Brief Summary of the aforesaid Circular issued by CBDT on
the procedure and calculation method to be adopted for deduction of Tax at
source from salaries of the employees and monetary and non monetary perquisites
to employees and advance and arrears of salaries including salaries from
earlier employer in case of two employers in a financial year. The employer
must be careful while deducting the TDS in last quarter (Q4) as there might be
lower deduction of TDS if the provisions are ignored.
So hereby we are giving :
- Method of Calculation of salaries and taxes if paid by
employer.
- Taxes on Perquisites
- Taxes in case of more than one employer
- Relief in case of arrears of salaries received during
the year.
- Computation of income under the head “Income from house
property”
- Salaries in Foreign Currencies
- Furnishing of Certificate for Tax Deducted (Section
203)
- Other essential points regarding the filing of the
Statement.
- TDS on Income from Pension.
- TDS in case of Non Resident.
-TDS On Payment Of Accumulated Balance from Recognized
Provident Fund And Approved Superannuation Fund.
- Examples of Calculation of Income-Tax for deduction
from Salary.
1. Method of Calculation
of salaries and taxes if paid by employer:
Every person who is responsible for paying salaries shall
deduct income-tax on the estimated income of the assessee under the head
"Salaries" for the financial year 2017-18 and income-tax is required to be calculated on
the basis of the rates specified, subject to the provisions related to
requirement to furnish PAN as per sec 206AA of the Act. & No tax will be
required to be deducted at source if salary income including the value of
perquisites, for the financial year exceeds the taxable limit i.e. Rs. 2.50
lacs , or Rs. 3 Lacs or Rs. 5 lacs as the case may be.
Lower Deduction
If the jurisdictional TDS officer of the Taxpayer issues
a certificate of "No Deduction or Lower
Deduction of Tax" under section 197 of the Act, in response to the
application filed before him in Form No 13 by the Taxpayer; then the DDO should
take into account such certificate and deduct tax on the salary payable at the
rates mentioned therein.(see Rule 28AA). The Unique Identification Number of
the certificate is required to be reported in Quarterly Statement of TDS (Form
24Q).
Rule 30 prescribes time and mode of payment of tax deducted
at source to the account of Central Government.
The provisions of Section 192(3) allow the deductor to make
adjustments for any excess or shortfall in the deduction of tax already made
during the financial year, in subsequent deductions for that employee within
that financial year itself.
2. Taxes on Perquisites:
An option has been given to the employer to pay the tax
on non-monetary perquisites given to an employee in which tax is to be
determined at the average of income tax computed on the basis of rate in force
for the financial year, on the income chargeable under the head
"salaries", including the value of perquisites for which tax has been
paid by the employer himself.
3. Taxes in case of more than one employer:
Where an
individual is working under more than one employer or has shifted from one
employer to another ,the present/chosen employer will be required to deduct tax
at source on the aggregate amount of salary(including salary received from the
former employer). The employee has to furnish to the present/chosen employer
details of the income under the head "Salaries" due or received from
the former/other employer, in writing and duly verified by him and by the
former/other employer.
4. Relief in case of arrears of salaries received during the year.
Under
section 192(2A) where the assessee, being a Government servant or an employee
in a company, co-operative society, local authority, university, institution,
association or body is entitled to the relief under Section 89(1) he may
furnish to the person responsible for making the payment referred to in Para 1,
such particulars in Form No. 10E duly verified by him, and thereupon the person
responsible, as aforesaid, shall compute the relief on the basis of such
particulars and take the same into account in making the deduction under Para1 above.
With
effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect
of any amount received or receivable by an assessee on his voluntary retirement
or termination of his service, in accordance with any scheme or schemes of
voluntary retirement or in the case of a public sector company referred to in
section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if
an exemption in respect of any amount received or receivable on such voluntary
retirement or termination of his service or voluntary separation has been
claimed by the assessee under section 10(10C) in respect of such, or any other,
assessment year.
5. Computation of income under the head “ Income from house
property”:
While taking into account the loss from House Property, the DDO
shall ensure that the employee files the declaration referred to above and
encloses therewith a computation of such loss from house property. Following
details shall be obtained and kept by the employer in respect of loss claimed
under the head “ Income from house property” separately for each house
property:
a) Gross annual rent/value
b) Municipal Taxes paid, if any
c) Deduction claimed for interest paid, if any
d) Other deductions claimed
e) Address of the property
The DDO shall also ensure furnishing of the evidence or
particulars in Form No. 12BB in respect of deduction of interest as specified
in Rule 26C read with section 192 (2D).
