TDS on Salaries - Income Tax Department
TDS on Salaries - Income Tax Department
TDS on Salaries - Income Tax Department
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CHAPTER-2<br />
OVER VIEW OF THE <str<strong>on</strong>g>TDS</str<strong>on</strong>g><br />
PROVISIONS<br />
2.1 Introducti<strong>on</strong> :<br />
Secti<strong>on</strong> 192 of the I.T. Act, 1961 provides that every pers<strong>on</strong><br />
resp<strong>on</strong>sible for paying any income which is chargeable under the<br />
head ‘salary’, shall deduct income tax <strong>on</strong> the estimated income of<br />
the assessee under the head salaries. The tax is required to be<br />
calculated at the average rate of income tax as computed <strong>on</strong> the<br />
basis of the rates in force. The deducti<strong>on</strong> is to be made at the time<br />
of the actual payment. However, no tax is required to be deducted<br />
at source, unless the estimated salary income exceeds the maximum<br />
amount not chargeable to tax applicable in case of an individual<br />
during the relevant financial year. The tax <strong>on</strong>ce deducted is required<br />
to be deposited in government account and a certificate of deducti<strong>on</strong><br />
of tax at source(also referred as Form No.16) is to be issued to the<br />
employee. This certificate is to be furnished by the employee with<br />
his income tax return after which he gets the credit of the <str<strong>on</strong>g>TDS</str<strong>on</strong>g> in<br />
his pers<strong>on</strong>al income tax assessment. Finally, the employer/deductor<br />
is required to prepare and file quarterly statements in Form No.24Q<br />
with the <strong>Income</strong>-tax <strong>Department</strong>.<br />
2.2 Who is to deduct tax :<br />
The statute requires deducti<strong>on</strong> of tax at source from the income<br />
under the head salary. As such the existence of “employer-employee”<br />
relati<strong>on</strong>ship is the “sine-qua-n<strong>on</strong>” for taxing a particular receipt under<br />
the head salaries. Such a relati<strong>on</strong>ship is said to exist when the employee<br />
not <strong>on</strong>ly works under the direct c<strong>on</strong>trol and supervisi<strong>on</strong> of his employer<br />
but also is subject to the right of the employer to c<strong>on</strong>trol the manner in<br />
which he carries out the instructi<strong>on</strong>s. Thus the law essentially requires<br />
the deducti<strong>on</strong> of tax when;<br />
(a)<br />
(b)<br />
(c)<br />
Payment is made by the employer to the employee.<br />
The payment is in the nature of salary and<br />
The income under the head salaries is above the maximum<br />
amount not chargeable to tax.<br />
For the various categories of employers, the pers<strong>on</strong>s<br />
resp<strong>on</strong>sible for making payment under the head salaries and for<br />
deducti<strong>on</strong> of tax are as below:<br />
In the case of,<br />
1. Central/State Government/P.S.U - The designated<br />
drawing &<br />
disbursing officers.<br />
2. Private & Public Companies - The company itself<br />
as also the<br />
principal officer<br />
thereof.<br />
3. Firm - The managing<br />
partners/partner of<br />
the firm.<br />
4. HUF - Karta of the HUF<br />
5. Proprietorship c<strong>on</strong>cern - The proprietor of<br />
the said c<strong>on</strong>cern.<br />
6. 1<br />
Trusts - Managing trustees<br />
thereof.<br />
In case of a company, it is to be noted, that though the company<br />
may designate an officer /employee to make payments <strong>on</strong> the behalf<br />
1<br />
As per sub secti<strong>on</strong> 4 of sec 192, the trustees of a recognised provident fund<br />
are required to deduct tax at source at the time of making payment of the<br />
accumulated balance due to an employee. The <str<strong>on</strong>g>TDS</str<strong>on</strong>g> is to be made in a case<br />
where sub-rule 9 of part - A of Fourth Schedule of the Act applies and the<br />
deducti<strong>on</strong> is to be made as per rule 10 of part A of Fourth Schedule.<br />
2<br />
3