It is mandatory to provide tax computation of each employee while filing the TDS Return on Salary for Quarter 4 as per the format of Annexure II in Form 24Q. Based on this the Part B of Form 16 for the employee is generated by the Income Tax Department.
Apart from providing details for employees where the tax is involved, it is a good practice to report for all employees even if there is no tax element. It is of prime importance to understand the Taxation Regime opted for by each employee.
A simple guide for providing information of each employee is provided below:
- Basic Information: This includes the Name & PAN of Employee, Category (General / Sr. Citizen, etc), and Employment Period during the year.
- Select Taxation Regime: By default, it is the New Regime. However, one can opt out and move to ‘Old Regime’.
- Gross Salary: This section encompasses all components of salary earnings under Section 17.
- Exemptions under Section 10: Depending on the selected ‘Taxation Regime’, exemption amounts need to be placed under different sub-sections, as applicable. Many of the exemptions have been withdrawn in the ‘New Regime’.
- Net Salary: This is the amount of Gross Salary, less total Exemptions u/s 10.
- Previous Employer Income: To determine the total salary income of the employee, earnings from previous employer also needs to be provided, If applicable. After adding this income, the combined Net Salary is determined.
- Deductions under Section 16: These are deductions under various sub-sections, which also include ‘Standard Deduction’ u/s 16(ia). This applied to both taxation regimes.
- Income under ‘Salary’: The Net Salary (combined with previous employers, if applicable) less total Deductions u/s 16 determines the ‘Income from Salary’
- Other Income Details: Here one needs to provide the employee’s ‘Other Sources of Income’ over and above the Salary. This is broken up into i) Income / Loss on House Property and ii) Income from Other Sources. It should be noted that Loss on House Property has limitations under the ‘New Regime’.
- Total Income: The sum total ‘Income from Salary’, ‘Income / Loss on House Property’ and ‘Other Sources of Income’ determines ‘Total Income’ of the employee.
- Deductions under Chapter VI-A: For applicable deductions under different sections, respective amounts need to placed. Make sure that the ‘Deductible Amount’ is within the maximum permissible value. It is important to note that in the ‘New Regime’ most sections in this Chapter have been removed.
- Total Taxable Income Amount: The ‘Taxable Income’ of the employee is determined as Total Income less Deductions under Chapter VI-A.
- Tax on Total Income: Calculate the ‘Income Tax’ of the employee based on the slab rate (there are separate slabs rates for Old & New Regime).
- Rebate under section 87A: The rebate on the tax amount is appliable only up to a level of ‘Taxable Income’ which is separate in both the taxation regimes. Check the eligibility and the value of Rebate u/s 87A in the applicable regime and accordingly provide the value.
- Net Income Tax (after Rebate): This amount is net ‘Income Tax’ which is ‘Tax on Total Income’ less ‘Rebate u/s 87A’.
- Surcharge & Educational Cess: On the ‘Net Tax’, as per applicability, Surcharge and Educational Cess is to be added for determining to total tax payable. Please note, ‘Surcharge’ is currently applicable only beyond certain defined income levels under both the taxation regimes.
- Total Tax after Surcharge & Educational Cess: Sum up the Net Income Tax, Surcharge (if applicable) and Education Cess.
- Relief under section 89: Provide the amount based on the eligibility of the employee to claim relief u/s 89 as per the provisions of the Act.
- Net Tax Payable: After, accounting for any relief u/s 89, the ‘Net Tax Payable’ of the employee is determined.
- Total TDS: The total Tax Deducted (TDS) of the employee is the sum total of TDS by the current ‘Employer’ and the previous employers during the financial year. It is expected that the TDS value should either be equal or greater than the ‘Net Tax Payable’ to avoid any default notice advise.
There is a few other information about the employee that also needs to be provided for reporting purposes. These are summarized as under:
- Details of contribution paid by Trustees of an approve Superannuation Fund
- PAN & Name of Landlord(s) if Rent paid by the employee exceeds Rs. 1.00 lac during the year
- PAN & Name of Lender(s) for Home Loan wherein the interest paid on Home Loan has been claimed under ‘Income / Loss from House Property’.
TDSMAN has been designed to provide convenience in preparing the Annexure II of Form 24Q-Q4 which will help in reporting information of each employee. Any lapses may lead to non-compliance.
You visit www.tdsman.com for more details and reach out for a demo / presentation.