TDS on Salaries – Section 192- Procedure to deduct TDS – Compliance with Income Tax Act and rules there under
Under Section 192, the employer is required to deduct Tax at Source while making the payment of salary during financial year to the employees, at the rate of applicable to the individuals. For deduction of Tax at source (TDS), the tax has to be calculated according to slab wise rate. The applicable slab wise rate for deduction of tax at source will be notified through the Finance Act.
Applicable rate of Tax on income chargeable under the head “Salaries” for the Financial year 2019-20 (i.e., Assessment Year 2020-21) is as follows:
|Sl.No.||Total Income||Rate of Tax|
|1.||Where the total income does not exceed Rs. 2,50,000/-||NIL|
|2.||Where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000/-||5% of the amount by which the total income exceeds Rs. 2,50,000/-|
|3.||Where the total income exceeds Rs. 5,00,000/- but does not exceeds Rs. 10,00,000/-.||Rs. 12,500/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.|
|4.||Where the total income exceeds Rs. 10,00,000/-.||Rs. 1,12,500/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-|
TDS should be deducted at applicable rates as above along with surcharge and Education Cess.
Surcharge at 10% of income tax, where total income exceeds INR 50 lakh up to INR 1 crore. 15% of income tax, where the total income exceeds INR 1 crore up to INR 2 crore. 25% of income tax, where total income exceeds Rs 2 crore upto Rs 5 crore and 37% of income tax, where total income exceeds Rs 5 crore.
Health and Education Cess at the rate of 4% (without any limit in taxable income) on income tax plus surcharge will be levied.
Every person who is paying salary has to comply with the provisions of the Income tax Act and the rules made there under. The following are the steps / Points that may be followed in complying with the same:
Take a declaration from the employees with regard to their savings, investments or sums qualified for deduction or exemption under salaries.
Points to be considered by the employer at the time of taking declarations from employees for TDS purpose:
Calculate the taxable salary by giving the effect of the following:
If the employee is receiving the House Rent allowance (HRA) and paying the Rent, then least of the following amount is to be allowed as exemption under HRA.
|b)||40% of salary (50% if house is situated at Mumbai, Kolkata, Delhi or Chennai).
Note: Salary = Basic+ Dearness Allowance + Commission based on fixed % of turnover.
Less: 10% of Basic plus DA if it is part of retirement proceedings.
The lower of the above three will be allowable as exemption from HRA allowance.
Note: The Employer has to take the lease deed / rental agreement or rent paid receipt from the employee for giving the above exemption.
When the employee is receiving the uniform allowance to meet the terms and conditions of the working culture, then the actual allowance amount or expenditure incurred on buying of the Uniform whichever is lower is exempted.
The above allowances are illustrative only. The allowances would be based on the HR policy on providing the allowances to the employees as part of salary and the exemption would be based on the provisions of the Income Tax Act and the rules made there under.
Interest on Housing Loan: Section 24(b) of the Act allows deduction from income from house property on interest on borrowed capital as under:-
|Sl.No.||Purpose of Borrowing Capital||Date of Borrowing Capital||Maximum Deduction Allowable|
|1||Repair or renewal or reconstruction of the house||Any time||Rs. 30,000/-|
|2||Acquisition or construction of the house||Before 01.04.1999||Rs. 30,000/-|
|3||Acquisition or construction of the house||On or after 01.04.1999||Rs. 2,00,000/-|
After calculating the Taxable Salary as mentioned in previous steps, give the allowable deduction as given below:
By investment in following tax saving schemes upto a maximum limit of Rs.1,50,000/- an individual can save taxes
The deduction under Sec.80CCC towards amount paid or deposited to keep in force a contract for any annuity plan of LIC of India or any other insurer for receiving pension from the fund. The amount deposited or Rs.1,00,000 whichever is lowers is deductible. [subject to the maximum deduction under 80CCC and 80CCCD(1) Rs.1,50,000.].
The deduction under Sec.80CCD available to only An individual employed by the Central Government on or after 1.1.2004 or any other employer as well as self employed Individual who has paid or deposited any amount in his account under a notified pension scheme .
The deduction available, in case of a salaried individual, deduction of own contribution under section 80CCD(1) is restricted to 10% of his salary. In any other case, deduction under section 80CCD(1) is restricted to 10% of gross total income. Further, the deduction under section 80CCD(1) cannot exceed Rs. 1 lakh.
The entire employer’s contribution would be included in the salary of the employee. The deduction of employer’s contribution under section 80CCD(2) would be restricted to 10% of salary. However, the limit of Rs.1 lakh under section 80CCD(1) and Rs.1.50 lakh under section 80CCE does not apply to deduction under section 80CCD(2 ).
You can claim up to Rs 75,000 for spending on medical treatments of your dependents (spouse, parents, kids or siblings) who have 40% disability. The tax deduction limit of upto Rs 1.25 lakh in case of severe disability (i.e. disability of 80% or above) can be availed.
To claim this deduction, you have to submit Form no 10-IA.
Amount paid for specified diseases or ailment as prescribed under Rule DD of the Income Tax Rules. The deduction available to Individual for himself or his dependent spouse, children, parents, brothers or sisters. In the case of HUF, any member of his family
The deduction available is actual sum paid or Rs.40,000 (Rs.60,000, if the payment is for medical treatment of a senior citizen. Rs.80,000, if the payment is for medical treatment of a super senior citizen – resident who is at least 80 years of age at any time during the previous year), whichever is less, minus the amount reimbursed from the insurance company or the employer. Any amount incurred for the medical treatment, training and rehabilitation of a dependent disabled
Interest on loan should be taken from any financial institution or approved charitable institution. Such loan is taken for pursuing his higher education or higher education of his or her relative i.e., spouse or children of the individual.
The deduction is available for interest payment in the initial assessment year (year of commencement of interest payment) and seven assessment years immediately succeeding the initial assessment year or until the interest is paid in full by the assessee, whichever is earlier.
This deduction in respect of interest on deposits in the savings which is available for Resident Individual or HUF (other than those assessee who has covered in Section 80TTB) and Maximum deduction of Rs. 10,000/- will be allowed under this section
This deduction in respect of interest on deposits in case of senior citizens (a resident individual who is of the age of sixty years or more at any time during the relevant previous year) and Maximum deduction of Rs. 50,000/- will be allowed under this section
After giving the deduction under Section 80C to 80U from the taxable salary, then arrived amount would be treated as Total Income on which the TDS need to be deducted.
After giving the deduction under Section 80C to 80U, as mentioned above, calculate the tax according to slab wise.
The TDS as calculated according to the previous steps, deduct the TDS by calculating average for 12 months, then deduct TDS on monthly basis. If short deduct in the previous months, the balance need to be deducted from available months.
The employer has to obtain the proofs for the savings or investments made by the employee. If the employee has not submitted or not invested as given in his declaration, then calculate the Tax assuming the employee has not invested or done any savings and accordingly deduct the balance TDS from his salary before the payment of Salary.
The employer has deposit the TDS which was deducted from the Salaries. The due date for the same are, for the month of April to Feb of the Financial year the due date is 7th of the subsequent month in which the TDS was deducted.
The Employer has to file the E-TDS return in Form-24Q for each quarter. The following are the due dates for filing of the online E-TDS returns.
|PERIOD||DUE DATE OF FILING|
|April to June||15TH JULY|
|July to September||15th OCTOBER|
|October to December||15th JANUARY|
|January to March||15th MAY|
The Employer has to issue the Form-16 along with Form – 12BA to the respective employees on or before 31st May (after ending of the financial year).
(Republished with Amendments)