TDS on Salary Under Section 192

Updated on : March 15, 2023 - 5 p.m. 17 min read.

TDS (Tax Deducted at Source) on Salary is a system of collecting income tax in India at the time of payment of salary to an employee. Under Section 192 of the Income Tax Act, 1961, employers are required to deduct TDS from the salary of their employees based on the applicable income tax slab rates. The TDS amount is then deposited with the government on behalf of the employee. This system ensures regular and timely collection of income tax and helps in reducing tax evasion.

Who can Deduct TDS Under Section 192

Under Section 192 of the Income Tax Act, 1961, the responsibility of deducting TDS (Tax Deducted at Source) from an employee's salary lies with the employer. The term 'employer' under this section refers to any person or entity that is paying salary to an employee, including individuals, partnership firms, companies, and other types of organizations.

This includes both private and public sector employers, as well as government entities. Whether it is a small business or a large corporation, if they are paying salary to an employee, they are required to deduct TDS under Section 192.

When does a TDS Deducted under Section 192?

The TDS is deducted every time the employer pays salary to the employee, which could be monthly, quarterly, or annually, depending on the payroll cycle of the organization. The TDS is calculated based on the income tax slab rates applicable to the employee and the salary amount paid to them.

The due date for depositing TDS is typically the 7th of the following month for non-government entities, and the last day of the same month for government entities. The due date for filing TDS returns is typically the 31st of the following month.

How TDS is Deducted on Salary?

Calculation of Taxable Income of the Employee

Step 1:

Determine the taxable salary The first step in calculating TDS on salary is to determine the taxable salary of the employee. This includes any amount paid in the form of basic salary, allowances, bonuses, commissions, etc. The taxable salary is calculated after deducting any exemptions or deductions that the employee is eligible for, such as HRA (House Rent Allowance), LTA (Leave Travel Allowance), standard deduction, etc.

For example, if an employee has a basic salary of Rs. 50,000 per month and receives an HRA of Rs. 20,000 per month, the taxable salary would be Rs. 70,000 per month (i.e., Rs. 50,000 + Rs. 20,000 - exempted HRA).

Step 2:

Calculate the TDS amount Once the taxable salary is determined, the TDS amount is calculated based on the income tax slab rates applicable to the employee. The TDS rates vary depending on the income level of the employee and the tax laws in force at the time.

For the financial year 2022-23, the TDS rates for individuals are as follows:

Up to Rs. 2.5 lakhs: No tax
Rs. 2.5 lakhs to Rs. 5 lakhs: 5%
Rs. 5 lakhs to Rs. 7.5 lakhs: 10%
Rs. 7.5 lakhs to Rs. 10 lakhs: 15%
Rs. 10 lakhs to Rs. 12.5 lakhs: 20%
Rs. 12.5 lakhs to Rs. 15 lakhs: 25%
Above Rs. 15 lakhs: 30%

Using this tax slab, if the taxable salary of an employee is Rs. 70,000 per month, the annual salary would be Rs. 8.4 lakhs. The TDS amount would be calculated as follows:

Up to Rs. 2.5 lakhs: No tax
Rs. 2.5 lakhs to Rs. 5 lakhs: 5% of Rs. 2.5 lakhs = Rs. 12,500
Rs. 5 lakhs to Rs. 7.5 lakhs: 10% of Rs. 2.5 lakhs = Rs. 25,000
Rs. 7.5 lakhs to Rs. 8.4 lakhs: 15% of Rs. 90,000 = Rs. 13,500

The total TDS amount would be Rs. 51,000 per annum (i.e., Rs. 4,250 per month).

Step 3:

Deduct the TDS amount The TDS amount is then deducted from the salary paid to the employee by the employer. The employer must deduct the TDS amount at the time of payment of salary and issue a salary slip to the employee, which shows the details of the TDS deducted.

In our example, the employer would deduct Rs. 4,250 from the employee's salary of Rs. 70,000 and pay the balance amount of Rs. 65,750 to the employee.

