HOW TO CALCULATE TDS ON SALARY CIRCULAR BY CBDT :Part-1

CBDT has released circular no 17/2014 in which all the rules related to TDS on Salary has been explained . This circular generally issued i...

CBDT has released circular no 17/2014 in which all the rules related to TDS on Salary has been explained . This circular generally issued in the month of September,October but this year the circular has been issued in the month of December as the new govt has passed the Finance Bill in second quarter of the Fy 2014-15.Complete circular is given below for your ready reference. Download link for circular is given in second part of this circular here

SUBJECT:  INCOME-TAX  DEDUCTION  FROM  SALARIES  DURING  THE FINANCIAL  YEAR 2014-15  UNDER  SECTION 192  OF  THE  INCOME- TAX ACT, 1961.

*****

Reference is   invited  to Circular No.08/2013 dated   25.10.2013   whereby  the rates of deduction  of  income-tax  from  the payment of income under the head "Salaries" under  Section

192  of  the  Income-tax Act, 1961 (hereinafter  ‗the Act‘),  during the financial   year   2013-14,

were intimated. The present Circular contains the rates of deduction of income-tax from   the

payment of income chargeable under the head "Salaries" during  the  financial year 2014-15 and explains certain  related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax

Department-  www.incometaxindia.gov.in.

2. RATES OF INCOME-TAX AS PER FINANCE  (No. 2) ACT,  2014:

As per the Finance (No. 2) Act, 2014, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head  "Salaries" for the financial  year 2014-15 (i.e. Assessment Year 2015-16) at the following rates:

2.1  Rates of tax

A.        Normal Rates of tax:

Sl No	Total Income	Rate of tax
1	Where the total income does not exceed Rs. 2,50,000/-.	Nil
2	Where the total income exceeds    Rs. 2,50,000 but does not exceed    Rs. 5,00,000/-.	10 per cent of the amount by which the total income exceeds Rs. 2,50,000/-
3	Where the total income exceeds    Rs. 5,00,000/- but does not exceed  Rs. 10,00,000/- .	Rs. 25,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.
4	Where the total income exceeds    Rs. 10,00,000/-.	Rs. 1,25,000/- plus 30 per cent of the amount  by which the total income exceeds Rs. 10,00,000/-

B. Rates of tax for every individual, resident in India, who is of the age of sixty years or more but less than eighty years at any time during the financial year:

Sl No	Total Income	Rate of tax
1	Where the total income does not exceed Rs. 3,00,000/-	Nil
2	Where the total income exceeds Rs. 3,00,000 but does not exceed  Rs. 5,00,000/-	10 per cent of the amount by which the total income exceeds Rs. 3,00,000/-
3	Where the total income exceeds Rs. 5,00,000/- but does not exceed  Rs. 10,00,000/-	Rs. 20,000/- plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-.
4	Where the total income exceeds Rs. 10,00,000/-	Rs. 1,20,000/- plus 30 per cent of the amount   by which the  total income exceeds Rs. 10,00,000/-

C. In case of every individual being a resident in India, who is of the age of eighty years or more at any time during the financial year:

Sl No	Total Income	Rate of tax
1	Where the total income does not exceed Rs. 5,00,000/-	Nil
2	Where the total income exceeds    Rs. 5,00,000 but does not exceed Rs. 10,00,000/-	20 per cent of the amount by which the total income exceeds Rs. 5,00,000/-
3	Where the total income exceeds    Rs. 10,00,000/-	Rs. 1,00,000/- plus 30 per cent of the amount  by which the  total income exceeds Rs. 10,00,000/-

2.2       Surcharge on Income tax:

The amount of income-tax shall be increased by a surcharge @10% of the income-tax on payments to an individual taxpayer, if the total income of the individual exceeds Rs 1 crore during FY 2014-15 (AY 2015-16). However the amount of Surcharge shall not exceed the amount by which the individual‘s  total income exceeds Rs 1 crore and if surcharge so arrived  at, exceeds such amount

(assessee‘s total income minus one crore) then it will be restricted  to the amount of total income

minus Rupees one crore.