6. Salaries in Foreign Currencies:
For the purposes of deduction of tax on salary payable in foreign
currency, the value in rupees of such salary shall be calculated at the “Telegraphic
transfer buying rate” of such currency as on the date on which tax is required
to be deducted at source.
7. Furnishing of Certificate for Tax Deducted (Section 203):
Section 203 requires the DDO to furnish to the employee a
certificate in Form 16 detailing the amount of TDS and certain other
particulars. Rule 31 prescribes that Form 16 should be furnished to the
employee by 15th June (W.E.F. 02.06.2017) after the end of the financial year
in which the income was paid and tax deducted. Even the banks deducting tax at
the time of payment of pension are required to issue such deducted.
Further as per Circular 04/2013 dated 17-04-2013 all deductors
(including Government deductors who deposit TDS in the Central Government
Account through book entry) shall issue the Part A of Form No. 16, duly
authenticating and verifying it, in respect of all sums deducted on or after
the 1st day of April, 2012 under the provisions of section 192 of Chapter
XVII-B. Part A of Form No 16 shall have a unique TDS certificate number. 'Part B (Annexure)' of Form No. 16
shall be prepared by the deductor manually and issued to the deductee after due
authentication and verification along with the Part A of the Form No. 16. If
the DDO fails to issue these certificates to the person concerned, as required
by section 203, he will be liable to pay, by way of penalty, under section
272A(2)(g), a sum which shall be Rs.100/- for every day during which the failure
continues.
8. Other essential points regarding the filing of the Statement:
(a)The employer should quote the gross amount of salary (including
any amount exempt under section 10 and the deductions under chapter VI A) in
column 321 (Amount paid/credited) of Annexure I of Form 24Q as per NSDL RPU
(hereafter Return Preparation Utility).
(b) The employer should quote the amount of salary excluding any
amount exempt under section 10 in column 333 (Total amount of salary) of
Annexure II of Form 24Q as per NSDL RPU.
(c) TDS on Income (including loss from House Property) under any
Head other than the head ‘Salaries’ offered for TDS (shown in column 339) can
be shown in column 350 (Reported amount of TDS by previous employer, as per
NSDL RPU.
(d) Employer is advised to quote Total Taxable Income (Column 346)
in Annexure II without rounding-off and TDS should be deducted and reported
accordingly i.e. without rounding-off of TDS also.
If an assessee is employed
by more than one employer during the year, each of the employers shall issue
Part A of the certificate in Form No. 16 pertaining to the period for which
such assessee was employed with each of the employers and Part B may be issued by each of the
employers or the last employer at the option of the assessee.
Quarterly Statement of TDS:
The person deducting the
tax (employer in case of salary income), is required to file duly verified
Quarterly Statements of TDS in Form 24Q for the periods [details in Table
below] of each financial year, to the TIN Facilitation Centres authorized by
DGIT (System’s) which is currently managed by M/s National Securities
Depository Ltd (NSDL) or at www.incometaxindiaefiling.gov.in after registering as Deductor.
Particulars of e-TDS Intermediary at any of the TIN Facilitation Centres are
available at http://www.incometaxindia.gov.in and http://tin-nsdl.com portals. The requirement of filing an annual return
of TDS has been done away with W.E.F. 1.4.2006. The quarterly statement
for the last quarter filed in Form 24Q (as amended by Notification No.
S.O.704(E) dated
12.5.2006) shall be treated as the annual return of TDS.
The statements furnished in paper form or electronically under
digital signature or along with verification of the statement in Form 27A of
verified through an electronic process in accordance with the procedures,
formats and standards specified by the Director General of Income‐tax (Systems).
All Returns in Form 24Q are required to be furnished
electronically except in case where the number of deductee records is less than
20 and deductor is not an office of Government, or a company or a person who is
required to get his accounts audited under section 44AB of the Act. [Notification
No. 11 dated 19.02.2013].
Rectification of mistake in filing TDS Statement:
DDO can also file a correction statement for rectification of any
mistake or to add, delete or update the information furnished in the statement
delivered earlier.
