TDS on provision for salary

According to Section 192, which deals with the TDS on salary income, every employer has to deduct TDS on salary payment if the employee’s salary exceeds the basic exemption limit stated by the government. Section 192 impacts all the salaried people of India, and in today’s guide, you will understand the important TDS provisions for salary.

Which personnel are required to deduct TDS 192 of the income tax Act?

Any employer who is paying salary to their employees has to deduct TDS every month under the section 192:

The employers include:

Individual
HUF
Local authority
Company
Trusts
Firm

When is TDS deducted on salary?

TDS has to be deducted by the employer at the time of payment of salary income when the taxable income amount of an employee exceeds the basic exemption limit.

The basic exemption limit is as follows:

INR 2.25 lakhs if the age is below 60 years
INR 3 lakhs if the ages more than 60 years but below 80 years
INR 5 lacs for 80 and above

Suppose the employee opts for advance salary or arrear of salary. The employer has to deduct the TDS at the time of payment. Even if the employee does not have a pan card, TDS on salary has to be deducted.

What is the rate of TDS?

]Unlike the other sections of TDS under Income Tax, under section 192, there is no fixed rate of TDS.

So to calculate the rate of TDS, the estimated total tax liability on the estimated income is divided over the period of employment (months).

How to calculate tax deductions?

For calculation of TDS, the following points have to be considered:

Total income of the employee other than the salary like rent income will also be considered by the employer while calculating TDS, provided the employee submits the details of such income.
Interest on home loans up to INR 2 lacs will be subtracted from the salary income to get an estimated income for calculating TDS. This is only valid if the evidence is submitted in form 12 BB by the employee.
In many cases, employees make various investments to enjoy tax benefits or to reduce their tax liability. However, the employee might not know about such investment, so the TDS amount increases than the actual tax payable. So in such cases, you can declare the information about your tax saving investment to your employee using the form 12 BB. Whenever the employees learn about this, they will consider these investments and then calculate your TDS accordingly.

How is the TDS calculated in the case of more than one employer?

Usually, there are two situations:

Either the employee is engaged with two or more employees simultaneously
Change of job during a year

Engaged with more than two employees simultaneously

When an employee works with more than 1 employer simultaneously, he has to provide details about his salary and TDS in form 12B to any one of the employers. So the employer has to deduct the TDS from the aggregate salary of the employee.

Change of job during a year

There can be a situation when an employee has more than one employer in a financial year. For example, if the employee resigns and joins another employer during the financial year, the details of his previous employment have to be submitted in the form 12 B to his new employee so that the TDS can be calculated correctly. So the present employer will also consider the employee’s previous salary and the TDS deducted while calculating TDS for the remaining months of the FY.

Calculation of TDS if the salary is payable in foreign currency

In such a case, firstly, the salary will be converted to Indian currency. The exchange rate will be considered based on the last day of the month immediately preceding the next month in which the salary is due or is paid in advance. After a successful conversion, the TDS will be calculated as per normal probations of TDS deduction.

For example, if the employee’s salary is paid in the month of August in foreign currency, then the exchange rate of 31st July will be considered.

Summary

In this article, you have understood TDS on Provision for Salary and you must know as an employer that the employer has to file a salary TDS return in Form 24Q. You can easily do TDS Return Filing online through our web portal or consultation with tax experts.