2.3.1    Education Cess on Income tax:

The amount of income-tax including the surcharge if any,  shall be increased by Education Cess on

Income Tax at the rate of two percent of the income-tax.

2.3.2    Secondary and Higher Education Cess on Income-tax:

An additional education cess is chargeable at the rate of one percent of income-tax including the surcharge if any, but not including the education cess on income-tax as in 2.3.1.

3.  SECTION  192  OF  THE  INCOME-TAX  ACT,  1961:  BROAD  SCHEME  OF  TAX DEDUCTION AT SOURCE FROM "SALARIES":

3.1  Method of Tax Calculation:

Every person who is responsible for paying  any income chargeable  under the head "Salaries"

shall  deduct income-tax  on  the estimated income of the assessee under the head  "Salaries" for

the financial year 2014-15. The income-tax is required to be calculated on the basis of the rates given above, subject to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at  the time of each payment. No tax, however, will be required to be deducted at source in  any case unless the estimated salary income including  the value of perquisites, for the financial year exceeds Rs. 2,50,000/- or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical illustrations of computation of tax are given at Annexure-I).

3.2   Payment of Tax on Perquisites by Employer:

An option has been given to the employer to pay the tax on non-monetary perquisites given to an employee. The employer may, at its option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. However, the employer will have to pay the tax at the time when such tax was otherwise deductible i.e. at the time of payment of

income chargeable under the head ―salaries‖ to the employee.

3.2.1 Computation of Average Income Tax:

For the purpose  of  making  the  payment   of  tax mentioned in para 3.2 above, tax  is to be determined at the  average  of    income  tax  computed on the  basis of rate in force  for  the financial  year, on  the  income  chargeable under   the  head  "salaries", including the  value of perquisites for which tax  has been paid by the employer himself.

3.2.2    Illustration:

The income chargeable under the head ―salaries‖ of an employee below sixty years of age for the year inclusive of all perquisites is Rs.4,50,000/-, out of which, Rs.50,000/- is on account of non- monetary perquisites  and    the employer opts  to  pay the tax  on  such  perquisites  as  per the

provisions discussed in para 3.2 above.

STEPS:

Income Chargeable under the head ―Salaries‖ inclusive of all perquisites	Rs.  4,50,000/-
Tax on Total Salary (including Cess)	Rs.    20,600/-
Average Rate of Tax [(20,600/4,50,000) X 100]	4.57%
Tax payable on Rs.50,000/= (4.57% of 50,000)	Rs. 2285/-
Amount required to be deposited each month	Rs.  190 ((Rs. 190.40) =2285/12)

The    tax so    paid by the employer shall be deemed to be TDS made from the salary of the employee.

3.3  Salary From More Than One Employer:

Section  192(2)  deals  with  situations  where  an  individual  is  working  under  more  than  one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer (as the tax payer may choose) from the aggregate salary of the employee, who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head "Salaries" due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

3.4 Relief When Salary Paid in Arrear or Advance:

3.4.1    Under section 192(2A) where the assessee, being  a Government servant or an employee in a  company, co-operative society, local authority, university, institution,  association or body is entitled to the relief under  Section 89(1)  he may furnish to the person  responsible  for making the payment referred to  in Para (3.1), such particulars in  Form No.  10E duly verified by him, and thereupon the person responsible, as aforesaid, shall  compute the relief on the basis of such particulars and take the same into  account  in   making  the deduction  under Para(3.1) above.

3.4.2    With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.

3.5  Information regarding Income under any other head:

(i) Section 192(2B)  enables a taxpayer to furnish  particulars  of income under any head other than "Salaries" ( not being a loss under any such head other than the loss under the head ―  Income from house  property‖) received  by the taxpayer for the same financial  year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which

is properly signed and verified by the taxpayer in the  manner as prescribed under Rule 26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under:

I, …………………. (name of the assessee), do declare that what is stated above is

true to the best of my information and belief.

It is reiterated that the DDO can take into account any loss only under the head ―Income from house property‖.  Loss under any other head cannot be considered by the DDO  for calculating the amount  of  tax  to be deducted.

