CMA Ramesh Krishnan
Introduction: Taxation on salary is the vital area which should be known not only by the employer but also the employee should be aware about this area. Section.192 of the Income tax act is crucial section under TDS which deals with the TDS deduction on Salary. This section describes the complete process of tax deduction from salary of employees. In this article, I will try to highlight some major points which a person as an employee should know and cooperate with employer to comply with the requirement of section 192 and ensure the correct deduction of tax from his/her salary.
1. Declaration of the Income details: Every employer need to collect the declaration from each employee about the income other than his/her salary income from their organization. This declaration needs to be given by the employee either beginning of the every financial year (April) or at the time of joining with new employer whichever is earlier. This declaration should be in the form 12C as per rule 26B and it should contain
a. Employee name/PAN/Residential status
b. Income other than Salary like House property/Business/Capital gain/ Other sources
c. TDS or advance tax payment paid or deducted if any
2. Declaration of Investments and other deduction: Apart from the income details the employee has to declare his/her investment/savings details which eligible under chapter VI-A , such as various section like 80C/80D/80DD/80DDB/80E/80G/80U/80TTA etc. This will be declared in the form 12BB, In this form employee has to declare the following details
a. Income from his/her previous employment (if he joins in the middle of the financial year)
b. Projected investment which eligible for chapter VI-A for the financial year
c. House property interest details (self occupied/let out)
d. Rent payment in case of claiming HRA exemption u/s.10(13A)
e. Children with education details for claiming Children education & hostel expenses allowance u/s.10(14)
This declaration also needs to submit with employer in the beginning of the financial year or at the time of joining whichever is earlier.
This above 2 declarations is the responsibility of the employee to give without fail with the employer to ensure proper & correct TDS deduction from the salary of an employee.
After receiving those declarations, responsibility starts with employer. from here I will continue the article in Frequently asked questions (FAQ) mode
Q.1 How the employers calculate the tax of employee?
Ans: Employer will follow the steps like
a. Employer will first arrive the Salary income of the employee in working organization with considering the eligible deductions/exemptions/allowance under the head Salaries.
b. Second step, in case employee joined mid of the financial year, employer adds the salary income of the employee from their previous employment.
c. After that employer will add the Income other than salary declared by the employee in form 12C with considering the deductions mentioned in the form.
d. Then they will arrive the eligible deduction under chapter VI-A as per employee declaration
e. Finally employer need to calculate the employee`s total tax liability for the year. During final liability, employer need to consider the any tax deducted from his income already during the financial year from any source and any advance tax paid by employee on his/her own. This TDS/advance tax only consider based on the payment proof or certificate from the deductor.
f. Based on the arrived tax liability, employer starts to deduct the TDS from the employee`s salary in the equal monthly installment for the year or remaining period incase joined during mid of the year.
Q.2 What will happen if the employee fails to declare these forms?
Ans: If employee fails to declare these forms, employer will consider the Salary income for the present employment without giving the exemptions/deductions to arrive the tax liability. It will lead the more or excess TDS deduction from the employee`s salary.
Q.3 What will be the consequences if the employee does not declare the Other Incomes and previous employment income to the employer?
Ans: If the employee does not declare the other income details and previous employment details, there will not be any problem for the employer because employer has responsibility to ensure the TDS deduction from the salary paid from their company only. However, employee may get the huge tax burden and interest liability u/s.234B & 234C in the year end or at the time of filling the income tax return. If the employee fails to declare the previous employment income details, there may be chance of considering deduction under Chapter VI-A and basic exemption and house property interest deduction double time by the both employer and finally while consolidating salary from the both employer, it will be allowed one time and end up the employee with huge tax liability.
Q.4 What is the consequence if employee declares wrong details in the declaration?
Ans: Giving incorrect or wrong information in the declaration will lead the excess or short deduction of tax and put the employee in to trouble during year end or income tax filling stage.
Q.5 What are the documents need to be submitted with employer along with declaration?
