Section 192 of the Income Tax Act, 1961, deals with TDS from Salary. This an important provision that ensures taxes are collected from employees’ earnings before they receive their salary. Here’s a simple guide to understanding this section:
What is Section 192?
According to Section 192, employers are responsible for calculating the TDS based on the projected income of the employee for the financial year. The amount deducted should be deposited with the government. Employers are required to issue Form 16. This is a certificate showing the total salary paid and the tax deducted, to employees by June 15th of the following financial year.
Calculation of TDS
Various factors are considered to determine the TDS:
- Basic Salary: The fixed amount paid regularly.
- Allowances: These may include house rent allowance (HRA), special allowances, etc.
- Deductions: Contributions to Provident Fund (PF), insurance premiums, and other eligible deductions under Section 80C, 80D, etc., reduce the taxable income.
Then the tax is calculated according to the applicable income tax slab rates. These vary depending on the income level. For instance, for the financial year 2024-25, the tax slabs are:
- Up to ₹2.5 lakh: Nil
- ₹2.5 lakh to ₹5 lakh: 5%
- ₹5 lakh to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
Example:
Suppose Priya earns an annual salary of ₹8,00,000. Her employer estimates that her total taxable income after deductions will be ₹7,50,000. So, we can calculate the tax liability for this income as follows:
- Income up to ₹2.5 lakh: Nil
- From ₹2.5 lakh to ₹5 lakh (₹2.5 lakh @ 5%): ₹12,500
- Income from ₹5 lakh to ₹7.5 lakh (₹2.5 lakh @ 20%): ₹50,000
Hence, Total tax liability = ₹12,500 + ₹50,000 = ₹62,500
So, if Priya’s employer follows the annual tax slab rates, they will deduct ₹62,500 from her salary throughout the year, ensuring she doesn’t have a large tax bill at the end of the financial year.
Conclusion:
In summary, Section 192 streamlines the tax collection process for salaries, making it easier for employees to manage their tax obligations throughout the year. Employers play a crucial role in this system by accurately calculating and deducting the appropriate amount of tax, thus ensuring compliance with tax regulations.
– Ketaki Dandekar (Team Arthology)
Read more about TDS on Salary here – https://cleartax.in/s/section-192