3.6       Computation of income under the head “ Income from house property‖:

While taking into account the loss from House Property, the DDO shall ensure that the employee files  the declaration referred to above and encloses therewith  a computation of such loss from house property. Following details shall be obtained and kept by the employer in respect of loss claimed under the head ―Income from house property‖ separately for each house property:

a)         Gross annual rent/value

b)         Municipal Taxes paid, if any

c)         Deduction claimed for interest paid, if any d)         Other deductions claimed

e)         Address of the property

f)         Amount of loan, if any; and

g)        Name and address of the lender (loan provider)

3.6.1    Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-

(i)         the deduction is allowed only in case of  house property which is owned and is in the occupation  of the employee   for his  own residence.    However, if  it is  actually not occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.

(ii)       the quantum of deduction allowed as per table below:

Sl No	Purpose of borrowing capital	Date of borrowing capital	Maximum Deduction allowable
1	Repair  or  renewal  or  reconstruction  of the house	Any time	Rs. 30,000/-
2	Acquisition or construction of the house	Before 01.04.1999	Rs. 30,000/-
3	Acquisition or construction of the house	On or after 01.04.1999	Rs. 1,50,000/- (upto AY 2014-15)
			Rs. 2,00,000/- (w. e. f. AY 2015-16)

In case of Serial No. 3 above

(a) The acquisition  or construction of the house should be completed within3 years from the end of the FY in which the capital was borrowed. Hence it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.

(b) Further any prior period interest for the FYs upto the FY in which the property was

acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.

(c) The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of  Principal and Interest of the loan so repaid.

3.7       Adjustment for Excess or Shortfall of Deduction:

The provisions of Section 192(3) allow the deductor to make adjustments for any excess   or shortfall    in  the  deduction  of  tax  already  made  during  the  financial  year,    in    subsequent deductions for that employee within  that financial year itself.

3.8       Salary Paid in Foreign Currency:

For  the purposes of deduction of tax on salary payable  in  foreign currency, the value in rupees of such  salary shall  be  calculated  at the  “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source ( see Rule 26).

4.         PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES:

4.1. As per section 204(i) of the Act, in case of payments other than payments by the Central Government or the State Government, the  "persons responsible for paying" for the purpose of Section 192 means  the  employer  himself or if the employer  is a Company, the Company itself including the Principal Officer thereof. Further, as per Section 204(iv), in case the credit, or as the case may be, the payment is made by or on behalf of Central Government or State Government,

the DDO or any other person by whatever name called, responsible for crediting, or as the case may be, paying such sum is the ―persons responsible for paying" for the purpose of Section 192.

4.2. The tax determined as per para 9 should be deducted from the salary u/s 192 of the Act.

4.3.    Deduction of Tax at Lower Rate:

If the jurisdictional TDS officer of the Taxpayer issues a certificate of No Deduction or Lower Deduction of Tax under section 197 of the Act, in response to the application filed before him in Form No 13 by the Taxpayer; then the DDO should take into account such certificate and deduct tax on the salary payable at the rates mentioned therein.(see Rule 28AA).   The Unique Identification Number of the certificate is required to be reported in Quarterly Statement of TDS (Form 24Q)

4.4.      Deposit of Tax Deducted:

Rule 30 prescribes time and mode of payment of tax deducted at source to the account of Central

Government.

4.4.1. Due dates for payment of TDS:

Prescribed time of payment/deposit of TDS to the credit of Central Government account is as under:

a)             In case of an Office of Government:

Sl No.	Description	Time up to which to be deposited.
1	Tax deposited without Challan [Book Entry]	SAME DAY
2	Tax deposited with Challan	7TH DAY NEXT MONTH
3	Tax on perquisites opt to be deposited by the employer.	7TH DAY NEXT MONTH

b)            In any case other than an Office of Government

Sl No.	Description	Time up to which to be deposited.
1	Tax deducted in March	30th APRIL NEXT FINANCIAL YEAR
2	Tax deducted in any other month	7TH DAY NEXT MONTH
3	Tax on perquisites opted to be deposited by the employer	7TH DAY NEXT MONTH

