Central Board of Direct Taxes (CBDT) introduced Deduction of tax at source Income-tax deduction from salaries under section 192 of the Income-tax Act, 1961 vide circular number 01/2017 dated 2nd January 2017.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF DIRECT TAXES
DEDUCTION OF TAX AT SOURCE-
INCOME-TAX DEDUCTION FROM SALARIES
UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961
DURING THE FINANCIAL YEAR 2018-19
NEW DELHI, the 1st January, 2019
|Para No.||Page No.|
|2.||RATES OF INCOME-TAX AS PER FINANCE ACT, 2018||1|
|2.1 Rates of tax||1|
|2.2 Surcharge of Income tax||2|
|2.3.1 Health and Education Cess||3|
|3||BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM SALARIES||3|
|3.1 Method of Tax Calculation||3|
|3.2 Payment of Tax on Non monetary Perquisites by Employer||3|
|3.2.1 Computation of Average Income Tax||3|
|3.3 Salary From More Than One Employer||4|
|3.4 Relief When Salary Paid in Arrear or Advance||4|
|3.5 Information regarding Income under any Other head||4|
|3.6 Computation of Income under the head ” Income from house property”||5|
|3.7 Adjustment for Excess or Shortfall of Deduction||6|
|3.8 Salary Paid in Foreign Currency||6|
|4||PERSONS RESPONSIBLE FOR DEDUCTION OF TAX AND THEIR DUTIES||6|
|4.1 Stipulation of section 204 of the Act||6|
|4.2 Tax determined to be deducted from Salary u/s 192||7|
|4.3 Deduction of Tax at Lower Rate||7|
|4.4 Deposit of Tax Deducted||7|
|4.4.1 Due dates for payment of TDS||7|
|4.4.2 Mode of payment of TDS||7|
|4.5 Interest, Fee, Penalty& Prosecution for Failure to Deposit Tax Deducted||8|
|4.6 Furnishing of Certificate for Tax Deducted (Section 203)||9|
|4.7 Mandatory Quoting of PAN and TAN||12|
|4.8 Compulsory Requirement to furnish PAN by employee (Section 206AA)||12|
|4.9 Statement of Deduction of tax under of section 200 (3) [Quarterly Statement of TDS]||13|
|4.10 TDS on Income from Pension||14|
|4.11 Matters pertaining to the TDS made in case of Non Resident||15|
|5||COMPUTATION OF INCOME UNDER THE HEAD “SALARIES”||15|
|5.1 Income chargeable under the head “Salaries”:||15|
|5.2 Definition of “Salary”, “perquisite” and “profit in lieu of salary”(Section 17)||15|
|5.3 Income not included under the Head “Salaries” (Exemptions)||24|
|5.4 Deduction u/s 16 of the Act form the Income from Salaries||29|
|5.5 Deductions under Chapter VI-A of the Act||30|
|6||REBATE OF RS. 2500 FOR INDIVIDUAL HAVING TOTAL INCOME UPTO RS. 3.5 LAKH (SECTON 87A)||42|
|7.||TDS ON PAYMENT OF ACCUMULATD BALANCE UNDER RECOGNISED PROVIDENT FUND AND CONTIBUTION FROM APPROVED SUPERANNUATION FUND.||42|
|8.||DDOS TO SATISFY THEMSELVES OF THE GENUINENESS OF CLAIM||44|
|9.||CALCULATION OF INCOME-TAX TO BE DEDUCTED||44|
|II||FORM NO 12BA||60-61|
|IIa||FORM NO 12BB||62-63|
|III||REVISED PROCEDURE FOR FURNISHING QTLY E-TDS/TCS STATEMENT BY DEDUCTORS / COLLECTORS||64-65|
|IV||THE PROCEDURE OF FURNISHING FORM 24G||66-72|
|V||PERSON RESPONSIBLE FOR FILING FORM 24G IN CASE OF STATE GOVT DEPARTMENTS/CENTRAL GOVT DEPARTMENTS||73|
|VI||PROCEDURE OF PREPARATION OF QUARTERLY STATEMENT OF DEDUCTION OF TAX u/s 200 (3)||74-76|
|VII||DEPTT. OF ECO. AFFAIRS NOTIFICATION DATED 22.12.2013||77|
|VIII||BOARD‘S NOTIFICATION DATED 24.11.2000||78-79|
|IX||BOARD‘S NOTIFICATION DATED 29.01.2001||80|
|X||FORM NO. 10 BA||81|
2. RATES OF INCOME-TAX AS PER FINANCE ACT, 2018:
As per the Finance Act, 2018, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head “Salaries” for the financial year 2018-19 (i.e. Assessment Year 2019-20) at the following rates:
2.1 Rates of tax
A. Normal Rates of tax:
|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 per cent 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 exceed Rs. 10,00,000/-.||Rs. 12,500/- plus 20 per cent 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/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-|
B. Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less than eighty years at any time during the financial year:
|Total Income||Rate of tax|
|1||Where the total income does not exceed Rs. 3,00,000/-||Nil|
|2||Where the total income exceeds Rs. 3,00,000 but does not exceed Rs. 5,00,000/-||5 per cent of the amount by which the total income exceeds Rs. 3,00,000/-|
