Section 192 of the Income Tax Act, 1961 lays down the provisions relating to the deduction of tax at source from salaries. As per this section, every employer is required to deduct tax at source (TDS) from the salary payable to an employee during the financial year.
Let us understand the various aspects of Section 192 in detail:
- Who is liable to deduct tax at source?
As per Section 192, every employer who is paying salary to an employee is liable to deduct tax at source. It is important to note that the definition of employer includes a person who is responsible for paying any income chargeable under the head “Salaries”.
- When is TDS to be deducted?
TDS under Section 192 is to be deducted at the time of payment of salary to the employee. If the salary is paid in advance or in arrears, the TDS is to be deducted in the year in which the income is taxable.
- What is the rate of TDS under Section 192?
The rate of TDS under Section 192 depends on the total income of the employee and the tax slab in which the employee falls. The employer is required to deduct tax 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.
- What is the threshold limit for TDS under Section 192?
TDS under Section 192 is applicable only if the salary paid to the employee exceeds the basic exemption limit. The basic exemption limit for the financial year 2021–22 is Rs. 2,50,000 for individuals below 60 years of age, Rs. 3,00,000 for senior citizens (between 60 and 80 years of age), and Rs. 5,00,000 for super senior citizens (above 80 years of age).
- How is the TDS amount calculated?
The TDS amount is calculated on the basis of the income tax slab in which the employee falls. The employer is required to deduct tax 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. The TDS amount can be calculated using the tax calculator available on the Income Tax Department’s website.
- What are the obligations of the employer?
The employer is required to obtain the PAN of the employee and deduct TDS at the applicable rate. The TDS amount deducted should be deposited to the credit of the Central Government within the specified due dates. The employer is also required to issue Form 16 to the employee at the end of the financial year, which contains details of salary paid and tax deducted.
- Deduction of TDS under Section 192 for the financial year
The employer is required to deduct TDS for each financial year in which the salary is paid. The financial year runs from 1st April to 31st March of the following year. The TDS amount deducted during the financial year is considered as advance tax paid by the employee and is adjusted against the total tax liability at the time of filing the income tax return.
- Relief under Section 89
In some cases, an employee may receive arrears of salary due to a revision of pay or any other reason. In such cases, the employer may deduct TDS at a higher rate, resulting in a higher tax liability for the employee. Section 89 provides relief to such employees by allowing them to claim a rebate for the excess tax deducted in the form of relief under Section 89. The relief under Section 89 is calculated on the basis of the tax rates applicable in the relevant financial years.
- Payment of TDS
The TDS amount deducted under Section 192 is required to be deposited to the credit of the Central Government within the specified due dates. The due date for depositing TDS for each month is the 7th day of the following month. In case of a delay in depositing TDS, interest at the rate of 1% per month or part thereof is levied on the amount of TDS for the period of delay.
- Issuance of Form 16
The employer is required to issue Form 16 to the employee at the end of the financial year. Form 16 is a certificate of TDS which contains details of salary paid and tax deducted. The employer is required to issue Form 16 to the employee by 31st May of the following financial year. The employee is required to use the details in Form 16 to file the income tax return.
In conclusion
Section 192 of the Income Tax Act is an important provision that governs the deduction of tax at source from salaries. Employers should comply with the provisions of this section to avoid penalties and interest for non-compliance. Employees should also ensure that their employers are deducting TDS as per the applicable rates and depositing the same to the credit of the Central Government within the specified due dates.
Read more useful content:
- section 145 of income tax act
- section 10e of income tax act
- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
Q. What is Section 192 of the Income Tax Act?
Section 192 of the Income Tax Act, 1961 lays down the provisions relating to the deduction of tax at source from salaries.
Q. Who is required to deduct tax at source under Section 192?
As per Section 192, every employer who is paying salary to an employee is required to deduct tax at source.
Q. What is the rate of TDS under Section 192?
The rate of TDS under Section 192 depends on the total income of the employee and the tax slab in which the employee falls.
Q. What is the threshold limit for TDS under Section 192?
TDS under Section 192 is applicable only if the salary paid to the employee exceeds the basic exemption limit.
Q. When is TDS to be deducted under Section 192?
TDS under Section 192 is to be deducted at the time of payment of salary to the employee.
Q. What is the due date for depositing TDS under Section 192?
The due date for depositing TDS under Section 192 for each month is the 7th day of the following month.
Q. What is Form 16?
Form 16 is a certificate of TDS that contains details of salary paid and tax deducted. The employer is required to issue Form 16 to the employee at the end of the financial year.
Q. What is the relief under Section 89?
Section 89 provides relief to employees who receive arrears of salary by allowing them to claim a rebate for the excess tax deducted in the form of relief under Section 89.
Q. Can an employee claim a refund if the TDS deducted is more than the actual tax liability?
Yes, an employee can claim a refund if the TDS deducted is more than the actual tax liability.
Q. What is the penalty for non-compliance with Section 192?
If an employer fails to deduct TDS or fails to deposit the TDS amount to the credit of the Central Government within the specified due dates, penalty and interest can be levied for non-compliance. The penalty can be up to the amount of TDS not deducted or not deposited.
