Section 200 of the Income Tax Act, 1961 is an important provision that deals with the deduction of tax at source from the income of an employee. The section lays down the obligations of an employer to deduct tax at source from the salary or wages paid to an employee and to deposit the same with the government within a prescribed time limit. In this blog, we will discuss the provisions of section 200 in detail.
Overview of Section 200:
Section 200 of the Income Tax Act, 1961 requires every person who is responsible for paying any income chargeable under the head “Salaries” to deduct income tax at source and deposit the same with the government within the prescribed time limit. The section applies to all types of employers, whether individuals, firms, companies, or any other entity that pays salary or wages to an employee.
Obligations of an Employer under Section 200:
- Deduction of TDS from Salaries: As per Section 200, an employer is required to deduct tax at source from the salary paid to an employee at the time of payment of salary. The rate of TDS is determined based on the income tax slab rates applicable to the employee for that financial year.
- Depositing TDS with the Government: After deducting TDS from the salary of an employee, an employer is required to deposit the same with the government within a prescribed time limit. The due date for depositing TDS is the 7th of the following month for tax deducted in the preceding month, except for the month of March, where the due date is April 30th.
- Filing of TDS Returns: An employer is required to file TDS returns on a quarterly basis. The due date for filing TDS returns is the 31st of July, October, January, and May for the quarters ending June, September, December, and March, respectively.
Penalty for Non-Compliance:
Non-compliance with the provisions of Section 200 can attract penalties and interest. If an employer fails to deduct TDS from the salary of an employee or fails to deposit the same with the government, he/she may be liable to pay interest on the amount of tax due at the rate of 1% per month or part thereof. In addition, a penalty may also be imposed under Section 271C of the Income Tax Act, 1961, which can be up to the amount of tax that should have been deducted and deposited.
Calculation of TDS under Section 200:
The rate of TDS to be deducted from the salary of an employee is determined based on the income tax slab rates applicable for that financial year. The employer must calculate the TDS amount based on the salary payable to the employee and deduct the same at the time of payment of salary. The TDS amount to be deducted may also be affected by the employee’s investments in tax-saving instruments such as Provident Fund, National Pension Scheme, or Life Insurance policies, as these may be eligible for tax deductions under Section 80C of the Income Tax Act, 1961.
Exemption from TDS under Section 200:
As per Section 200(3) of the Income Tax Act, 1961, an employee may be exempt from TDS deduction if his/her income is below the basic exemption limit, which is currently Rs. 2.5 lakh for individuals below the age of 60 years. The employee must submit a declaration in Form 15G or 15H, as applicable, to the employer stating that his/her income is below the basic exemption limit and that no tax is payable on the income earned.
Consequences of Non-Deduction or Non-Payment of TDS:
If an employer fails to deduct TDS from the salary of an employee or fails to deposit the same with the government, he/she may face several consequences, including interest and penalties. In addition to the interest on the amount of tax due at the rate of 1% per month or part thereof, a penalty may also be imposed under Section 271C of the Income Tax Act, 1961, which can be up to the amount of tax that should have been deducted and deposited. Further, the employer may also face legal action and prosecution under the Income Tax Act, 1961.
Conclusion:
Section 200 of the Income Tax Act, 1961 is an important provision that outlines the obligations of an employer to deduct TDS from the salary of an employee and deposit the same with the government within the prescribed time limit. Compliance with the provisions of this section is crucial for employers to avoid penalties, interest, and legal action under the Income Tax Act, 1961. By fulfilling their obligations under Section 200, employers can contribute to the growth and development of the country and ensure that their employees’ tax liabilities are fulfilled in a timely and efficient manner.
Read more useful content:
- section 145 of income tax act
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Frequently Asked Questions (FAQs)
What is Section 200 of the Income Tax Act, 1961?
Section 200 of the Income Tax Act, 1961 lays down the obligations of an employer to deduct tax at source from the salary or wages paid to an employee and to deposit the same with the government within the prescribed time limit.
Who is responsible for deducting TDS under Section 200?
The employer is responsible for deducting TDS from the salary or wages paid to an employee.
What is the rate of TDS to be deducted under Section 200?
The rate of TDS to be deducted from the salary of an employee is determined based on the income tax slab rates applicable for that financial year.
When is the TDS amount to be deposited with the government?
The TDS amount deducted by the employer is to be deposited with the government within a prescribed time limit, which is usually the 7th of the following month for tax deducted in the preceding month.
What is the penalty for non-compliance with Section 200?
Non-compliance with the provisions of Section 200 can attract penalties and interest. If an employer fails to deduct TDS from the salary of an employee or fails to deposit the same with the government, he/she may be liable to pay interest on the amount of tax due at the rate of 1% per month or part thereof. In addition, a penalty may also be imposed under Section 271C of the Income Tax Act, 1961, which can be up to the amount of tax that should have been deducted and deposited.
Is an employee eligible for exemption from TDS under Section 200?
An employee may be eligible for exemption from TDS under Section 200 if his/her income is below the basic exemption limit and he/she submits a declaration in Form 15G or 15H, as applicable, to the employer.
What is the due date for filing TDS returns under Section 200?
An employer is required to file TDS returns on a quarterly basis, with the due date for filing TDS returns being the 31st of July, October, January, and May for the quarters ending June, September, December, and March, respectively.
Can an employer revise the TDS return filed under Section 200?
Yes, an employer can revise the TDS return filed under Section 200 if he/she discovers any errors or omissions in the original return filed.
Is it mandatory for all employers to deduct TDS under Section 200?
Yes, it is mandatory for all employers who pay salary or wages to an employee to deduct TDS under Section 200, unless the employee is eligible for exemption from TDS.
Can an employer deduct TDS at a higher rate than prescribed under Section 200?
An employer can deduct TDS at a higher rate than prescribed under Section 200 if he/she has obtained the necessary approval from the Income Tax Department.