Ans: Declarations need to be submitted first however supporting documents for other incomes and deductions during the year end to finalize the tax workings mostly by Jan/Feb/Mar, because employer responsibility to ensure to collect the proper documents for any deductions/exemptions. In case employee declared the details and not produce the documents with the employer also will lead the huge tax liability at the year end and gives the burden to employee.
Q.6 Whether employee needs to produce the Original proof with employer?
Ans: Yes. Employee needs to submit the original proof of documents with employer for his all exemption and deductions claim to avoid the double deductions in multiple time.
Q.7 Whether rent receipts & agreement is mandatory to claim the HRA exemption?
Ans: Yes. Original rent receipts are mandatory to claim the HRA exemption, rental agreement can be provided as optional but receipts are the base for claiming the exemption
Q.8 What will deduction for rent if salary structure not having HRA portion?
Ans: In case salary structure does not HRA component, then employee can opt the deduction u/s.80GG of rent paid subject to maximum of Rs.5000 per month deduction.
Q.9 Whether original medical bills required claiming the medical reimbursement?
Ans: Yes. Medical reimbursement of Rs.15000 per annum maximum exemption allowed, to avail this employee has to submit original medical bills with employer .However fixed medical allowance is fully taxable. The medical reimbursement has been withdrawn wef from A.Y 2019-20 and in lieu of it a standard deduction of Rs 40,000 is allowed u/s 16
Q.10 Whether proofs are require for claiming Leave Travel Allowance?
Ans: Previously it is mandatory to submit the document proofs but after the Supreme Court judgment in case of CIT vs Larsen & Toubro Ltd in 2009, for claiming LTA, proofs are not required only declaration if enough to claim the same.However Finance Act 2015 introduced a new section 192(2D) which came after Supreme Court decision, by virtue of which the person responsible for making the payment of salary are obliged to collect the necessary evidence or proof in the prescribed form and manner to allow any claim for any deduction and/or tax. The Central Board of Direct Taxes (CBDT) has prescribed the form i.e. Form 12BB, in which salaried employees would now required to furnish evidence of claims and tax saving investments to the employer
Q.11 What is the solution if after submitting the proofs also employer missed to consider or fail to submit the proofs but employee has the original documents?
Ans: In case employee submitted all the documents but employer did not consider or missed to consider the deductions and exemptions or employee fail to submit the documents before employer deduct the tax, then employee can claim the exemption and deductions based on the proof available with him/her in their Income tax return. However Leave Travel Concession or Allowance cannot claim by employee on their own in the income tax return since that need employer confirmation about the leave details etc.
Q.12 Whether the employer can allow the 80G deduction during tax calculation?
Ans: Employer can allow the donations which are eligible for 100% deduction such as Government scheme like National defence fund, Prime Minister relief fund, Earth quake relief fund etc. but other donations which are comes under 50% eligibility need to be claimed by the employee in the income tax return directly.
Q.13 How employee can ensure the TDS deducted from the employer has been deposited?
Ans: In the normal course the employer has to deposit the TDS deducted from the employee`s salary within 7th of the following month except March deduction (March deduction can be paid within 30th of April) every month employee cannot check whether paid or not however quarterly once employer has to submit the TDS return the same will be reflect in to employee`s form 26AS, So employees can login in their form 26AS and check whether TDS deducted from their salary has been deposited or not. If not, they can check with their employer accordingly.
Conclusion: The above points and information are very basic information to know as an employee to ensure their TDS from salaries. Basically the cooperation between the employer and employee in the TDS deduction will make more effective to minimize the error and ensure the proper deduction.
Read Other Articles from CMA Ramesh Krishnan
(Republished with Amendments)
Author Bio
My Previous employer not pay my last month salary, but TDS deposited as per that salary. Now I’m several times asking for rectify this in 26 AS , not getting any response from their end. What can I do now?
Under which section an employer has flexibility to deduct income tax monthly or quarterly for the amount calculated for a particular financial year.