|3||Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-||Rs. 10,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.|
|4||Where the total income exceeds Rs. 10,00,000/-||Rs. 1,10,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-|
C. In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year:
|Total Income||Rate of tax|
|1||Where the total income does not exceed Rs. 5,00,000/-||Nil|
|2||Where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000/-||20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-|
|4||Where the total income exceeds Rs. 10,00,000/-||Rs. 1,00,000/- plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000/-|
2.2 Surcharge on Income tax:
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section 111A or section 112 or section 112A of the Act, shall be increased by a surcharge for the purpose of the Union, calculated, in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act,-
(a) having a total income exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten percent of such income-tax and
(b) having a total income exceeding one crore rupees, at the rate of fifteen percent of such income-tax:
Provided that in the case of persons mentioned above having total income exceeding;-
(a) Fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees;
(b) one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
2.31 Health and Education Cess
Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be discontinued. However, a new cess, by the name “Health and Education Cess” shall be levied at the rate of four percent of income tax including surcharge wherever applicable, No marginal relief shall be available in respect of such cess.
3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”:
3.1 Method of Tax Calculation:
Every person who is responsible for paying any income chargeable under the head “Salaries” shall deduct income-tax on the estimated income of the assessee under the head “Salaries” for the financial year 2018-19. The income-tax is required to be calculated on the basis of the rates given above, subject to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at the time of each payment. No tax, however, will be required to be deducted at source in a case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs. 2,50,000/- or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical illustrations of computation of tax are given at Annexure-I).
3.2 Payment of Tax on Perquisites by Employer:
An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at its option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. However, the employer will have to pay the tax at the time when such tax was otherwise deductible i.e. at the time of payment of income chargeable under the head “salaries” to the employee.
3.2.1 Computation of Average Income Tax:
For the purpose of making the payment of tax mentioned in para 3.2 above, tax is to be determined at the average of income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head “salaries”, including the value of perquisites for which tax has been paid by the employer himself.
The income chargeable under the head “salaries” of an employee below sixty years of age for the year inclusive of all perquisites is Rs. 4,50,000/-, out of which, Rs. 50,000/- is on account of non-monetary perquisites and the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.
|Income Chargeable under the head “Salaries” inclusive of all perquisites||Rs. 4,50,000/-|
|Tax on Total Salary (including Cess)||Rs. 10,400/-|
|Average Rate of Tax [(10, 400/4,50,000) X 100]||2.31/%|
|Tax payable on Rs.50,000/= (2. 31% of 50,000)||Rs. 1155|
|Amount required to be deposited each month||Rs. 96( Rs 96.25)= 1155/12|
The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee.
3.3 Salary From More Than One Employer:
Section 192(2) deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer (as the tax payer may choose) from the aggregate salary of the employee, who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head “Salaries” due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).
