Section 192 & 192A of Income Tax Act

Section 192

Under section 192 of the Income Tax Act, it is mandatory for the employers whether individual, HUF, firm, or a corporate society to deduct TDS from the salary paid to their employees provided such salary exceeds the basic exemption limit applicable to the financial year.

Section 192 & 192A of Income Tax Act

According to the Section 192 of the Income Tax Act, TDS on salary shall be deducted only at the time of payment to an employee and not on when it becomes due, or obligation arises. Thus, if an employer follows the mercantile system of accounting and provides for salary on an actual basis, the tax will not be deducted U/Section 192 till such time salary is paid.

Whether the employer is carrying on business or profession or claiming such salary as a deduction or not doesn’t matter as the status of an employer is not relevant under section 192. Even where the employer has only one employee, TDS on salary is mandatory. However, an employer-employee relationship between the deductor and deductee is a must U/Section 192.

Under this section, Income from Salary is computed after considering all the allowances U/S 10 and deduction under Chapter VI-A. However, the annual circular on TDS does not allow deduction U/S 80G to donations to certain specific funds.

Salary of an employee is chargeable to tax on due basis or receipt basis, whichever is earlier. But for TDS on salary, tax deduction shall always be made on actual payment of salary by the employer. If an employee is working with more than one employer, then he may give information about his TDS, Salary, etc. in form 12B to any one of the employers. If the employee resigns and joins another employer, he can furnish the detail of his previous employment in this form to this subsequent employer. However, if the employee does not provide the detail of income from other employment, the employer will deduct tax only in respect of salary paid by him.

Any non-monetary perquisite paid to an employee by the employer will be included in salary for calculation of TDS. However, the tax amount paid on non-monetary perquisites by the employer will not be allowed as business expenditure while calculating tax liability of the employer U/S 40(a) (v) of Income Tax Act, 1961.

An employer can consider income from other head based on a declaration statement duly confirmed and filed by the employee but should not count any loss other than loss under the head “House property.”

Income Tax slab rate for individuals and HUF

Income tax is required to be deducted U/ Section 192 from the income chargeable under the head “Salaries” for the FY 2017-18 (AY 2018-19).

Individual Tax Payers & HUF of age less than 60 years

Senior Citizens of Age more than 60 years but less than 80 years

Senior citizens of age 80 years or more

Income Tax Rate

Education cess

Secondary & Higher Education cess

Up to 2,50,000

Up to 3,00,000

Up to 5,00,000

Nil

Nil

Nil

2,50,000-5,00,000

3,00,000-5,00,000

5%

2%

1%

5,00,000-10,00,000

5,00,000-10,00,000

5,00,000-10,00,000

20%

2%

1%

More than 10,00,000

More than 10,00,000

More than 10,00,000

30%

2%

1%

If an individual attains the age of 60 or 80 years during the financial year, his age shall be regarded as 60/80, for that whole financial year.

If the income of the individual or HUF is more than Rs. 50 lakhs, the surcharge will be applicable as under:

Income

Surcharge

Up to 50 lakhs

Nil

50 lakhs to 1 crores

10%

More than 1crores

15%

Tax rebate U/S 87A of Rs. 2500 for individuals with income of up to Rs. 3.5 lakh has been proposed. The tax liability of people with income up to Rs. 5 lakhs is reduced to half. All the other categories of taxpayers in the subsequent slabs will also get a regular benefit of Rs. 12500/- per tax assessee.

The TDS deducted is to be deposited to government and Form 16 should be issued to employees. He can claim the TDS amount while submitting tax return against the total tax payable. The cutoff date for issuing the Form 16 is 31st May of the next FY, in which the tax is deducted. If the employer is giving perquisites & profit lieu of salary, form 12BA is also issued along with form 16 U/S 17(3).

Time limit for the TDS Payment to the Government is 7th of the next month in which TDS is deducted. However, for a government office, the time limit is the same day of deduction without a challan. The deposition of TDS is to be made via challan no ITNA 281.

The employer deducting TDS or Payer of such income should furnish a quarterly return to the Income-tax department in a form prescribed which form 24 Q.

Due date is as under:

Particulars

Due date

1st Quarter

On or before 15th July

2nd Quarter

On or before 15th October

3rd Quarter

On or before 15th January

4th Quarter

On or before 15th May

Due date for government deductors:

Particulars

Due date

1st Quarter

On or before 31th July

2nd Quarter

On or before 31th October

3rd Quarter

On or before 31th January

4th Quarter

On or before 15th May

Section 192A of the Income Tax Act

Section 192A deals with tax deducted at source on provident fund withdrawals and came into effect on 1st June 2015.

As per this section, withdrawals from EPF account exceeding Rs. 50000 will be tax deductible at the rate of 10% or the maximum marginal rate, i.e., 34.608% (failing to furnish PAN to the employer) if an employee leaving EPF before completing five years of service. Thus, if a person fails to submit PAN or form no 15G or 15H, TDS is applicable at the maximum marginal rate. However, if the PF holder furnishes form 15G or 15H, then no TDS is applicable.

TDS on withdrawal from EPF account will not be applicable in the following cases:

  • Transfer of EPF balance from one EPF a/c to another.
  • If withdrawal from EPF a/c does not exceed Rs. 50000.
  • Termination of service because of ill health of member, discontinuation or contraction of business by the employer, completion of a project or other cause beyond the control of the member.
  • If a person has submitted form 15G or 15H along with PAN. (Even if EPF withdrawal amount exceeds Rs. 50000 and service is less than 5 years)
  • If an employee withdraws from EPF a/c after a period of 5 years of non-stop service, including service with the previous employer.

Note: If an employee has provided service for more than five years in an organization, submission of PAN and Form 15G or Form 15H is not mandatory. Further, an employee, whose service is terminated due to ill-health or any other reasons such as discontinuance or contraction of business or project completion, is also not required to submit PAN.

Form 15G and 15H cannot be accepted by the department if amount withdrawal exceeds the basic exemption limit. EPF account is mandatory for all employees earning up to Rs. 6500/- p.m. in firms employing over 20 workers.

 

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