Our company does not have LTA component in salary structure. Can i take one week leave from employment and claim LTA in the income tax return
What to do about interest while filing return on FD if it is not reflected in Form-26 AS
What are the key dates when the income tax starts deducting for salaried employees for assessment year (Key dates).
Hi,
Can anyone explain about the declaring the previous employer salary information for TDS cutting to current employer.
thanks
regards
@shyam
Benefit of LTA exemption shall be considered by your empolyer
If they refused to give benefit you can yourself claim the benefit while filing your income tax return.
If you are eligebile to claim LTA EXEMPTION, then write a letter to finance department of your company that they deducting extra Tax .
Extract of Section 10(5)
“Section 10(5)in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—
(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;
(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,
subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :
Providedthat the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.
Explanation.—For the purposes of this clause, “family”, in relation to an individual, means—
(i) the spouse and children of the individual ; and
(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual; ]”
Conditions for the purpose of section 10(5) as Prescribed in Rule 2B of Income Tax Rules- Extract of Rule 2B
2B.(1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,—
(a) on leave to any place in India;
(b) to any place in India after retirement from service or after the termination of his service,
shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :—
[(i) where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;
(ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and
(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :—
(A) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and
(B) where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.]
(2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 :
[Providedthat nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.]
(3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption.
Explanation : The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in deter-mining the eligibility of the amount in respect of the value of the travel con-cession or assistance in relation to the number of journeys under sub-rule (2).]
[(4) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 :
Providedthat this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.]
DEAR SIR,
My Salary has a component for LTA which is being deducted at Rs.5000 per month. There are a few claims that the finance department in our company said with regards to LTA.
1. My Company says, Finance department with effect from FY 2014-2015 has stopped considering the LTA and LTA component must be taxed. Is this correct?
2. Employee cannot claim the LTA through the employer. Is this correct?
3. Employee must claim the tax refund through income tax Department. Is this correct?
4. My employer is giving evasive answers on “how to claim the tax refund from the income tax department”. What to do?
5. How do I claim the income tax refund from the income tax refund,if the employer is refusing to accept the LTA?
Please help.
Regards,
Shyam
30-03-2015 Bangalore
TDS from salary – what every employee should know.
You people simply accept everything as your duty.
You blindly accept it as duty even if the employer is negligent and arrogant.
What provision is there in the income tax to punish employer’s negligence in the
following cases:-
a) Erroneous and excess income tax deduction causing loss to the employee.
b) Unwarranted tax deduction by the employer thereby causing loss to the employee.
c) Why do you blindly accept section 192 of Income Tax Act when income tax liability
arises only after income crosses threshold limit of Rs.2.5 lakhs (earlier Rs.2 lakhs).
d) As professionals ( C As) you should be able to differentiate between
‘income’ and ‘income in the hands of the assessee’. As C A professionals you should
clearly educate employer, employee and all others.
Why you professionals show ignorance oin this aspect.
d) Why do you expect the employee to co-operate with the employer for the
negligence shown by the employer and excess tax is deliberately and negligently
deducted thereby causing loss to the employee.
You have said: the emlopee should ‘cooperate’ and the employee should’ensure’
that tax deducted is and is reflected in 26AS. This is strange and foolish.
Suppose you are put to loss as stated above, do you cooperate with the tax deductor
and encourage his negligence? As a professional do you suffer silently and
encourage negligence?
If you CA professionls are working for a good cause punish the tax deductor for his
negligence. Because you professionals blindly accept everything as your duty
you encourage the negligence of the tax deductor.
You C A professionals consider what I said above and be pro-active to make a
provision in income tax which is equal to section 212 of contract act.
If you want more details I can give material evidence on this issue.
You respond to me as to how you can solve this problem.
Do not give me vague or evasive answers like : take up the matter with some
department etc.
I want to know what you can do? I don’t want evasive answers.
I want final result from you.
I want straight answer from you: Yes or no. You should serve larger interest
of the tax payers. Respond in writing and post this public forum.
Let every tax payer know the above issue.