3.4 Relief When Salary Paid in Arrear or Advance:
3.4.1 Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under Section 89 he may furnish to the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E duly verified by him, and thereupon the person responsible, as aforesaid, shall compute the relief on the basis of such particulars and take the same into account in making the deduction under Para(3.1) above.
Here “university” means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under Section 3 of the University Grants Commission Act, 1956 to be a university for the purpose of that Act.
3.4.2 With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.
3.5 Information regarding Income under any other head:
(i) Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than “Salaries” ( not being a loss under any such head other than the loss under the head ” Income from house property”) received by the taxpayer for the same financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under:
I, …………… (name of the assessee), do declare that what is stated above is true to the best of my information and belief.
It is reiterated that the DDO can take into account any loss only under the head “Income from house property“. Loss under any other head cannot be considered by the DDO for calculating the amount of tax to be deducted.
It may be noted that loss under the head “Income from house property” can be set off only up to Rs. 2.00 lakh with the income under any other head of income in view of the amendment to section 71 of the Act vide Finance Act, 2017. Hence, loss under the head “Income from house property” in excess of Rs. 2.00 lakh is to be ignored for calculating the amount of tax deduction.
3.6 Computation of income under the head “ Income from house property“:
While taking into account the loss from House Property, the DDO shall ensure that the employee files the declaration referred to above and encloses therewith a computation of such loss from house property. Following details shall be obtained and kept by the employer in respect of loss claimed under the head ” Income from house property” separately for each house property:
a) Gross annual rent/value
b) Municipal Taxes paid, if any
c) Deduction claimed for interest paid, if any
d) Other deductions claimed
e) Address of the property
The DDO shall also ensure furnishing of the evidence or particulars in Form No. 12BB in respect of deduction of interest as specified in Rule 26C read with section 192 (2D).
3.6.1 Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:
Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-
(i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
(ii) the quantum of deduction allowed as per table below:
|Purpose of borrowing capital||Date of borrowing
|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 after01.04.1999||Rs. 1,50,000/-
(upto AY 2014-15)
(w. e. f. AY 2015-16)
In case of Serial No. 3 above
(a) The acquisition or construction of the house should be completed within 5 years from the end of the FY in which the capital was borrowed. Hence, it is necessary for the DDO to have the completion certificateof the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
(b) Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.
(c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.
As discussed in para 4.6.5 section 192(2D) read with rule 26C makes it mandatory for the DDO to obtain following details/evidences in respect of Interest deductible.
(i) Interest payable or paid
(ii)Name of the lender
(iii) Address of the lender
(iv) PAN of the lender
PAN of the lender being financial institution or employer, is mandatory if it is available with the employee however in case of other lender obtaining of PAN is mandatory by the DDO.
3.7 Adjustment for Excess or Shortfall of Deduction:
The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself.
3.8 Salary Paid in Foreign Currency:
For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source ( see Rule 26).
4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES:
4.1. As per section 204(i) of the Act, in the context of payments other than payments by the Central Government or the State Government the “person responsible for paying” for the purpose of Section 192 means the employer himself or if the employer is a Company, the Company itself including the Principal Officer thereof. Further, as per Section 204(iv), in case the credit, or as the case may be, the payment is made by or on behalf of Central Government or State Government, the DDO or any other person by whatever name called, responsible for crediting, or as the case may be, paying such sum is the “person responsible for paying” for the purpose of Section 192.
4.2. The tax determined as per para 9 should be deducted from the salary u/s 192 of the Act.
4.3. Deduction of Tax at Lower Rate:
If the jurisdictional TDS officer of the employer issues a certificate of No Deduction or Lower Deduction of Tax under section 197 of the Act, in response to the application filed before him in Form No 13 by the employee; then the DDO should take into account such certificate and deduct tax on the salary payable at the rates mentioned therein.(see Rule 28AA). The Unique Identification Number of the certificate is required to be reported in Quarterly Statement of TDS (Form 24Q).
4.4. Deposit of Tax Deducted:
Rule 30 prescribes time and mode of payment of tax deducted at source to the account of Central Government.
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