TDS on Salary under Section 192

If you see your Salary Slip carefully, you will find that Salary Slip is having two type of pay amount viz. Gross Pay (i.e. Cost to Company or CTC) and Net Pay (i.e. In-Hand Salary or Take Home Salary).

Have you ever think why your In-hand Salary is less than the Gross Salary (or CTC). One of the main reason is TDS (Tax Deducted at Source). In this article we will be understanding thoroughly about the TDS on Salary.

CONCEPT OF TDS–  First of all, we should have a basic understanding about the concept of Tax Deducted at source. The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.

 

1. Who is liable to deduct TDS u/s 192(Salary) of the Income Tax Act?

 

  • Any person (Employer) who pays salary to other person (Employee) is liable to deduct TDS every month under section 192 of the Income Tax Act,1961.
  • Employer also known as deductor or payer.

    Employer’s can be
    Any person:-
  • Companies (Private or Public),
  • Individuals,
  • TRUSTS,
  • HUF (Hindu Undivided Family),
  • PARTNERSHIP FIRM,
  • Co-operative societies.

 

2. When TDS on salary is required to be Deducted under Section 192?

 

(i) The employer is liable to deduct TDS on salary at the time of making the PAYMENT to the employee. The TDS deduction on salary can only be made at the time when actual payment is made, NOT the time of crediting the party.

(ii) In case of individual, if your total salary income more than basic exemption limit. Then your TDS is required to be deducted by employer. As per Slab Rates.

(iii). Slabs rates and it’s calculation – In India Income Tax follows a tax slab system. Here, taxpayers’ income is categorized as ranges or slabs and certain tax rates are assigned to them. This is a progressive system of taxation where people earning more income are taxed at higher income tax slabs in proportion to their higher income.

The tax regime are basically of two types: viz. (a) New Tax Regime; (b). Old Tax Regime

(a). New Tax Regime:

 

It will be the DEFAULT tax regime at the time of filing ITR for FY 2023-24 (AY 2024-25). However, taxpayer has the OPTION to CHANGE from NEW TAX REGIME (Default Regime) to OLD TAX REGIME as per their convenience at the of time of filing ITR (i.e. on or before 31/July/2024) unless they are having Business Income.

AS PER NEW REGIME (DEFAULT TAX REGIME):- (INDIVIDUAL)

INCOME TAX SLABS & RATES:FY 2023-24(AY 2024-25)

Up to Rs 3,00,000 NIL
Rs 3,00,000 to Rs 6,00,000 5%
Rs 6,00,001 to Rs 9,00,000 10%
Rs 9,00,001 to Rs 12,00,000 15%
Rs 12,00,001 to Rs 15,00,000 20%
Above Rs 15,00,000 30%

Note –

  • Under NEW TAX REGIME for FY 23-24, ONLY Standard Deduction of Rs 50,000 is allowed to salaried employees & pensioners. Other Deduction & Exemption such as u/s 80C, 80D, 80CCD(1B), 80TTA, 80G, Interest on house property loan u/s 24(b), HRA, LTA etc. will NOT be allowed to taxpayer.
  • Apart from above deduction, only 2 deduction is allowed under NEW TAX REGIME namely – Section 80CCD(2) – NPS Contribution by Employer & Section – 80JJAA – Tax deduction on generating EMPLOYMENT can be claimed by employers from their Business Income (Certain Conditions need to be fulfilled before claiming deduction u/s 80JJAA).

(b). Old Tax Regime:

 

Old tax regime is regime that existed before the implementation of the new regime. Under this, all type of deductions/exemptions are allowed to be claimed (subject to the documents available). If employee wants to opt. OLD TAX REGIME, the employee must specify the tax regime he wants to choose to the employer.

AS PER OLD REGIME:- (INDIVIDUAL Aged below 60 YEARS )

INCOME TAX SLABS & RATES: FY 2023-24(AY 2024-25)

Up to Rs 2,50,000 NIL
Rs 2,50,000 to Rs 5,00,000 5%
Rs 5,00,001 to Rs 10,00,000 20%
Above RS. 10,00,000 30%
  • Surcharge (if any) will apply if Total Taxable Income exceeds the specified limit of income + Health & Education Cess @ 4% (always) will apply.

 

3. When TDS on Salary will not be Deducted?

 

If the net taxable salary of the employee is below the amount which is not chargeable to tax (as per old or new regime), then TDS is not to be deducted.

As per old regime, if the total income (i.e. gross total income – exemptions – deductions) is below the basic exemption limit, then no TDS shall be charged.

