All about Income Tax / TDS Deduction from Salaries for FY 2024-25

Circular No. 3/2025 issued by the Central Board of Direct Taxes (CBDT) provides guidance on income tax deduction from salaries under Section 192 of the Income-tax Act, 1961, for the financial year 2024-25. It incorporates amendments from the Finance Acts of 2023 and 2024, highlighting key changes such as the inclusion of Agniveer Corpus Fund contributions in “salary” under Section 17(1) and revised provisions for perquisites under Section 17(2). Surcharge rates under the old tax regime have been updated, with rates varying from 10% to 37% based on income thresholds. The new tax regime rates for FY 2024-25, introduced under Section 115BAC, range from 5% to 30% depending on income levels, with specific conditions for computation. Amendments to Form 16 and Form 24Q ensure compliance with the revised provisions. Notable updates include modifications to reflect the replacement of “Education Cess” with “Health and Education Cess” and enhanced reporting requirements for other tax deductions and collections. Employers must adhere to these guidelines for accurate tax calculation and reporting, ensuring compliance with the latest rules.

F. No. 275/107/2024-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
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Circular No : 3/2025 – Income Tax | Dated: 20^th February, 2025

SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2024-25 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.

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Reference is invited to Circular No. 24/2022 dated 07.12.2022, whereby the rates of deduction of income-tax from the payment of income under the head “Salaries” under section 192 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), during the financial year 2022-23, were intimated. The said Circular also explained certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter referred to as ‘the Rules’).

The present Circular contains the amendments made vide the Finance (No.2) Act of 2024, Finance (No.1) Act of 2024 and Finance Act of 2023 in respect of rates of deduction of income-tax from the payment of income under the head “Salaries” under section 192 of the Act. Where no amendments have been made by the above referred Acts. in such cases, the above referred Circular No. 24 of 2022 shall continue to he applicable for F.Y. 2024-25. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Fax Department- milt’. incometaxindia.gov. in.

Amendments made vide the Finance (No. 2) Act of 2024, Finance (No. 1) Act of 2024 and Finance Act of 2023 in respect of rates of deduction of income-tax from the payment of income under the head “Salaries” under section 192 of the Income-tax Act, 1961, during the financial year 2024-25

1. The term ^–Salary” has been defined in section 15 of the Act. It has been further explained in section 17. As per the amendment in section 17(1) of the Act vide the Finance Act, 2023. “salary”, inter alia, includes the following:

ix) the contribution made by the Central Government in the previous year. to the Agniveer Corpus. Fund account of an individual enrolled in the Agnipath Scheme referred to in section 80CCII,….”

2. As per the amendment vide the Finance Act, 2023 in section 17(2) of the Act, “perquisite”, inter alia, includes the following:

“….

(i) The value of rent-free accommodation provided to the employee by his employer [computed in such manner as may be prescribed j;

(ii) The value of any accommodation provided to the assessee by his employer at a concessional

3. As per the amendment vide Finance (No. 2) Act, 2024, the provisions related to Surcharge (under Old Tax Regime) applicable in the case of every individual are as under:

4. As per the amendment vide Finance (No. 2) Act, 2024 in respect of section 115BAC, the rates of income tax (under New Tax Regime) for the FY 2024-25 (i.e. Assessment Year 2025-26) arc as under:

Further, for the purposes of sub-section (IA) of section 115BAC, the total income of the person shall he computed—

(I) without any exemption or deduction under the provisions of clause (5) or clause (134) or prescribed under clause (14)(other than those as may he prescribed _/sir this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (h) section 24 [in respect of the property referred to in sub-section (2) of section 231 or clause (iia) of sub-section (1) of section 32 or section 32AD or .section 33AB or section 33A13A or .sub-clause (ii) or sub-clause (iia) of sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or .section 350 ‘C^. or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) section 8OCCD or sub-section (2) 0^–section 80C(711 or section 8OJJAA.

(ii) without set off of any loss,—

(a) carried forward or depreciation from any earlier assessment year. if such loss or depreciation is attributable to any of the deductions referred to in clause (i);

(h) under the head “Income from house property” with any other head of income;

(iii) by claiming the depreciation, if any, under any provision of section 32. except clause (iia) of sub-section (1) of the said section, determined in such mariner as may be prescribed;

and

(iv) without any exemption or deduction for allowances or perquisite, by whatever name called. provided under any other law for the time being in force.

