Every Employer at the time of payment of ‘Salary’ has to deduct TDS at an average rate of Income Tax applicable and the balance amount is payable to the employee. Following are the conditions for TDS deduction u/s 192:
- The employer-employee relationship must exist between deductor and deductee.
- Employer makes payment to the employee.
- It is in nature of salary.
- Payment is made to resident/ non-resident employee.
- The income under the head salary is above the maximum amount not chargeable to tax. (i.e; total salary for a financial year is more than Rs. 2,50,000)
What is the average rate of income tax under section 192?
Basically, the average rate of income tax is to be calculated on the basis of Income Tax Slab Rates in force for a particular financial year.
Let’s take an example to understand:
Suppose, Jay is earning Rs. 60,000 per month as salary income for FY 2016-17 and his total deduction under chapter VII-A for a year amounts to Rs. 1,00,000.
|Particulars||Amount (In Rs.)|
|Jay’s Total Income would be estimated as (60,000 * 12 months)||7,20,000|
|Deductions under Chapter VII-A||(1,00,000)|
|Income Chargeable to tax||6,20,000|
|TAX as per current slab rate||49,000|
|Education Cess and SHEC @ 3% of TAX||1470|
|Net Tax Payable||50,470|
Average rate of tax in case of each individual is different for each financial year and keeps varying based on the estimated income of the taxpayer and the Income Tax Slab Rates in force for that assessment year.
When to deduct and deposit TDS under section 192?
The deduction should be made at the time of making payment and not when it becomes due or obligation arises.
TDS deducted by the employer on salary payments is required to be deposited with the government before the prescribed due date. At the time of depositing TDS with the government, the employer is also required to mention his TAN.
Further, Due date for deposit of TDS deducted on salary for every month is 7th of the next month however, for the month of March, it is 30th April. The deposition of TDS can be made via challan No. ITNS 281.
What is the TDS on salary if employee changed jobs?
In case of employee who has changed his employer during the year, employee is required to submit his previous salary details and TDS to subsequent employer then these details are to be submitted in Form 12BB according to new rule 26C. Based on such form, Employer will consider the aggregate salary and TDS paid so far and deduct TDS for the remaining income earned by the employee.
The TDS deducted on salary is reflected in Form 16, which is issued to the employee at the end of the financial year by his employer. Also, Form 16 contains details of quarterly TDS deducted by employer along with total income earned and tax deductions. Further, an Employee can also check the details of the TDS deducted and deposited by his employer through the Form 26AS from his e-filing login.
An employer needs to file Form 24Q for TDS deducted on salary by him. Form 24Q is filed quarterly on or before the due date. Further, it contains details of salary paid and TDS deducted and deposited by an employer.
Deductor will be liable to pay the fine of INR 200 per day u/ Section 234E till the failure to pay TDS continues. However, the penalty should not exceed the amount of TDS for which statement was required to be filed.