Basic exemption limit have been specified as per age which are as follows:

 

AS PER OLD REGIME:-

Age Total income
Resident in India below 60 years Rs 2.5 lakh
Senior Citizens between 60 years and below 80 years Rs 3 lakh
Super Senior Citizens above 80 years Rs 5 lakh

Please note: In case of resident person, if the total income (i.e. gross total income – exemptions – deductions) is going below Rs. 5 lacs, then rebate u/s 87A shall be allowed and tax shall become zero, hence no TDS shall be charged.

 

AS PER NEW TAX REGIME:-

Basic exemption limit is up to RS. 3,00,000 and it does not require TDS to be deducted upto this limit. However, if we consider standard deduction and Rebate u/s 87A, then Salary upto Rs. 7,50,000 shall be non taxable and no TDS shall be charged under new regime.

 

4. Some additional points related to Salary on TDS :-

 

(i). Employer shall considered details of other income deduction of employee if furnished by employee. For, Example any deduction related to Deduction under chapter VI-A & any other income.

(ii). Employer shall not considered any loss except loss under the head of income from house property (In case employee opt. OLD TAX REGIME) upto RS.2,00,000.

(iii). In case where employee works with more than one employer simultaneously or employee change his job & join another employer then at his own option he may furnished details of his other employment to any on of the employer/current employer “FORM No.12B”

(iv). If Tax on Non-Monetary perquisites of employee is paid by employer then such tax is not allowed as deduction to employer under the income head of PGBP( PROFITS AND GAINS OF BUSINESS OR PROFESSION ) & Such Tax is not taxable in hands of employee due to u/s section.10(10C).

 

5. SOME GENERAL POINTS RELATED TO TDS :-

 

(i). TDS is deductible only if amount of is taxable in hand of recipients (receiver).
Example:-
For example, if you are under 60 and your total taxable income is Rs 7 lakh, you must pay tax as per slabs rate of Rs 4,50,000 lakh as tax (income up to Rs 2.5 lakh is not taxable). TDS is deducted every month by your employer. So, your expected tax liability over the year is divided by 12 and collected every month.

(ii). All TDS rates are fixed rates. (Fixed rates), it means surcharge & HEC shall not be considered.
i.e. 1%,2%,5%,10% etc.
But if payment is made to non-resident/foreign company or payment of salary,Surcharge and HEC shall be considered.

(iii). Section 206AA – Non-furnishing of PAN:
If payee(Employee) does not furnish(provide) his PAN/AADHAAR to payer(Employer) .Then, Rates is:-

    • Rate as per respective Section ( in case of salary the rate is Slabs rate)
    • Rate @20%
      Whichever is Higher .

 

EXAMPLE OF TDS ON SALARY :-

 

A resident employee Mr. Mritunjay (aged 27), who works for TAX EFFECTS , is fixed as Rs 1,00,000 per month as salary during the FY 2023-24. Mr. Mritunjay has invested Rs 50,000 in Sukanya Samriddhi Scheme, Rs 60,000 in PPF, Rs 40,000 in NSC, Rs. 4,000 Preventive Health Checkup. What will be the monthly TDS deducted u/s 192?

  1. IF he opted DEFAULT NEW TAX REGIME U/S 115BAC.
  2. IF he opted OLD TAX REGIME.

SOLUTION:-

1) – IF he opted DEFAULT NEW TAX REGIME U/S 115BAC.:

 

Computation of Total Taxable Income &  TDS REQ. to deducted per Month

PARTICULARS AMOUNT
GROSS SALARY (1,00,000*12) 12,00,000
LESS:- STANDARD DEDUCTION (50,000)
NET SALARY(BEFORE SUCH TAX)
[No deductions u/s 80C or 80D allowed]
11,50,000
TDS ON SALARY{ ( 6,00,000 – 3,00,000)*5% + 9,00,000 – 6,00,000)*10% + (11,50,000 -9,00,000)*15%} 82500
TDS PER MONTH = 82500/12

 

6875
NET SALARY(AFTER TAX) PER MONTH 93125
2)- IF he opted Old TAX REGIME (i.e. on or before 31/July/2024):

 

Computation of Total Taxable Income &  TDS REQ. to deducted per Month:

PARTICULARS AMOUNT
GROSS SALARY (1,00,000*12) 12,00,000
LESS:- STANDARD DEDUCTION (50,000)
LESS:- Deduction under Chapter VI-A

U/S 80C :-

50,000 in Sukanya Samriddhi Scheme
Rs 60,000 in PPF

Rs 40,000 in NSC


U/S  80D:-

4000 Preventive Health Checkup

 

(1,54,000)
NET SALARY ( BEFORE SUCH TAX ) 9,96,000
TDS ON SALARY{(5,00,000-2,50,000)*5% + (9,96,000-5,00,000)*20% (1,11,700)
TDS PER MONTH= 1,11,700/12 9308.33

Happy Readings!

 

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