Section 192 – TDS on Salary

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What is Salary?

Salary include Wages, Annuity or Pension, Gratuity and others as per Section 17(i). It also includes Perquisites as per Section 17(ii) and Profit in lieu of Salary as per Section 17(iii)

Tax Deduction (TDS) under section 192

No specific TDS rate is specified, however, the deduction is as per the income tax slab rates applicable in the relevant financial year for which the salary is paid to an employee.

At first, the total projected taxable income of the employee is determined after taking into consideration the expected income and the exemptions / deductions. Based on this monthly TDS is calculated by dividing it by 12 (twelve). This amount is to be deducted from the employee’s salary each month.

In case of change in projected income during the course of the year, tax liability is re-computed as per the revised total income. Any excess or deficit arising out of any earlier deduction is adjusted in the subsequent deductions during the same financial year.

If change in projected income leads to excessive tax deduction, employer shall not deduct any tax in subsequent months. The refund of excess tax paid during the financial year, shall be claimed as a refund by the employee during filing IT Return.

Important Notes:

  • If employee does not have PAN, TDS shall be deducted at the rate of 20% (excluding education cess and higher education cess).
  • In case of change of employer: Details of the previous employment in Form 12B to be provided to the new employer. The new employer will consider the previous salary and TDS while computing the annual taxable income and the corresponding tax. If previous details of income of other employment is not provided, new employer shall deduct TDS only from the salary paid by him.
  • Marginal relief is provided in respect of salary or arrears of salary being subject to a higher rate of tax due to change in the slab rates. To get this relief, one must file Form 10E on the official income tax portal. In the absence of this form, one will not receive relief under Section 89.

Illustrations

Employee #1

Annual Tax based on Projected Income: Rs. 12,000

Note: No change in the Projected Income

TDS – Rs. 1,000 each month

Total TDS for the Year – Rs. 12,000

Employee #2

Annual Tax based on Projected Income: 12,000 (April to June)

Annual Tax based on Projected Income: 15,000 (July to Dec)

Annual Tax based on Projected Income: 12,600 (Jan to Feb)

Actual Tax: 18,000

Formula for Calculation:

[(Annual Tax / 12) X Month Serial No.] Less: Cumulative TDS till Date = TDS for the Month

Note: April is 1, May is 2 and so on.

TDS for each Month

Apr        (12,000/12 X 1 = 1,000) – 0 = 1,000

May       (12,000/12 X 2 = 2,000) – 1,000 = 1,000

Jun         (12,000/12 X 3 = 3,000) – 2,000 = 1,000

Jul          (15,000/12 x 4 = 5,000) – 3,000 = 2,000 (increase in tax)

Aug        (15,000/12 x 5 = 6,250) – 5,000 = 1,250

Sept       (15,000/12 x 6 = 7,500) – 6,250 = 1,250

Oct         (15,000/12 x 7 = 8,750) – 7,500 = 1,250

Nov        (15,000/12 x 8 = 10,000) – 8,750 = 1,250

Dec        (15,000/12 x 9 = 11,250) – 10,000 = 1,250

Jan         (12,600/12 x 10 = 10,500) – 11,250 = (-750) no TDS (decrease in tax)

Feb         (12,600/12 x 11 = 11,550) – 11,250 = 300

Mar        (18,000/12 x 12) = 18,000) – 11,550 = 6,450 (increase in tax)

Authored by – CA Anushka Saraogi

⇒Tax on Salary – Popular Exemptions & Deductions⇐

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