However, if a DDO applies before the jurisdictional Additional/Joint Commissioner of Income Tax to permit quarterly payments of TDS under section 192, the Rule 30(3) allows for payments on quarterly basis and as per time given in Table below:

Sl. No.	Quarter of the financial year ended on	Date for quarterly payment
1	30th June	7th July
2	30th September	7th October
3	31st December	7th January
4	31st March	30th April next Financial Year

4.4.2  Mode of Payment of TDS

4.4.2.1 Compulsory filing of Statement by PAO, Treasury Officer, etc in case of payment of

TDS by Book Entry:

In the case of an office of the Government, where tax has been paid to the credit of the Central Government without the production of a challan [Book Entry], the Pay and Accounts Officer or the Treasury Officer or the Cheque Drawing and Disbursing Officer or any other person by

whatever  name  called  to  whom  the  deductor  reports  about  the  tax  deducted  and  who  is responsible for crediting such sum to the credit of the Central Government, shall‐

(a) submit a statement in Form No. 24G within ten days from the end of the month to the agency authorized by the Director General of Income‐tax (Systems) [TIN Facilitation Centres currently managed by M/s National Securities Depository Ltd] in respect of tax deducted by the deductors and reported to him for that month; and

(b) intimate the number (hereinafter referred to as the Book Identification Number or BIN) generated by the agency to each of the deductors in respect of whom the sum deducted has been credited. BIN consists of receipt number of Form 24G, DDO sequence number in Form No. 24G and date on which tax is deposited.

The procedure of furnishing  Form  24G is  detailed  in  Annexure  III.  PAOs/DDOs  should  go through  the  FAQs  in  Annexure  IV  to  understand  the  correct  process  to  be  followed.  The ZAO/PAO  of  Central  Government  Ministries  is  responsible  for  filing  of  Form  No.  24G  on monthly basis. The person responsible for filing Form No. 24G in case of State Govt. Departments is shown at Annexure V.

The procedure of furnishing Form 24G is detailed in Annexure IV. PAOs/DDOs should go through the FAQs therein to understand the correct process to be followed.

4.4.2.2  Payment by an Income Tax Challan:

(i) In case the payment is made by an Income Tax Challan, the amount of tax so deducted shall be deposited to the credit of the Central Government by remitting it, within the time specified in Table in para 4.4.1 above, into any office of the Reserve Bank of India or branches of the State Bank of India or of any authorized bank;

(ii) In case of a company and a person (other than a company), to whom provisions of section

44AB are applicable, the amount deducted shall be  electronically remitted into the Reserve Bank of India or the State Bank of India or any authorised bank accompanied  by an electronic income-tax challan  (Rule125).

The amount shall be construed as electronically remitted to the Reserve Bank of India or to the

State Bank of India or to any authorized bank, if the amount is remitted by way of:

(a)       internet banking facility of the Reserve Bank of India or of the State Bank of India or of any authorized bank; or

(b)       debit card. {Notification No.41/2010 dated 31st May 2010}

4.5  Interest, Penalty & Prosecution for Failure to Deposit Tax Deducted:

4.5.1 If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time, he shall be liable to action in accordance with the provisions of section 201 and shall be deemed to be an assessee-in-default in respect of such tax and liable for  penal action u/s

221 of the Act. Further Section 201(1A) provides that such person shall be liable to pay simple interest

(i) at the rate of 1% for every month or part of the month on the amount of such tax from

the date on  which such tax was deductible to the date  on which such tax is deducted;

and

(ii) at the rate of one and one-half percent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Such interest, if chargeable,  is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.

4.5.2 Section 271C inter alia lays down that if  any person  fails  to  deduct whole or any part of tax at source or fails to pay the whole or part of tax under  the  second proviso to section 194B, he shall  be liable to pay, by way of  penalty, a sum equal to the amount  of tax  not  deducted or paid by him.

