TDS from Salary
Introduction
Every employer responsible for paying salary must deduct tax at source under section 192 if the salary income exceeds the basic exemption limit. TDS is deducted at the time of salary payment and is based on the estimated tax liability of the employee.
Key Provisions
- Applicability:TDS applies to all employers, including individuals, firms, companies, and government bodies. It is deducted from both resident and non-resident employees.
- Rate of Deduction:Tax is deducted based on the applicable slab rates, considering exemptions and deductions declared by the employee. If PAN is not provided, TDS is deducted at 20% or the applicable rate, whichever is higher.
- TDS on Non-Monetary Perquisites:Employers may pay tax on perquisites instead of deducting TDS, which is then treated as TDS on behalf of the employee.
Computation of TDS
- Estimated Taxable Salary =Salary + Other Income – House Property Loss – Deductions under Chapter VI-A
- TDS Liability =Estimated Tax – TDS/TCS from Other Sources – Section 89 Relief
- Employee Disclosures:Employees may declare additional income, TDS/TCS, and house property losses to their employer for accurate TDS computation.
Special Cases
- Multiple Employers:Employees working with multiple employers can provide Form 12B to one employer for consolidated TDS deduction.
- Job Change:Employees can declare previous employer salary details to their new employer to ensure proper TDS calculation.
- TDS on ESOPs:In eligible start-ups, TDS on Employee Stock Option Plans (ESOPs) is deferred until 48 months from the end of the assessment year of allotment, or date of resignation, or date of share sale.
TDS Compliance & Filing
- Deposit:TDS is deposited using Challan ITNS 281 within 7 days from the end of the deduction month, except for March deductions, which are due by April 30. Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statements:Employers must file Form 24Q quarterly. Government offices depositing TDS without a challan must file Form 24G monthly.
- TDS Certificate:Form 16 must be provided to employees by June 15 of the following year.
Non-Compliance & Penalties
- Failure to Deduct/Deposit TDS:The employer is treated as an “assessee-in-default” and is liable for interest and penalties under Section 201.
- Late Filing of TDS Statements:A fee of Rs. 200 per day applies under Section 234E, along with penalties under Sections 271H and 272A.
- Failure to IssueForm 16: Liable for a penalty under Section 272A.