Step 4:

Deposit the TDS amount with the government The final step is for the employer to deposit the TDS amount with the government within the due date. The TDS amount must be deposited using the appropriate Challan form, and the employer must file the TDS returns in a timely manner.

Salary from More Than One Employer

If you are someone who has income from multiple employers in a financial year, you need to be aware of the implications of TDS (Tax Deducted at Source) on salary. It's important to note that TDS is deducted by the employer from your salary before it is paid to you, and it is your responsibility to ensure that the correct amount of TDS is deducted.

Firstly, if you join a new employer during the financial year, you should provide them with Form 12B. This form contains details of your income and taxes deducted by your previous employer. This will help your new employer to calculate the correct amount of TDS to be deducted from your salary.

Secondly, you need to calculate your total income from all employers and determine your tax liability based on the applicable income tax slab rates. This is important because each employer may be deducting TDS based on their own calculations, and you need to ensure that the total TDS deducted is adequate to cover your total tax liability.

Finally, it's essential to submit proof of TDS deducted by each employer to the respective employers. This will ensure that your total TDS deducted is accounted for while filing your income tax return. Failure to do so may result in a mismatch between the TDS deducted and the actual tax liability, which could lead to penalties and interest charges.

Deductions under Section 89

One way to reduce your tax liability is by claiming deductions from your total income. Under Section 89 of the Income Tax Act, individuals can claim relief for tax deducted from their salary. This applies to those employed by government organizations, companies, co-operative societies, local authorities, universities, and other associations or bodies.

Marginal relief is provided under Section 89 for those who are subject to a higher tax rate due to changes in the slab rates. To claim this relief, individuals need to file Form 10E on the official income tax portal. Without filing this form, individuals will not be able to receive relief under Section 89.

It's important to note that this relief is not automatic and needs to be claimed by the individual. By utilizing the provisions of Section 89, individuals can adjust the tax deducted from their salary and reduce their overall tax liability.

TDS Statements

TDS (Tax Deducted at Source) statements are important documents that are filed by entities that are responsible for deducting TDS on various payments such as salaries, rent, professional fees, and so on. These statements provide a summary of the TDS deductions made during a particular period and are filed with the Income Tax Department.

The TDS statements are filed using Form 24Q for TDS on salaries, Form 26Q for TDS on payments other than salaries, and Form 27EQ for TDS on non-salary payments made to non-residents. These statements contain details such as the name and PAN of the deductor and the deductee, the amount paid, the rate of TDS, and the amount of TDS deducted.

In addition to filing TDS statements, entities that deduct TDS are also required to issue TDS certificates to the deductees. Form 16 is issued for TDS on salaries and Form 16A is issued for TDS on payments other than salaries.

Time limit to deposit the tax under section 192

The time limit for depositing TDS varies based on the type of employer.

If the TDS is deducted by a government employer, it must be deposited on the same day of deduction.

If the TDS is deducted by a non-government employer, the time limit for depositing TDS depends on the timing of the salary credit and TDS deduction. If the salary is credited and TDS is deducted in March, the TDS must be deposited on or before 30 April of that financial year. If the salary is credited and TDS is deducted in any month other than March, the TDS must be deposited within seven days from the end of the month in which TDS was deducted.

TDS Return Filed by Employer

The TDS return filed by the employer contains details of TDS deductions made during the year and is filed on a quarterly basis.

The due dates for filing TDS returns are as follows:

31st July - for the quarter ending on 30th June
31st October - for the quarter ending on 30th September
31st January - for the quarter ending on 31st December
31st May - for the quarter ending on 31st March

The TDS return filed by the employer should contain details such as the name and PAN of the deductor and deductee, the amount paid and the amount of TDS deducted. The return can be filed online using the government's TDS Return Preparation Utility (TRPU) or through a tax professional.

TDS Certificate

A TDS certificate is a document issued by the deductor to the deductee as proof of TDS deduction. Employers are required to issue Form 16 to their employees under Section 192 of the Income Tax Act. The TDS certificate contains details such as salary paid, TDS deducted, and other deductions claimed by the employee. It is issued annually and is essential for filing income tax returns.

By Amit Pawar

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