4.5.3 Further, section   276B   lays    down that   if   a person fails to pay to the credit   of   the Central  Government  within  the prescribed  time, as above, the  tax  deducted at  source  by him or tax payable by him under the second proviso to section 194B, he shall be  punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years, along with fine.

4.6 Furnishing of Certificate for Tax Deducted (Section 203):

4.6.1 Section 203 requires the DDO to furnish  to the employee a  certificate in Form 16 detailing the amount of TDS and certain other particulars. Rule 31 prescribes that Form 16 should be furnished to the employee by 31st May after the end of the financial year in which the income was paid and tax deducted. Even the banks deducting tax at the time of payment of pension are required to issue such certificates. Revised Form 16 annexed to Notification No 11 dated 19-

02-2013 is enclosed. The certificate in Form 16 shall specify

(a)       Valid permanent account number (PAN) of the deductee;

(b)       Valid tax deduction and collection account number (TAN) of the deductor;

(c)            (i)  Book identification number or numbers (BIN) where deposit of tax deducted is without production of challan in case of an office of the Government;

(ii)  Challan  identification  number  or  numbers  (CIN*)  in  case  of  payment through bank.

(*Challan  identification  number  (CIN)  means  the  number  comprising  the  Basic  Statistical Returns (BSR) Code of the Bank branch where the tax has been deposited, the date on which the tax has been deposited and challan serial number given by the bank.)

(d)       Receipt numbers of all the relevant quarterly statements of TDS (24Q). The receipt number of the quarterly statement is of 8 digit.

Further as per Circular 04/2013 dated 17-04-2013 all deductors (including Government deductors who deposit TDS in the Central Government Account through book entry) shall issue the Part A of Form No. 16, by generating and subsequently downloading it through TRACES Portal and after duly authenticating and verifying it, in respect of all sums deducted on or after the

1st day of April, 2012 under the provisions of section 192 of Chapter XVII-B. Part A of Form No

16 shall have a unique TDS certificate number.  'Part B (Annexure)' of Form No. 16 shall be prepared  by the deductor manually and  issued  to the deductee  after  due authentication  and verification alongwith the Part A of the Form No. 16.

If the DDO fails to issue these certificates to the person concerned, as required by section 203, he will be liable to pay, by way of penalty, under section 272A(2)(g),  a sum which shall be Rs.100/- for every day during which the failure continues.

It   is, however, clarified that there is no obligation to issue the TDS certificate in case tax at source is not deductible/deducted  by virtue of claims of exemptions  and  deductions.

[Note: TRACES is a web-based application of the Income - tax Department that provides an interface to all stakeholders associated with TDS administration. It enables viewing of challan status, downloading of NSDL Conso File, Justification Report and Form 16 / 16A as well as viewing of annual tax credit statements (Form 26AS). Each deductor is required to Register in the Traces portal. Form 16/16A issued to deductees should mandatorily be generated and downloaded from the TRACES portal].

Certain essential points regarding the filing of the Statement and obtaining TDS certificates are mentioned below:

(a)       TDS certificate (Form16) would be generated for the deductee only if Valid PAN is correctly  mentioned  in  the  Annexure  II  of  Form  24Q  in  Quarter  4  filed  by  the  deductor. Moreover, employers are advised to ensure in Form 16 that the status of ―matching‖ with respect

to ―Form 24G/OLTAS‖ is ‗F‘. If the status of matching other than ‗F‘, kindly take necessary

action promptly to rectify the same.  It is pertinent to mention here that certain facilities have been

provided  to  the  deductors  at  website  www.tdscpc.gov.in/     including  online  correction  of statements (Form 24Q).

(b)       The employer should quote the  gross amount of salary (including any amount exempt under section 10 and the deductions under chapter VI A) in column 321 (Amount paid/credited) of Annexure I of Form 24Q as per NSDL RPU (hereafter Return Preparation Utility).

(c)       The employer should quote the amount of salary excluding any amount exempt under section 10 in column 337 (Total amount of salary) of Annexure II of Form 24Q as per NSDL RPU.

