Tax Deduction at Source (TDS) on amount paid to Employees
Tax is deducted at source by an individual if required by law. The tax so deducted can be claimed as credit in the income tax return filed by the assessee. The amount so deducted get reflected in Form No. 26AS which can be downloaded from the income tax site.
An employer is required to deduct Tax from the amount paid to employee basically in two cases
1. Salary paid to employee (Sec 192).
2. Payment of Accumulated Balance due to an Employee if same is taxable in hands of employees (Sec 192A)
Section 192
1. TDS under this section is to be deducted by any employer. The employer can be individual/ HUF/ Company or any other assessee. The only condition is that there need to be employer employee relationship between the deductor and deductee.
2. TDS under this section is to be deducted whether or not employee is Resident or Non-Resident.
3. TDS under this section is required to be deducted when the amount of Salary is actually paid.
4. The employer is required to deduct tax at source on the amount payable at the average rate of income tax. Average rate of Income tax is calculated on the basis of rates in force for the financial Year in which payment is made.
5. The amount on which tax is to be deducted is after taking the benefit of Standard Deduction of Rs 40,000 w.e.f. Assessment Year 2019-20 and all the other benefits of Chapter VI-A.
6. The TDS deducted is to be deposited to government by 7th of next month, and for the month of March it is 30th Also, FORM 16 should be issued to employees annually. He can claim the TDS amount while submitting tax return against the total tax payable. The cut off date for issuing Form 16 is 31st May of the Next Financial year in which tax is deducted. Apart from issue of form 16 Form 12 BA is also issued in case the employer is giving perquisites & Profit lieu of salary under section 17 (3).
7. In the case of an employee who is working for more than one employer, he may furnish his salary TDS details to the employer of his choice.
8. In case of employee who has changed his employer also submit his previous TDS, salary details to subsequent employer.
9. These details are to be furnished Form 12 B according to Rule 26A. Up on receipt of such Form, Employer considers the aggregate salary and TDS paid so far and deduct if necessary for the remaining Income earned by the employee.
10. Adjustment can be made in the subsequent deduction in case of Lower deduction or excess payment of TDS made due to Increment in salary, Advance salary, Bonus, Commission etc.
Section 192A
In a case where the accumulated balance due to an employee participating in a recognised provident fund is includible in his total income tax is to be deducted at the time of payment of the accumulated balance due to the employee at the rate of 10%:
Provided that no deduction under this section shall be made where the amount of such payment or the aggregate amount of such payment to the employee is less than fifty thousand rupees i.e. the minimum threshold limit for this deduction is Rs. 50000
Provided further that any person entitled to receive any amount on which tax is deductible under this section shall furnish his Permanent Account Number to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate.
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