Section 192 of the Income Tax Act, 1961, deals with the deduction of tax from salaries. It is an essential provision that governs the taxation of employee salaries in India. As an employer, it is important to understand the provisions of Section 192 to ensure compliance with the law and avoid penalties.
In simple terms, Section 192 mandates employers to deduct tax at source (TDS) from the salaries paid to their employees. The amount of TDS deducted depends on the employee’s income tax slab and other factors, such as exemptions and deductions claimed by the employee. Let us delve deeper into the provisions of Section 192.
Who is Liable to Deduct TDS under Section 192?
As per Section 192, any employer who pays a salary to an employee is liable to deduct TDS. This includes the government, companies, firms, individuals, or any other organization that pays a salary to an employee.
How to Calculate TDS under Section 192?
The TDS under Section 192 is calculated based on the employee’s income tax slab and the exemptions and deductions claimed by the employee. The employer has to consider the employee’s income tax slab and deduct TDS accordingly.
For instance, if an employee’s income tax slab is 20% and the monthly salary is Rs. 50,000, the TDS will be calculated as follows:
Taxable income = Salary – Exemptions – Deductions = Rs. 50,000 – Rs. 10,000 – Rs. 5,000 (considering exemptions and deductions) = Rs. 35,000
TDS = Taxable income x Applicable tax rate = Rs. 35,000 x 20% = Rs. 7,000
Thus, the employer will deduct Rs. 7,000 as TDS from the employee’s monthly salary.
What are the Exemptions and Deductions under Section 192?
As per Section 192, the employer can consider certain exemptions and deductions while calculating TDS. These include:
- Standard deduction: A standard deduction of Rs. 50,000 is available to salaried employees.
- HRA exemption: If the employee receives a house rent allowance (HRA), the employer can consider it for exemption based on certain conditions.
- LTA exemption: If the employee receives a leave travel allowance (LTA), the employer can consider it for exemption based on certain conditions.
- Medical reimbursement: The employer can reimburse medical expenses incurred by the employee up to a certain limit.
- Deductions under Section 80C: The employer can consider investments made by the employee under Section 80C for deductions.
- Deductions under Section 80D: The employer can consider medical insurance premiums paid by the employee for deductions.
- Other deductions: The employer can consider other deductions such as interest paid on home loans, donations made to certain organizations, etc.
Here are some additional details about Section 192:
- TDS Payment and Filing of TDS Returns:
After deducting TDS from the employee’s salary, the employer must pay the amount to the government by the 7th of the following month. The employer must also file TDS returns quarterly in the prescribed format, which includes details of TDS deducted and paid to the government. Failing to file TDS returns or pay TDS on time can result in penalties and interest charges.
- Form 16:
Form 16 is a certificate issued by the employer to the employee which contains details of the employee’s salary, TDS deducted, and other deductions claimed by the employee. The employer must issue Form 16 to the employee by 15th June of the following financial year. The employee can use Form 16 while filing income tax returns and claiming refunds.
- Threshold Limit:
According to Section 192, TDS is only applicable if the employee’s salary exceeds a certain threshold limit. For the financial year 2022–23, the threshold limit for TDS deduction is Rs. 2.5 lakhs per annum. However, for senior citizens (above 60 years of age), the threshold limit is Rs. 3 lakhs per annum, and for super senior citizens (above 80 years of age), it is Rs. 5 lakhs per annum.
- Lower TDS Deduction:
If the employee submits Form 15G/15H to the employer, stating that they do not have taxable income or that their tax liability is lower than the TDS deduction, the employer can consider a lower TDS deduction or no TDS deduction at all, subject to certain conditions.
- Interest on Delayed Payment of TDS:
If the employer fails to pay TDS on time or deducts a lower amount of TDS than required, they are liable to pay interest on the delayed payment or shortfall in TDS deduction. The interest rate is 1% per month or part thereof.
In conclusion
Section 192 of the Income Tax Act is a crucial provision that governs the deduction of tax from salaries in India. Employers must comply with its provisions, such as deducting TDS, paying TDS on time, filing TDS returns, and issuing Form 16 to employees. Employees must also ensure that they claim exemptions and deductions available to them while calculating TDS on their salaries. Overall, compliance with Section 192 ensures that the taxation of employee salaries is carried out smoothly and transparently.
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Frequently Asked Questions (FAQs)
Q. What is Section 192 of the Income Tax Act?
Section 192 of the Income Tax Act, 1961, is a provision that governs the deduction of tax from salaries. It specifies the rates at which tax must be deducted from an employee’s salary, the thresholds for TDS deduction, and other related provisions.
Q. Who is responsible for deducting TDS under Section 192?
The employer is responsible for deducting TDS from the employee’s salary under Section 192. The employer must deduct TDS at the applicable rates and deposit it with the government.
Q. What is the TDS rate under Section 192?
The TDS rate under Section 192 depends on the employee’s salary and the tax slab they fall into. The current TDS rates for the financial year 2022-23 are as follows:
0% for salary up to Rs. 2.5 lakhs per annum
5% for salary between Rs. 2.5 lakhs to Rs. 5 lakhs per annum
10% for salary between Rs. 5 lakhs to Rs. 7.5 lakhs per annum
15% for salary between Rs. 7.5 lakhs to Rs. 10 lakhs per annum
20% for salary between Rs. 10 lakhs to Rs. 12.5 lakhs per annum
25% for salary between Rs. 12.5 lakhs to Rs. 15 lakhs per annum
30% for salary above Rs. 15 lakhs per annum
Q. Is there a threshold for TDS deduction under Section 192?
Yes, there is a threshold limit for TDS deduction under Section 192. For the financial year 2022-23, the threshold limit for TDS deduction is Rs. 2.5 lakhs per annum. However, for senior citizens (above 60 years of age), the threshold limit is Rs. 3 lakhs per annum, and for super senior citizens (above 80 years of age), it is Rs. 5 lakhs per annum.
Q. What is Form 16, and when is it issued?
Form 16 is a certificate issued by the employer to the employee which contains details of the employee’s salary, TDS deducted, and other deductions claimed by the employee. The employer must issue Form 16 to the employee by 15th June of the following financial year.
Q. What is the penalty for non-compliance with Section 192?
Non-compliance with Section 192 can result in penalties and interest charges. If the employer fails to deduct TDS or deposits it after the due date, they are liable to pay a penalty of 1% per month or part thereof on the amount of TDS due. Failing to file TDS returns or filing them late can also result in penalties and interest charges.
