Table of Contents
1. Section 192 of the Income Tax Act, 1961
Section 192 contains provisions relating to TDS on payment of salary to an employee.
2. Who is responsible to deduct and pay tax under this section?
- As per Section 192, TDS shall be deducted by every person responsible for paying any income chargeable to tax under the head “Salaries”.
- In other words, the employer who is responsible for paying salary to an employee should deduct tax at the time of payment of such salary.
- The existence of an employer-employee relationship is mandatory for deduction of tax under Section 192
3. When should the tax be deducted under Section 192?
As per Section 192, TDS shall be deducted at the time of actual payment of salary.
4. What is the rate of TDS as per Section 192?
- Tax has to be calculated at the average rate of income tax computed on the basis of rates in force on the estimated total income of the assessee for the relevant financial year in which payment is made.
- i.e. tax should be deducted as per slab rates applicable to an individual on his estimated total income for the financial year.
Note: In case an employee opts for concessional rate of tax under section 115BAC, then the employer shall compute his total income and deduct tax as per the provisions of section 115BAC.
5. Circumstances where no tax needs to be deducted under section 192?
- No tax needs to be deducted if the taxable income of the employee does not exceed Rs.2.5 Lakhs. (for senior citizens – Rs. 3 lakhs, for super senior citizens – Rs. 5 Lakhs)
- No tax needs to be deducted if the income tax payable by the employee is “NIL” after deductions or rebate if any.
6. What is the frequency of deduction of tax under this section?
- Tax on the estimated annual income of the employee shall be deducted in instalments from the employee’s salary as per an agreement between the employee and the employer.
- The income tax on annual income can be deducted monthly or during months as agreed upon by both the parties.
7. What happens when the employee changes his job during the year?
- In case the assessee resigns from a particular job and takes up a new job during the financial year, he will be required to furnish the details of his previous employment in Form 12B.
- This will help the new employer to compute TDS properly after taking into account his previous salary.
8. What is Form 16?
Form 16 is the certificate issued as proof of paying the deducted tax to the credit of the government. It acts as a proof that income tax on the salary of an employee has been deducted and deposited with the government.
9. What is the responsibility of the employee and employer under this section?
- Employee is responsible to disclose the details of his income from all sources truly and fairly along with proofs for all the deductions availed.
- Employee is also responsible to disclose the amount of salary earned during previous employment, if any.
- The employer is responsible to calculate the estimated annual income of the employee according to the provisions of the Income Tax Act, 1961 and deduct tax accordingly
- The Employer is also responsible to remit the deducted tax to the government within the due dates specified as per the Income Tax Act and provide the certificate of tax deduction in Form 16 to the employee.