Tax deduction on Salaries FY 2023-24.
The CBDT has issued circular No 04/2023 dated 5th April,
2023 clarifying employer’s TDS obligation for Financial Year 2023-24. This
Circular is applicable for TDS during FY 2023-24 and subsequent years.
The CBDT has clarified that an employer need to seek
information from each of its employees regarding their intended tax
regime whether new regime i.e a low tax rates with no deduction of various
allowances and investments etc. or old regime which permits deductions and
allowances.
Each employee is required to intimate its option to his employer for
each year at the beginning of each year and upon such intimation by the
employee to the employer, the employer has to compute the employee's total
income and deduct tax at source according to the option exercised by each of
the employees.
In the absence of any intimation by the employee, the
employer shall presume that the employee continues to be in new regime and the
employer shall deduct tax at source.
Such an employee’s intimation to its employer is only for
the purpose of TDS obligation and the employee shall still have the option to
choose old or new regime at the time of filing its tax return.
The salaried taxpayers will have option to switch from every
year but those with business or profession income, after opting for regular tax
regime will have option to move out or change regime only once.
In view of the above clarification, it is suggested that in
order to avoid any dispute, this process is fully documented by each of the
employer.
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Each employer should immediately send a
letter/email to each of its employees seeking option.
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In case no reply is received from any of the
employees, then an email may be sent to such employees informing that no
intimation about choosing option of old or new regime has been received and
accordingly default regime i.e. new regime will be applicable in his case.
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Tax deduction be made for the month of
April,2023 and onwards as per that intimation.
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A suggestion to each of the employee to make a
comparative computation of income and tax liability under old regime and new
regime may be made available to employees and opt for the regime which is more
beneficial.