5. As per the amendment made vide Finance (No. 2) Act, 2024, section 192(28) is reproduced as under:

“………..  (2B) Where an assesee who receives any income chargeable 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 properly”): or

(ii) any lax deducted or collected under the provisions of Part B or Part BR of this Chapter, as the case may be,

Jar the canna financial _.year, he may send to the person responsible ,for making the

payment referred to in sub-section 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

(e) the loss, if any. under the head “income, from house property” in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall lake into account the particulars referred to in clauses (a), (b) and (e) fin- the purposes of making the deduction under sub-section (I):

Provided that this sub-section shall not in ant• case have the effect of reducing the tax deductible from income under the head “Salaries”, except where the loss under the head “Income _.from house property” and the tax deducted in accordance with other provisions of Part B and lax collected in accordance with the provisions of Part 1313, of^. this Chapter, has been taken into account.

6. The Form No. 16 has been amended vide the Income-tax (Fifth Amendment) Rules, 2023, w.e.f. 1-7-2023 and shall be applicable for the assessment year 2024-25 and subsequent assessment years, Form No. 16 (has been further modified vide the Income-tax (Eighth Arndt.) Rules, 2024. w.e.f. 15-10-2024. The modified Form No. 16 is placed at Annexure-A.

7. The amendments in Form No. 24Q made by the income-tax (Fifth Amendment) Rules, 2023 are as under:

(i) In Annexure-I : Deductee wise Break up of TDS, “Health and Education Cess has been substituted for “Education Cess”.

(ii) Annexure-11 Details of salary paid or credited during the financial year …… … and net tax payable (under section 192) has been substituted by the Income-tax (Fifth Amendment) Rules. 2023, w.e.f. 01.07.2023.

Further, the amendment in Form No. 24Q made by the Income-tax (Eighth Amendment) Rules, 2024 w.e.f. 15.10.2024 is as under:

(i) In Annexure-Il, column No. 388A- “Amount reported as per section 192(213), of other tax deducted al source or tax collected at source, other than (3I() has been inserted.

8. As per the amendment vide Income-tax (Eighteenth Amendment) Rules, 2023 w.e.f. 01.09.2023 in the Rule 3 of the Rules, in respect of the accommodation provided by any other employer, the rates prescribed for valuation of perquisites arc as under:

9. The definition of “remote area” given in Explanation (v) to Rule 3 of the Rules has been amended vide Income-tax (Eighteenth Amendment) Rules, 2023 w.e.f. 1)1.09.2023 as under:

(v) “remote area”, for purposes of proviso to sub-rule (1) means any area other than an area which is located

(a) within the local limits of’ or

(b) within a distance, measured aerially, of 30 kilometers from the local limits of any municipality or a cantonment hoard having^– a population of 1,00,000 or more based on the 2011 census…

10. As per clause (iii) of’ sub-rule (7) of Rule 3, the value of free food and non- alcoholic beverages provided by the employer to the employee shall be the amount of expenditure incurred by such employer. As per the amendment vide Income-tax (Tenth Amendment) Rules, 2023, w.e.f. 21.06.2023, the second proviso to clause (iii) of sub-rule (7) of Rule 3 reads as under-

“Provided further that the provisions of the first proviso in respect of free food and non-alcoholic beverage provided by the employer through paid voucher shall not apply to an employee, being ern assessee, who has exercised an option under sub-section (5) of section 115BAC or whose income is chargeable to tax under sub-section (119) of section 115BAC.”

11. The exemption limit of leave encashment, in the case of employees other than Government employees, has been enhanced to Rs 25,00,000/- vide CBDT Notification No. 31/2023 dated 24.05.2023. Accordingly, the exemption in respect of leave encashment in case of a non-Government employee at the time of retirement shall be lower of’ the following, amounts:

• Period ()learned leave standing to the credit in the employee’s account at the time of retirement x average monthly salary.
• Average monthly salary x 10 (i.e.. 10 months’ average salary).
• Maximum amount as specified by the Central Government, i.e., Rs. 25,00,000.
• Leave encashment actually received at the time of retirement.

If an employee receives leave salary from more than one employer in the same year, then the maximum amour)t of exemption under section 10(10AA)(ii) of the Act cannot exceed the amount specified by the Central Government (i.e., Rs. 25,00,000). Where any employee has claimed exemption of leave salary under this section in any earlier year(s), then in case of such employee, the ceiling limit (i.e., Rs. 25,00,000) shall be reduced by the amount of exemption earlier claimed.

