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Introduction: As the financial year draws to a close, employers and Heads of Departments (HODs)/Drawing and Disbursing Officers (DDOs) are reminded of their critical role in adhering to Tax Deducted at Source (TDS) compliances under Section 192 of the Income Tax Act, 1961. Central to these compliances is the collection and verification of Form 12BB from employees. This document is pivotal for employers to accurately deduct TDS based on the legitimate deductions and exemptions claimed by employees. This article delves into the requisite steps employers need to take to ensure compliance, thereby avoiding potential penalties and prosecution.

As the deadline for final TDS from salary is near, the employers (HOD / DDO) who are responsible for deducting TDS u/s 192 of the Income-tax Act, 1961, are expected to make the following compliances :-

(i) The employer is required to obtain Form 12BB from each of its eligible employee alongwith documentary evidence and verify the details in Form 12BB with evidence of exemptions / deductions claimed by the employee.

(ii) The employer may preferabley obtain the Form 12BB from the employee in the beginning of the Financial Year itself.

(iii) The employer is required to fill Annexure-II (break up of salary, deduction, income from other sources, house property income and tax liability) of 24Q, TDS statements for Quarter-4 of the Financial Year.

(iv) The employer should thereafter issue Form-16 after downloading the same from TRACES portal.

A sample check points to be followed by the HOD / DDOs while making TDS deductions from salary is provided as under :-

(i) Obtain details of PAN, status of Aadhar PAN linkage, savings, deductions & exemption claims along with evidence where applicable;

(ii) Obtain information whether the employee is option for new tax regime or old tax regime ;

(iii) Obtain Form 12BB from the employees for the purpose of claiming deductions / exemptions alogn with documentary evidence. Form 12BB may be obtained in the beginning of the Financial Year ( to take care of last minute deduction / exemptions )

(iv) Verify the details in Form 12BB submitted by the employees with reference to evidence of exemptions / deductions claimed and the tax regime opted by the employees.

(v) Fill Annexure-II (breakup of salary, deduction, income from other sources, house property income and tax liability) of Form 24Q TDS Statements for Quarter 4 of the Financial Year.

(vi) Issue Form 16 after downloading the same from TRACES portal.

(vii) Educate employees about the importance of making rightful claims for deductions / exemptions as also to file correct and complete returns of income and also the need to avoid making ineligible / wrongful claims of refunds in their Income Tax Returns.

The employers may follow the TDS compliances as mentioned above and for this purpose may adopt the check points as provided above.

Please note that non-compliances leads to action u/s 201(1)/201(1A) of the Income tax Act, 1961, thereby treating the employer as assessee in default. This will further lead to levy of penalty u/s 271C and launching prosecution proceedings u/s 276B /276BB of the Income tax Act, 1961.

Conclusion: Understanding and implementing the new TDS compliances under Section 192 of the Income Tax Act, 1961, particularly the relevance of Form 12BB, is crucial for both employers and employees. Employers must diligently follow the outlined procedures, from collecting Form 12BB at the beginning of the financial year to issuing Form 16 after thorough verification of claims. This not only ensures compliance but also educates employees on the importance of legitimate claims. Adhering to these compliances benefits all parties involved by fostering a culture of transparency and responsibility in tax matters, ultimately contributing to the nation’s economic well-being.

Hope the above article will serves useful purpose.

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