TDS on Salary u/s 192

[Poornima Gupta]

• Who is the payer?

Person responsible for paying any income chargeable under the head "Salaries" – (Employer)

• Who is the payee? Employee
• Time of deduction – Time of payment
• Maximum amount which can be paid without deduction –

The amount of exemption limit

• Amount of deduction- Amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee.

( Average rate of income-tax means the rate arrived at by dividing the amount of income tax calculated on the total income, by such total income. )

The employer may, at time of deducting TDS may increase/reduce the amount to be deducted for adjusting any previous deduction or failure to deduct during the financial year.

Relevant points-

 Employee having income/loss under other heads / any other TDS/TCS – [192(2B)]-

Where the employee has in the same financial year -

• Income chargeable under other heads of income
• Loss if any, under head “Income from house property” (Losses under other heads not to be considered)
• TDS/TCS

he shall send the particulars of such income or loss under income from house property or TDS/TCS to the employer in such format and manner prescribed after which the employer shall take it into account for the purpose of deducting TDS u/s 192.

Such particulars shall be sent in Form No. 12BAA as per Rule 26B.

 Employer to provide perquisite details to employee- [192(2C)] and Rule 26A

Employer shall furnish a statement giving correct and complete particulars of perquisites or profits in lieu of salary as well as their value to employee in

1. relevant columns provided in Form No. 16 (if the amount of salary paid/payable is upto Rs. 1,50,000) or
2. Form No. 12BA (if the amount of salary paid/payable is more than Rs. 1,50,000)

 Employee working under different employers in FY- 192(2) and Rule 26A

Where the employee has worked under more than 1 employer in PY, he may furnish to the employer (any 1 employer,  employee may choose based on circumstances) deducting TDS , details of

• The income under the head "Salaries" due/received by him from the other employer
• TDS if deducted by another employer

in Form No. 12B , thereupon employer shall take into account such details for TDS calculation.

 Employer can ask proofs from Employee for his income – 192(2D)

Employer may ask necessary evidence or particulars of claims (including claim for set-off of loss) for the purposes of estimating income of the assessee and thereafter compute TDS.

Rule 26C- Furnishing of evidence of claims by employee

Employee shall furnish the following evidence in Form No. 12BB to employer in respect of the claims specified -

Sl. No	Nature of claims	Evidence or particulars
(1)	(2)	(3)
1.	House Rent Allowance	Name  Address  PAN of the landlord ( where the aggregate rent paid during the PY exceeds Rs 1 lakh)
2.	Leave travel concession or assistance	Evidence of expenditure
3.	Deduction of interest under the head “Income from house property”	Name Address PAN of the lender
4.	Deduction under Chapter VI-A	Evidence of investment or expenditure

 CIRCULAR NO. 04/2023- Clarification regarding deduction u/s 192 for the regime according to which tax needs to be ascertained by ER

With effect from A.Y. 2024-25 , employer shall ask employees having income under section 192 regarding their intended tax regime and each employee shall inform the employer regarding his intended regime for each year and upon intimation, the employer shall compute his total income, and deduct tax at source thereon according to the option exercised.

 If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default tax regime i.e Section 115BAC(1A) . Accordingly, the employer shall deduct TDS in accordance with the rates under Section 115BAC(1A).

However, the employee may change while furnishing return of income the regime following which employer has deducted tax.

Example – If employee has intimated employer to deduct tax according to optional tax regime, the employer may do so but he is not bound to pay tax under the optional tax regime and can still opt to pay tax under default tax regime.

 TDS certificate – Rule 31

The employer is required to issue TDS certificate in Form No. 16.

The deductor is required to verify the contents of Part A and Part B of the TDS certificate before issuing them to the deductee.

Form 16 is required to be issued by the employer up to 15th June of the financial year immediately following the financial year in which the amount was paid and tax has been deducted.

More information on how to download the Form can be found from Income Tax website - incometaxindia.gov.in

Points to be considered in special cases-

 TDS on Non-Monetary Perquisite can be paid by Employer – [192(1A), 192(1B)] –

Where employer provides non-monetary perquisite to the employee , such perquisite shall be added to the income of employee as per the provisions of this act and the employer may pay tax on the whole or part of such income without making any deduction from the salary as TDS for this part.

 TDS on sweat equity shares or specified securities by eligible startups- [192(1C)]

 An eligible startup ( u/s 80-IAC ) allotting sweat equity shares or specified securities to employees in PY shall deduct or pay tax on such income within fourteen days -

(i) after the expiry of 48 months from the end of the relevant AY; or

(ii) from the date of the sale of such specified security or sweat equity share by the assessee(employee) ; or

(iii) from the date of the assessee ceasing to be the employee of the startup,

whichever is the earliest.

Amount to be calculated on the basis of rates in force of FY in which such security is allotted.

This shall apply from AY beginning on 1/4/2021 onwards.

 Employee claiming relief u/s 89- [192(2A) and Rule 21AA]

Where -

• a government employee or
• employee in a company, co-operative society, local authority, university, institution, association or body

is entitled to relief u/s 89, he shall inform employer of such particulars in Form No. 10E after which employer shall compute relief and take it into account for calculating TDS amount.

 Employee earning salary in foreign currency – [192(6) and Rule 26]

TDS on salary payable in foreign currency shall be calculated in rupees on the basis of prescribed rate of exchange.

Under Rule 26, the rate of exchange shall be the telegraphic transfer buying rate of such currency as on the date on which the tax is required to be deducted at source by employer.

CASE LAWS-

 Some of the important judgements under section 192 are mentioned below which can be referred to –

1. Harshdip Singh Dhillon Versus Union Of India Through The Commissioner Of Income Tax TDS - 2024 (1) TMI 275 - DELHI HIGH COURT

2. Shri Ajit Chandrashekar Dighe Versus The DCIT Thane - 2024 (11) TMI 381 - ITAT MUMBAI

3. The Great Eastern Shipping Co. Ltd., M/s. Kalyaniwalla And Mistry LLP Versus DCIT, TDS Circle – 2 (3) MTNL Bldg, Mumbai - 2024 (12) TMI 30 - ITAT MUMBAI

4. Drawing & Disbursement Officer, Lic of India Versus Asst Commissioner of Income Tax (TDS.) And Others - 2014 (1) TMI 1592 - ALLAHABAD HIGH COURT