Summary: The Finance Act 2024 introduced Form 12BAA to streamline tax compliance for employers and employees by allowing credit for Tax Collected at Source (TCS) during TDS calculations. Previously, employers couldn’t account for TCS paid on an employee’s income, leading to potential over-taxation. With Form 12BAA, employees can declare TCS paid on additional income—such as foreign tours—directly to employers, who must then adjust TDS accordingly. This form serves as an undertaking under Rule 26B of the Income-tax Rules, 1962, enabling employees to report other income details, TDS, and TCS paid to reduce overall tax deduction on salary. Key details required in Form 12BAA include employee PAN, TDS and TCS particulars, and any property loss declarations. Although the form submission isn’t mandatory, once an employee provides it, the employer is obliged to consider the TCS credit for TDS calculations. This adjustment ensures employees’ disposable income reflects all taxes paid, preventing unnecessary deductions.
Introduction:
Section 192(2B) of the Income Tax Act provides for the consideration of income under any other head and tax, if any, deducted thereon to be taken into account for the purposes of making the deduction under sub-section (1) of the aforesaid section, subject to certain conditions. However, there was no provision whereby the employer could take cognizance of the TCS of the employer, if any, before computing the TDS liability of the employer. Keeping this difficulty in view, the Finance Act 2024 introduced an amendment to Section 192(2B), whereby the employee can seek credit for such TCS.
Further, in consequence of the amendment made to Section 192(2B) of the Income Tax Act, the CBDT issued a notification dated 15/10/2024, introducing Form 12BAA. This form is an extension of the existing Form 12BA and is specifically designed to assist employees in availing the benefit of taxes paid on their additional income or tax collected on their foreign tours during the year. The primary aim of Form 12BAA is to facilitate the accurate calculation of Tax Deducted at Source (TDS) on salaries, thereby ensuring that employees are not over-taxed.
This article will delve into the meaning, advantages, and key features of Form 12BAA in greater detail.
Q.1 What are the provisions related to TCS, that may affect employee:
Ans: (i) TCS at the time of purchase of vehicle
(ii) TCS at the time of remittances made abroad
(iii) TCS at the time of foreign Tours, if any
The relevant amendments as made in the income tax act are as under:
1.1 Amendment as made in finance Act 2016
To reduce the quantum of cash transactions in the sale of goods and services, curb the flow of unaccounted money in the trading system, and bring high-value transactions within the tax net, it was proposed to amend the aforesaid section to provide that the seller shall collect the tax at the rate of one percent from the purchaser on the sale of a motor vehicle valued at over ten lakh rupees.
1.2 Amendment in finance Act 2020
To widen and deepen the tax net, it was proposed to amend Section 206C to levy TCS on overseas remittance and the sale of overseas tour packages, as follows:
- An authorized dealer receiving an amount or an aggregate of amounts of seven lakh rupees or more in a financial year for remittance out of India under the LRS of RBI shall be liable to collect TCS if they receive a sum in excess of the said amount from a buyer remitting such an amount out of India, at the rate of five percent.
- A seller of an overseas tour package who receives any amount from any buyer, who is purchasing such a package, shall be liable to collect TCS at the rate of five percent.
1.3 Amendment in finance Act 2023
The seller of an overseas tour program package shall collect a sum of twenty percent of the amount or aggregate of amounts in excess of seven lakh rupees received from the buyer in a financial year.
Q.2. What is the amended section related to TCS credit as per Finance Act 2024
Ans: To ease compliance, it is proposed that sub-section (2B) of Section 192 be amended to expand the scope of the said sub-section to include any tax deducted or collected under the provisions of Chapter XVII-B or Chapter XVII-BB, as the case may be, to be taken into account for the purposes of making the deduction under sub-section (1) of Section 192.
Q.3. Whether it is mandatory for employee to inform employer about TCS:
Ans: No, It is not mandatory.
The word used in Section 192B are as under:
Where an assessee who receives any income under the head “Salaries” has, in addition, —
(i) any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head “Income from house property”); or
(ii) any tax deducted or collected under the provisions of Part B or Part BB of this Chapter, as the case may be,
for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1), the particulars of—
(a) such other income;
(b) any tax deducted or collected under any other provision of Part B or Part BB of this Chapter, as the case may be; and
(c) the loss, if any, under the head “Income from house property”,
in such form and verified in such manner as may be prescribed:
The word “may” in the section indicates that it is the employee’s choice whether or not to inform the employer about their TCS.
Q.4 Whether it is mandatory for employer to allow credit for TCS, once undertaking is submitted by employee?
Ans: Yes. It is mandatory for the employer to take into account the such credit before deducting appropriate taxes on salary income.
The word used in Section 192B are as under:
and thereupon the person responsible as aforesaid shall take into account the particulars referred to in clauses (a), (b) and (c) for the purposes of making the deduction under sub-section (1)
The word “Shall” in the section indicates that it is mandatory for the employer to consider the undertaking submitted by the employee.
Q.5 Amendment has been effected from 01/10/2024, can employer take into account the TCS made between 01/04/2024 to 31/10/2024;
Ans: Yes, this amendment was made to ease compliance and is beneficial for employees. Therefore, employers can avail of the credit of TCS in this financial year, even if the tax was collected prior to 01/10/2024.
Q.6 In which form the employee should submit the information:
Ans: The form as prescribed in Rule – 26B of Income-tax Rules, 1962 is 12BAA
Q.7 What details are required for submitting Form 12BAA:
Ans: The details required to be filled in the Form 12BAA are as follows:
7.1 General Details:
- Name and address of the employee
- PAN of the employee
- Financial Year
7.2 Details of TDS Deducted:
- Section under which the TDS has been deducted
- Name of the deductor
- Address of the deductor
- TAN of the deductor
- Amount of tax deducted
- Amount of Income credited/received
- Any other relevant details
7.3 Details of TCS Collected:
- Section under which the TCS has been collected
- Name of the collector
- Address of the collector
- TAN of the collector
- Amount of tax collected
- Any other relevant details
7.4 Loss under the head “Income from house property”:
- Amount
- Details
Q.8 Is there any documents required to be enclosed?
Ans: No. The form No. 12BAA is in the form of undertaking.
An undertaking is a formal document where one party provides assurance to another that they have fulfilled or will fulfil an obligation or requirement under the law. Thus, the employee is responsible for any incorrect information provided in Form 12BAA.
Q.9.What are the advantages of submitting form 12BAA:
Ans: Form 12BAA streamlines the reporting process for employees and employers by allowing employees to provide details of tax paid on other income sources, thereby reducing their tax deductions. It helps employees declare the tax already paid on other sources of income, enabling the employer to consider all taxes paid while deducting tax at source. This reduction in tax deduction subsequently increases the overall disposable income of the employee.
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