisition of immovable property 1% 0.75%
14 194-IB Payment of rent by individual or HUF 5% 3.75%
15 194-IC Payment for Joint Development Agreements 10% 7.5%
16 194J Fee for Professional or Technical Services (FTS), Royalty, etc. 2% (FTS, certain royalties, call centre)
10% (others)
1.5% (FTS, certain royalties, call centre)
7.5% (others)
17 194K Payment of dividend by Mutual Funds 10% 7.5%
18 194LA Payment of Compensation on acquisition of immovable property 10% 7.5%
19 194LBA(1) Payment of income by Business trust 10% 7.5%
20 194LBB(i) Payment of income by Investment fund 10% 7.5%
21 194LBC(1) Income by securitisation trust 25% (Individual/HUF)
30% (Others)
18.75% (Individual/HUF)
22.5% (Others)
22 194M Payment to commission, brokerage etc. by Individual and HUF 5% 3.75%
23 194-O TDS on e-commerce participants 1%
(w.e.f. 1.10.2020)
0.75%

2. Further, the rate of Tax Collection at Source (TCS) for the following specified receipts has also been reduced by 25% for the period from 14th May, 2020  to 31st March, 2021:-

TCS Rate Chart for FY 2020-21 Pre & Post 14th May 2020

S. No Section of the Income-tax Act Nature of Receipts Existing Rate of TCS Reduced rate from 14/05/2020 to 31/03/2021
1 206C(1) Sale of
(a) Tendu Leaves 5% 3.75%
(b)Timber obtained under a forest lease 2.5% 1.875%
(c) timber obtained by any other mode 2.5% 1.875%
(d) Any other forest produce not being timber/tendu leaves 2.5% 1.875%
(e) scrap 1% 0.75%
(f) Minerals, being coal or lignite or iron ore 1% 0.75%
2 206C(1C) Grant of license, lease, etc. of(a) Parking lot 2% 1.5%
(b) Toll Plaza 2% 1.5%
(c) Mining and quarrying 2% 1.5%
3 206C(1F) Sale of motor vehicle above 10 lakhs 1% 0.75%
4 206C(1H) Sale of any other goods 0.1%
(w.e.f 01.10.2020)
0.075%

3. Therefore, TDS on the amount paid or credited during the period from 14th May, 2020 to 31st March, 2021 shall be deducted at the reduced rates specified in the table in para 1 above. Similarly, the tax on the amount received or debited during the period from 14th May, 2020  to 31st March, 2021 shall be collected at the reduced rates specified in the table in para 2 above.

4.  It is further stated that there shall be no reduction in rates of TDS or TCS, where the tax is required to be deducted or collected at higher rate due to non-furnishing of PAN/Aadhaar For example, if the tax is required to be deducted at 20% under section 206AA of the Income-tax Act due to non-furnishing of PAN/Aadhaar, it shall be deducted at the rate of 20% and not at the rate of 15%.

5. Legislative amendments in this regard shall be proposed in due course.

Ref: Press Release dated 13th May 2020

Click here for complete TDS/TCS Rate Chart.

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