9. TDS on Income from Pension:
In the case of pensioners who receive their pension (not being
family pension paid to a spouse) from a nationalized bank, the instructions
contained in this circular shall apply in the same manner as they apply to
salary-income. The deductions from the amount of pension under section 80C on
account of contribution to Life Insurance, Provident Fund, NSC etc., if the
pensioner furnishes the relevant details to the banks, may be allowed. Necessary
instructions in this regard were issued by the Reserve Bank of India to the
State Bank of India and other nationalized Banks vide RBI's Pension
Circular(Central Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64
(11CVL)-/92) dated the 27th April 1992, and, these instructions should be
followed by all the branches of the Banks, which have been entrusted with the
task of payment of pensions. Further all branches of the banks are bound u/s
203 to issue certificate of tax deducted in Form 16 to the pensioners also vide
CBDT circular no. 761 dated 13.1.98.
10. TDS in case of Non Resident:
A. Where Non-Residents are deputed to work in India and taxes are
borne by the employer, if any refund becomes due to the employee after he has
already left India and has no bank account in India by the time the assessment
orders are passed, the refund can be issued to the employer as the tax has been
borne by it [Circular No. 707 dated 11.07.1995].
B. In respect of non-residents, the salary paid for services
rendered in India shall be regarded as income earned in India. It has been
specifically provided in the Act that any salary payable for rest period or
leave period which is both preceded or succeeded by service in India and forms
part of the service contract of employment will also be regarded as income
earned in India.
11. Tds On Payment Of Accumulated Balance Under Recognised
Provident Fund And Contribution From Approved Superannuation Fund:
A. The trustees of a Recognized Provident Fund, or any person
authorized by the regulations of the Fund to make payment of accumulated
balances due to employees, shall in cases where sub-rule(1) of Rule 9 of Part A
of the Fourth Schedule to the Act applies, at the time when the accumulated
balance due to an employee is paid, make there from the deduction specified in
Rule 10 of Part A of the Fourth Schedule to the Act.
The accumulated balance is treated as income chargeable under the
head “Salaries”.
B. Where any contribution made by an employer, including interest
on such contributions, if any, in an approved Superannuation Fund is paid to
the employee, tax on the amount so paid shall be deducted by the trustees of
the Fund to the extent provided in Rule 6 of Part B of the Fourth Schedule to
the Act. TDS should be at the average rate of tax at which, the employee was
liable to be taxed during the preceding three years or during the period, if
that period is less than three years, when he was member of the fund.
The deductor shall remain liable to deduct tax on any sum paid on
account of returned contributions (including interest, if any) even if a fund
or part of a fund ceases to be an approved Superannuation fund.
C. As per section 192A of the Act, w. e. f. 01.06.2015 the
trustees of the EPF Scheme 1952 framed under section 5 of the EPF & Misc.
Provisions Act, 1952 or any person authorized under the scheme to make payment
of accumulated balance due to employees, shall, in a case where the accumulated
balance due to an employee participating in a recognized provident fund is includible
in his total income owing to the provisions of Rule 8 of Part A of Fourth
Schedule not being applicable at the time of payment of accumulated balance due
to the employee, deduct income tax thereon @ 10% if the amount of such payment
or aggregate of such payment exceeds Rs 50,000/-. In case the employee does not
provide his/her PAN or provides an invalid PAN then the deduction will have to
be made at maximum marginal rate.
The Rule-8 of Part-A of fourth schedule excludes the following
accumulated balance due and becoming payable to the employee from the total
income;
(i) If, he has rendered continuous service with his employer for a
period of five years or more, or
(ii) If, though he has not rendered such continuous service, the
service has been terminated by reason of -
• the employees ill health, or
• by the contraction or discontinuance of the employer’s business
or
• other cause beyond the control of employee, or
(iii) if, on cessation of his employment, the employee
obtains employment with any other employer, to the extent amount of such
accumulated balance is transferred to his individual account in any recognized
provident fund maintained by such other employer, or
(iv) if the entire balance standing to the credit of employee
is transferred to his account under a pension scheme referred to in section 80
CCD and notified by the central Government.
When the accumulated balance due and becoming payable to an employee
includes any amount transferred from his individual account in any other
recognized provident fund(s) maintained by his former employer(s), then in
computing the period of continuous service the period or periods of continuous
services rendered under former employer(s) shall be counted for the purposes of
(i) and (ii) above.
