TDS Return on Salary Payment (Form 24Q)

Section 192 of the Income Tax Act, 1961 deals with tax deducted at source (TDS) on salary. Your employer will deduct TDS from the salary payable to you. The salary you receive from your employer is categorised in ‘Income’ under the head ‘Salary’ and the employer will be responsible for deducting TDS at normal income tax rates applicable to you on your estimated income for the relevant financial year. The TDS deducted u/s 192 is reflected in Form 16, which is issued by the employer to the employee.

Under Section 192, TDS is deducted at the time of actual payment of salary and not during the accrual of salary. It means tax will be deducted if your employer pays salary in advance or at the time of salary payment in arrears. 

In case your estimated salary is not more than the basic exemption limit, tax amount will be zero and hence, TDS will not be deducted. 

This rule is applicable even to those who do not have a PAN. To know the income tax rates applicable to you, click here. 

The table below shows the basic exemption limit as per the age that does not require TDS to be deducted: 

At first, the employer estimates employee’s salary for the relevant financial year. This should include basic pay, dearness allowance, perquisites granted by the employer, other allowances granted by the employer like HRA, LTA, meal coupons, etc., EPF contributions, bonus, commissions, gratuity, salary from the previous employer, if any, etc.

In the next step, the employer calculates exemptions under Section 10 of the Income Tax Act. The exemptions can be applicable on allowances like HRA, travel expenses, uniform expenses, children’s education allowances, etc. Also, reduce the amount of professional tax paid, entertainment allowance and standard deduction of Rs 50,000. 

The employer reduces such exemption from the gross monthly income and the net amount will be treated as the taxable salary income.

If the employee has provided the information about other incomes such as rental income from house property or bank deposits, etc. In that case, such amounts should be added to the net taxable salary. Further, the interest paid on housing loans are deducted from the house property income, but if there is no income from house property, there will be a negative figure under the head ‘income from house property’. After adding or reducing the said amounts, the calculated figure will be the employee’s gross total income.

Now, the employer reduces the investments for the year, which fall under Chapter VI-A of the Income Tax Act declared by the employees as per the investment declaration submitted. The declaration may include the amounts of investments such as PPF, employee’s provident fund, ELSS mutual funds, NSC, Sukanya Samridhi account. It may also income expenditures such as home loan repayment, life insurance premiums, NSC, Sukanya Samridhi account, etc. Similarly, the employer allows deduction under various other sections such as Section 80D, 80G, etc.

Note: If the employee wishes to opt for a new tax regime, he/she may intimate the same to the employer about exercising the option each year. And the employer may deduct his/her income tax according to the new tax regime. 

Also, if the employee has declared to calculate income tax as per the new tax regime, then the Income Tax act does not allow 70 specified exemptions and deductions allowed in the old tax regime. Hence, the employer will calculate the net taxable income as per the income tax regime chosen by the employee.

Section 192 does not specify a TDS rate. TDS will be deducted as per the income tax slab and the rates thereof applicable to the taxpayer for the relevant financial year for which the salary is paid. 

The tax calculation is usually done by the employer at the beginning of the financial year. The TDS to be deducted by dividing the estimated tax liability of the employee for the financial year by the number of months of his employment under the particular employer. 

However, if there is no PAN of employee, TDS shall be deducted at the rate of 20% plus 4% cess. 

The employer adjusts any excess or deficit arising out of any earlier deduction by increasing or decreasing the number of subsequent deductions during the same financial year. 

If the employee has made any payment as an advance tax, then the same can be adjusted for calculation of TDS. The employee needs to intimate the same to the employer.