12. The sub-section (12C) has been inserted in section 10 of the Act vide Finance Act, 2023. Under section 10(12C) of the Act, any payment from the Agniveer Corpus Fund to a person enrolled under the Agnipath Scheme, or to his nominee shall be exempt. Section 10(12C) of the Act is reproduced as under;

“(I2C) any payment from the Agniveer Corpus Fund to a person enrolled under the Agnipath Scheme, or to his nominee.

Explanation.- -Par the purposes of this clause “Agniveer Corpus Fund” and “Agnipath Scheme” shall have the meanings respectively assigned to them in .section 80CCH,.^–

13. Section 87A provides relief in the form of rebate to individual taxpayers, resident in India, who arc in lower income bracket, i.e. having total income not exceeding Rs 5,00,000/-. The amount of rebate available under section 87A is Rs I 2,500/- or the amount of tax payable, whichever is less. As per the amendment vide Finance Act, 2023, w.e.f. 01.04.2024, the proviso to section 87A has been inserted and the same is reproduced as under:

“………Provided that where the total income of the assessee is chargeable to tax under sub-section (I A) of section I I 5BAC, and the total income—

(a) does not exceed seven hundred thousand rupees, the assessee shall he entitled to a deduction from the amount of income-tax (as computed before allowing _.for the deductions under this Chapter) on his total income with which he is chargeable fir any assessment _.year, of an amount equal to one hundred per cent of such income-tax or an amount of twenty-five thousand rupees, whichever is less,.

(h) exceeds seven hundred thousand rupees and the income-lax payable on such total income exceeds the amount by which the total income is in excess of seven hundred thousand rupees, the assessee shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, of an amount equal to the amount by which the income-tax payable on such !Will income is in excess of the amount by which the total income exceeds seven hundred thousand rupees.

14. Section 80CCI^–1 of the Act related to ‘Deduction in respect of contribution to Agnipath Scheme’ has been inserted vide Finance Act, 2023. Accordingly after paragraph No. 11 of para 5.5.3 the following paragraph No. 12 is inserted and the same is to be read as under:

“80CCH. (1) Where an assessee, being an individual enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after the 1st day of November, 2022, has in the previous year paid or deposited any amount in his account In the said Fund, he shall be allowed a deduction in the computation of his total income. of the whole of^–the amount so paid or deposited.

(2) Where the Central Government makes any contribution to the account of an assessee in the Agniveer Corpus Fund referred to in sub-section (1). the assessee shall be allowed a deduction in the computation of his total income of the whole of the amount so contributed.

Explanation.–For the purposes of this section,—

(a) “Agnipath Scheme” means the scheme for enrolment in Indian Armed Forces introduced vide letter No. 1(23)2022/D(Pay/Services), dated the 29th December. 2022 of the Government of India in the Ministry of Defence:

(b) “Agniveer Corpus Fund” means a find in which consolidated contributions of all the Agniveers and matching contributions of the Central Government along with interest on both these contributions are held”

15. Amendments in Penalty and Prosecution provisions on default on account of TDS-

(i) As per the Finance Act, 2023, section 271C on ‘Penalty for failure to deduct tax at source” has been amended. Section 271C, inter alia, lays down that if any person fails to deduct whole or any part of tax at source or fails to pay or ensure payment of, the whole or any part of tax under the proviso to section 19413 (w.e.f. 01.04.2023), sub-section (2) of section 194BA (w.e.f. 01.07.2023), he/she shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted or paid or payment ensured by him.

(ii) As per the Finance Act, 2023, section 276B on ‘Failure to pay tax to the credit of Central Government under Chapter X11-13 or XVH-B’ has been amended. Section 27613 lays down that if a person fails to pay to the credit of the Central Government within the prescribed time, as above, the tax deducted at source by him or tax payable by him or ensure payment of tax under the proviso to Section 19413 (w.e.f. 01.04.2023), or section 194BA(2) (w.e.f. 01.07.2023), he/she shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.”

(iii) Further, the following proviso has been inserted in section 27613 of the Act vide Finance (No.2) Act, 2024:

“Provided that the provisions of this section shall not apply if the payment referred to in clause (a) has been made to the credit of the central Government at any time on ©r before the time prescribed for filing the statement _.for such payment under sub-section (3) of section 200. “

16. Miscellaneous

16.1 These instructions arc not exhaustive and are issued only with a view to guide the employers. Wherever there is any doubt, reference may be made to the provisions of the Income-tax Act, 1961, the Income-tax Rules, 1962, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2022 (No. 38 of 2022), the above mentioned Finance Acts, the relevant circulars / notifications, etc.