Under the above four situations at (i) to (iv), the accumulated
balance due and payable to the employee is not liable for TDS under section 192
A.
12. Calculation Of Income-Tax To Be Deducted:
Salary income for the purpose of section 192 shall be computed as
follow:-
(a) First compute the gross salary
(b) Allow deductions(DEDUCTIONS
U/S 16 OF THE ACT FROM THE INCOME FROM SALARIES)
& compute the amount to arrive at Net salary of the employee
(c) Add income from all other heads- ‘House property’, ‘Profits
& gains of Business or Profession’, Capital gains and Income from other
Sources to arrive at the Gross Total Income.
However it may be remembered that no loss under any such head is
allowable by DDO other than loss under the Head “Income from House property” to
the extent of Rs. 2.00 lakh.
(d) Allow deductions (DEDUCTIONS
UNDER CHAPTER VI-A OF THE ACT)ensuring that the
relevant conditions are satisfied. The aggregate of the deductions subject to
the threshold limits shall not exceed the amount at (b) above and if it
exceeds, it should be restricted to that amount.
This will be the amount of total income of the employee on which
income tax would be required to be deducted. This income should be rounded off
to the nearest multiple of ten rupees.
Income-tax on such income shall be calculated at the rates
prescribed keeping in view the age of the employee and subject to the
provisions of sec.206AA. Rebate as per Section 87A up to Rs 2500/- to eligible
persons may be given. Surcharge shall be calculated in cases where applicable .
The amount of tax payable so arrived at shall be increased by
educational cess as applicable (2% for primary and 1% for secondary education)
to arrive at the total tax payable.
The amount of tax as arrived should be deducted every month in
equal installments. Any excess or deficit arising out of any previous deduction
can be adjusted by increasing or decreasing the amount of subsequent deductions
during the same financial year.
SOME ILLUSTRATIONS
Example 1
For Assessment
Year 2018-19
(A) Calculation of Income tax in the case of an employee (Male or
Female) below the age of sixty years and having gross salary income of:
i) Rs.2,50,000/- ,
ii) Rs.5,00,000/- ,
iii) Rs.10,00,000/-
iv) Rs.55,00,000/-. and
v) Rs. 1,10,00,000/-
(B) What will be the amount of TDS in case of above employees, if
PAN is not submitted by them to their DDOs/Offices:
|
Particulars
|
Rupees
(i)
|
Rupees
(ii)
|
Rupees
(iii)
|
Rupees
(iv)
|
Rupees
(v)
|
|
Gross Salary Income (including allowances)
|
2,50,000
|
4,00,000
|
10,00,000
|
55,00,000
|
1,10,00,000
|
|
Contribution of G.P.F.
|
45,000
|
50,000
|
1,00,000
|
1,00,000
|
1,00,000
|
Computation of Total Income and tax payable thereon
|
Particulars
|
Rupees
(i)
|
Rupees
(ii)
|
Rupees
(iii)
|
Rupees
(iv)
|
Rupees
(v)
|
|
Gross Salary
|
2,50,000
|
4,00,000
|
10,00,000
|
55,00,000
|
1,10,00,000
|
|
Less: Deduction U/s 80C
|
45,000
|
50,000
|
1,00,000
|
1,00,000
|
1,00,000
|
|
Taxable Income
|
2,05,000
|
3,50,000
|
9,00,000
|
54,00,000
|
1,09,00,000
|
|
(A) Tax thereon
|
Nil
|
2,500*
|
92,500
|
14,32,500
|
30,82,500
|
|
Surcharge
|
|
1,43,250
|
|
4,62,375
|
|
|
Add:
(i) Education Cess @ 2%.
(ii) Secondary and Higher
Education Cess @1%
|
Nil
Nil
|
50
25
|
1850
925
|
31,515
15,758
|
70,898
35,449
|
|
Total tax payable
|
Nil
|
2,575
|
95,275
|
16,23,023
|
36,51,222
|
|
|
|
|
|
|
|
*
After rebate of Rs 2500 u/s 87A
ANNEXURE
Compulsory filing of Statement by PAO, Treasury Officer, etc. in
case of payment of TDS by Book Entry.
