Home > Income Tax > TDS/TCS > Section 192 – TDS from Salary

Section 192 – TDS from Salary

U.C Date : 25 Feb 2015

Section 192 of income tax act contains provisions regarding tds on salary. An employer is required to deduct tds from the salary payable to the employees.

Employers which are required to deduct TDS –

  1. Company (Private or public, domestic or foreign)
  2. Partnership firm
  3. AOP, BOI, all artificial judicial persons
  4. Individuals and HUF who are required to audit under section 44AB in the preceding financial year. However only individuals and HUF who are required to audit because of turnover, gross receipts exceeding prescribed limits are required to deduct TDS.
    In other words, individuals and HUF who make their accounts audit to show lower profits as prescribed in section 44AD or section 44ADA are not required to deduct tax deducted at source.

Time of Deduction

Unlike provisions of other TDS sections, under section 192 tax is required to be deducted at the time of actual payment of salary, not at the time of accrual of salary. If salary is paid in advance or arrears of salary is paid, then tds is to be deducted.

No salary is required to be deducted if the estimated salary doesn’t exceed the amount not chargeable to tax. This rule is applicable even if employee doesn’t have PAN.

Calculation of tax to be deducted

Under section 192 no specific TDS rate is mentioned as with other TDS sections. Tax to be deducted is calculated at the rates applicable to the financial year for which the salary is paid. In other words, first salary of the employee is  calculated and then tax is calculated as per the tax slab as applicable to that individual. Although some deductions are allowed while calculating salary as given below.

Education cess @2% and Senior & higher education cess @1% is to be added while calculating tds on salary.

TDS @ 20% is deductible if no PAN is provided.

For eg – Salary payable to an employee is rs. 9,00,000 per year. Deductions allowed to employee under various sections is rs. 1,00,000. Therefore employer should calculate tax on rs. 8 lakhs which comes to rs. 87,550. The employer should deduct tds of rs. 87,550. Every month, 1/12 of this net tax liability as computed above is required to be deducted.

TDS is to be deducted even if the salary of employee is likely to exceed the taxable limit. Therefore it is to be assumed that the employee remains employed for whole year and TDS is to be deducted from the 1st month if estimated salary for whole year goes beyond taxable limit. The employer not have to wait for the salary to exceed the taxable limit.

The employer may at the time of deducting TDS, increase or decrease the amount to be deducted for the purpose of adjusting any previous deficient or excess deduction.

Calculation of salary

Salary included all allowance and calculated after deduction of following

  1. Leave encashment as per sec 10(10AA)
  2. House rent allowance (HRA) as per sec 10(13A)
  3. Interest under the head “House Property”
  4. Donations under sec. 80G – The donations are made under sec 80G (other than to a notified charitable institute) then the employer should allow that donation while calculating tax deductible.
    When donation is made to a notified public then the employer should not allow that donation while calculating tax deductible. Circular no. 8/2012 dated oct 5 2012.
  5. Other deductions- Deductions under secions 80C, 80CCC, 80CCD, 80CCG, 80D, 80DD, 80DDB, 80E, 80EE, 80GG, 80GGA, 80TTA, 80U.

The employee needs to file form no. 12BB with the employer, if he wants employer to consider these deductions. More details regarding form 12BB

Calculation of tax deductible when a person is employed by two or more employers:-

If an employer has more than one employer then he is required to submit form no. 12B, to one of the employers as selected by employee the details of salary due/received by him from other employers. The employer to which such form submitted is required to deduct tax on the aggregate salary from all employers.
If the employee is previously employed by other employer, then the present employer should consider the salary received and TDS already deducted. These details should be provided by the employer in writing.

If the employee has income(not loss other than loss under house property) under other head of income , then he may send to the employer details regarding such income and tax deducted thereon, if any. The employer will deduct tax considering such income and tax deducted thereon.
However, the TDS in such case should not be lower than the TDS which would have been deducted if the employee doesn’t submit such details.

If the employee has loss under the head House Property, then it also can be reported to employer and taken into consideration for calculating the tax deductible.

Other Points –

  • TDS need not be deducted from salary paid to partner by partnership firm – TDS on salary to partner
  • The employer has to obtain evidence or proof or particulars of prescribed claims (including claim for set-off of loss) in such manner and form prescribed. (Applicable from 1st June 2015)
  • TDS is also to be deducted on payment of salary to non-resident employee.
  • Monthly adjustment of TDS is to be made employee-wise and not collectively for all employees.
  • If the employee has made any payment as advance tax then the same can be taken into consideration for calculation of TDS.
  • Assessee can apply to assessing officer for no TDS or TDS at lower rate under Section 197.

Also Read:

Read more – Incometaxindia guide

Bare Act for Section 192

Bare Act for Section 192

(1) Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax  on the 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 under this head for that financial year.

[(1A) Without prejudice to the provisions contained in sub-section (1), the person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in clause (2) of section 17, may pay, at his option, tax on the whole or part of such income without making any deduction therefrom at the time when such tax was otherwise deductible under the provisions of sub-section (1).

(1B) For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of income-tax computed on the basis of the rates in force for the financial year, on the income chargeable under the head “Salaries” including the income referred to in sub-section (1A), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head “Salaries” as per the provisions of sub-section (1), and shall be subject to the provisions of this Chapter.] [(2) Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case, choose), such details of the income under the head “Salaries” due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1).] [(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 sub-section (1) of section 89, he may furnish to the person responsible for making the payment referred to in sub-section (1), such particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take it into account in making the deduction under sub-section (1).] [Explanation.—For the purposes of this sub-section, “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 (3 of 1956), to be a University for the purposes of that Act.] [(2B) Where an assessee who receives any income chargeable under the head “Salaries” has, in addition, any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head “Income from house property”) for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1) the particulars of—

(a)  such other income and of any tax deducted thereon under any other provision of this Chapter;

(b)  the loss, if any, under the head “Income from house property”,

in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall take—

(i)  such other income and tax, if any, deducted thereon; and

(ii)  the loss, if any, under the head “Income from house property”,

also into account for the purposes of making the deduction under sub- section (1) :

Provided that this sub-section shall not in any case have the effect of reducing the tax deductible except where the loss under the head “Income from house property” has been taken into account, from income under the head “Salaries” below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account.] [(2C) A person responsible for paying any income chargeable under the head “Salaries” shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed.]

(3) The person responsible for making the payment referred to in sub-section (1)  [or sub-section (1A)]  [or sub-section (2) or sub-section (2A) or sub-section (2B)] may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.

(4) The trustees of a recognised provident fund, or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule applies, at the time an accumulated balance due to an employee is paid, make therefrom the deduction provided in rule 10 of Part A of the Fourth Schedule.

(5) Where any contribution made by an employer, including interest on such contributions, if any, in an approved superannuation fund is paid to the employee, [tax] on the amount so paid shall be deducted by the trustees of the fund to the extent provided in rule 6 of Part B of the Fourth Schedule.

(6) 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 prescribed rate of exchange.

“(2D) The person responsible for making the payment referred to in sub-section (1) shall, for the
purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed.

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