16.2 It is stated that in case any assistance is required, the Assessing Officer/the Local Public Relation Officer of the Income-tax Department may be contacted.

16.3 These instructions may be brought to the notice of all Disbursing Officers and Undertakings including those under the control of the Central/ State Governments.

16.4 Copies of this Circular are available at the following websites:  www.finmin.nic.in & www.incometaxindia.gov.in Hindi version will follow.

(Rubal Singh)
Deputy Secretary
(IT-Budget), CBDT

Copy to:

1. All State Governments/Union Territories.

2. All Ministries/Departments of Government of India etc.

3. President’s Secretariat

4. Vice-President’s Secretariat

5. Prime Minister’s Office

6. Ink Sabha Secretariat

7. Rajya Sabha Secretariat

8. Cabinet Secretariat.

9. Secretary, U.P.S.C., DhoIpur House, New Delhi

10. Secretary, Staff Selection Commission, Lodhi Complex, New Delhi

11. Supreme Court of India. New Delhi

12. Election Commission, New Delhi Planning Commission, New Delhi

13. Secretariat of Governors/Lt. Governors Of all States/Union Territories

14. All Integrated Financial Advisors to Ministries/Departments of Government of India

15. Al! heads of Departments & Offices subordinate to the Department of Revenue CBDT, CBEC

16. Army headquarters. New Delhi

17. Air headquarters, New Delhi Naval headquarters, New Delhi

18. Director-General of Posts & Telegraphs, New Delhi

19. Comptroller & Auditor General of India

20. Accountant Generals of all State Governments

21. Director of Audit (Central)Kolkata, New Delhi, Mumbai.

22. All Banks (Public Sector, Nationalized including State Bank of India)

23. Secretary, Reserve Bank of India Central Office P.B.No.406, Mumbai 400001 (25 copies for distribution to its Branches).

24. Accounts Officer. Inspector General of Assam Rifles. (1Iqrs), Shillong All Chambers of Commerce 8.: Industry

25. Lok Sabha /Rajya Sabha Secretariat Libraries (15 copies each)

26. All Officers and Sections in Technical Wing of CBDT

27. Chief Inspector, RBI Inspection Deptt. Regional Cell Mumbai/Kolkata/ Channai/New Delhi/and Kanpur.

28. Controller of Accounts, Deptt. Of Economic Affairs, New Delhi

29. Manager, Reserve Bank of India, Public Debt Office. Ahmedabad/Bengaluru/ Bhubaneswar/ Mumbai/Hyderabad/Kanpur/Jaipur/Chernnai/Nagpur/New Delhi/ Patna/ Guwahatiffrivandrum.

30. Controller General of Defence Accounts. New Delhi.

31. Directorate of Audit, Defence Services, New Delhi. National. Saving Organisation, Nagpur.

32. Deputy Accountant General, Post & Telegraph, Kolkata.

33. The Legal Adviser, Export-Import Rank of India, P.13.No.19969, Mumbai 4000021. Chief Controller of Accounts, CBDT„ Lok Nayak Bhawan, Khan Market, New Delhi

34. S. Branch. Department of Economic Affairs. New Delhi

35. The Min. of Law (Deptt. of Legal Affairs), Shastri Bhawan New Delhi. All Foreign Banks operating in India

36. Air India, New Delhi.

37. University Grants Commission, Bahadur Shah Jafar Marg, New Delhi.

Deputy Secretary
(IT-Budget), CBDT

Notes:

1. Government deductors to fill information in item I of Part A if tax is paid without production of an income tax challan and in item II of Part A if tax is paid accompanied by an income-tax challan.

2. Non-Government deductors to fill information in item II of Part A.

3. The deductor shall furnish the address of the Commissioner of Income-tax (TDS) having jurisdiction as regards TDS statements of the assessee.

4. If an assessee is employed under one employer only during the year, certificate in Form No. 16 issued for the quarter ending on 31st March of the financial year shall contain the details of tax deducted and deposited for all the quarters of the financial year.

5. (I) If an assessee is employed under more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers.

(i) Part B (Annexure-l) of the certificate in Form No.16 may be issued by each of the employers or the last employer at the option of the assessee.

(ii) Part B (Annexure-Il) of the certificate in Form 16 may be issued by the specified bank to a specified senior citizen.

6. In Part A, in items I and Il, in the column for tax deposited in respect of deductee, furnish total amount of tax, surcharge and health and education cess.

7. Deductor shall duly fill details, where available, in item numbers 2(f) and 10(k) before furnishing of Part B (Annexure-l) to the employee.