1. Procedure of preparation and furnishing Form 24G at
TIN-Facilitation Centres (TIN-FCs):
The Form 24G should be prepared by the PAO/DTO/CDDO (hereinafter
referred to as AOs) as per the data structure (File format) prescribed by the
DIT (Systems), Delhi which is available on TIN website www.tin-nsdl.com.
After preparation of form 24G, the AO is required to validate the
same by using the Form 24G File Validation Utility (FVU) which is freely
available on TIN website.
Once file is validated through FVU, ‘.fvu file’ in CD/DVD/Pen
Drive along with physical Statement Statistic Report (SSR) signed by the AO, to
be furnished at TIN-FCs. On successful acceptance of Form 24G at the TIN-FC, an
acknowledgement containing 15 digit Token no. is provided to the AO. The AO can
view the status of Form 24G on TIN website.
Book identification Number (BIN) is generated for each ‘DDO record
with valid TAN’ reported in Form 24G, which is further disseminated to the AOs
on email ID mentioned in Form 24G. AOs need to communicate the BIN details to
respective DDOs. BIN is to be quoted by the DDOs in quarterly e-TDS/TCS
statements. BIN consists of receipt number of Form 24G. DDO serial number and
date of transfer voucher.
The AO is required to furnish Form 24G within ten days from the
end of the month in respect of tax deducted by the deductors and reported to
him for that month. Only one regular Form 24G for a ‘month-FY’ can be
submitted.
2.Correction in Form 24G:
AO can file a correction Form 24G for any modification or cancellation
of Form 24G accepted at TIN central system. Preparation and validation of
correction Form 24G is in line with regular form 24G. The validated Form 24G
correction file (.fvu file) copied on a CD/pen drive is to be submitted along
with the provisional receipt of original Form 24G and SSR to TIN-FC. On
successful acceptance of correction Form 24G at the TIN-FC, an acknowledgement
containing 15 digit Token no. is provided to the AO.
3. Online uploading of correction Form 24G at TIN website:
AO can file a correction Form 24G for any modification or
cancellation of Form 24G accepted at TIN Central System. Preparation and
validation of correction form 24G is in line with regular form 24G. The
validated Form 24G correction file (.fvu file) can be uploaded online through
AO account at TIN website. For correction Form 24G accepted at TIN central
system, an online acknowledgement containing a 15 digit token number is
generated and displayed to the AO. The format of the acknowledgement is
identical to the one issued by the TIN-FC. There is no need to submit SSR and
provisional receipt of original form 24G in online upload.
4. Relevant PAO/CDDO/DTO who is liable for filing Form 24G?
A relevant PAO/CDDO/DTO is that office to whom the Deductor/DDO
(TAN holder) reports remittance of TDS/TCS through book adjustment. Generally,
the Central Government DDOs report TDS through book entry to their respective
Pay and Accounts Officers (PAOs) and the State Government DDOs report TDS
through book entry to their respective District Treasury Officers(DTOs). Such
PAOs and DTOs are required to file Form 24G on monthly basis.
There are also cases of Cheque Drawing and Disbursing Officers
(CDDOs) who report TDS through book entry directly to State AG. For example,
PWD, Forest Department etc. Such CDDOs are also required to file Form 24G on
monthly basis.
5. Where should Form 24G be submitted?
Form 24G is to be furnished only in electronic form in a CD/pen
drive at TIN-FCs or online through AO Account at www.tin-nsdl.com web portal. The
facility to submit Form No. 24G online is available free of cost. Provisional
Receipt Number (PRN) is issued as an acknowledgement of the receipt of Form
24G.
6. Can the same office/officer also act as DDO and AO?
Ordinarily, the PAO office is the one to whom the DDO reports the
TDS and therefore, both should be from different offices. However, where the
DDO and AO are the same, as in the case of CDDOs, the statistics report of Form
24G should be counter signed by his superior officer.
7. What is AIN and who should apply?
Accounts Office Identification Number (AIN) is a unique seven
digit which is allotted by the Directorate of Income Tax (Systems), Delhi, to
every AO. Each AO is uniquely identified in the system by this number. AOs are
required to apply for AIN with jurisdictional TDS office. The AIN application
can be downloaded from TIN site. Every AIN holder is required to file Form 24G.
Compiled by :
Kritika Modi ( CA Finalist at Sandeep Ahuja & co)