(d)       TDS on Income (including loss from House Property) under any Head other than the head

‗Salaries‘ offered for TDS (shown in column 341) can be shown in column 353 (Reported amount

of TDS by previous employer, as per NSDL RPU.

(e)       Employer is advised to quote Total Taxable Income (Column 346) in Annexure II without rounding-off and TDS should be deducted and reported accordingly i.e. without rounding-off of TDS also.

Example:

Total Taxable Income	Total Taxable Income (Rounded Off)	TDS to be Deducted (Incl. cess)	TDS Deducted/ Reported after rounding-off of income (Incl. cess)	Short Deduction
1350094	1350090	236929.05	236927.80	Rs. 1.25

4.6.2.    If an assessee is employed by more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers and Part B may be issued by each of the employers or the last employer at the option of the assessee.

4.6.3.    Authentication by Digital Signatures:

(i) Where a certificate is to be furnished in Form No. 16, the deductor   may, at his option, use digital signatures to authenticate such certificates.

(ii) In case of certificates issued under clause (i), the deductor shall ensure that

(a) the conditions prescribed in para 4.6.1 above are complied with;

(b) once the certificate is digitally signed, the contents of the certificates are not amenable to change; and

(c)  the  certificates  have  a  control  number  and  a  log  of  such  certificates  is maintained by the deductor.

v  The digital  signature is  being  used to  authenticate most  of the e-transactions  on  the internet as transmission of information using digital signature is failsafe. It saves time specially in organisations having large number of employees where issuance of certificate of deduction of tax with manual signature is time consuming (Circular no 2 of 2007 dated

21.05.2007)

4.6.4.   Furnishing of particulars pertaining to perquisites, etc (Section 192(2C):

4.6.4.1 As per section 192(2C), the responsibility of providing correct and complete particulars of perquisites or profits in lieu of  salary given to an employee is placed on the person  responsible for paying such income i.e., the person responsible  for deducting tax at source. The form and manner  of  such particulars are prescribed in Rule 26A, Form 12BA (Annexure II) and Form 16 of the Rules. Information relating to the nature and value of perquisites is to be provided by the employer in Form 12BA in case salary paid or payable is above Rs.1,50,000/-. In other cases, the information would have to be provided  by the employer in Form 16 (PART B) itself.

4.6.4.2 An employer, who has paid the tax on perquisites on behalf of the employee as per the provisions discussed in para 3.2 of this circular, shall furnish to the employee concerned, a certificate to the effect that tax has been paid to the Central Government and specify the amount so paid, the rate at which  tax has been paid and certain other particulars in the amended Form

16.

4.6.4.3 The obligation cast on the employer under Section 192(2C) for furnishing a statement showing the value  of  perquisites  provided to the employee is a crucial responsibility of the employer, which is expected to be discharged in  accordance  with law  and  rules of valuation framed  there under. Any false  information, fabricated documentation or suppression of requisite information will entail consequences thereof provided under the law. The certificates in Forms 16 and/or Form 12BA specified above, shall be furnished to the employee by 31st May of the financial year immediately following the financial year in which the income was paid and tax deducted. If he fails to issue these certificates to the person concerned, as required by section

192(2C), he will be liable to pay, by way of penalty, under section 272A(2)(i), a sum which shall be Rs.100/- for every day during which the failure continues.

As per Section 139C of the Act, the Assessing Officer can require the taxpayer to produce Form

12BA alongwith Form 16, as issued by the employer.

4.7       Mandatory Quoting of PAN and TAN:

4.7.1  Section 203A of the  Act makes it obligatory  for  all   persons  responsible for deducting tax at source to obtain and quote the Tax deduction and collection Account No (TAN) in the challans, TDS-certificates, statements and other documents. Detailed instructions  in  this regard are available in this Department's Circular No.497 [F.No.275/118/ 87-IT(B) dated 9.10.1987]. If a person  fails  to  comply with the provisions of section  203A, he will be  liable  to pay, by way of penalty,  under    section  272BB,  a  sum  of  ten  thousand  rupees.  Similarly,  as  per  Section

139A(5B),  it is obligatory for persons  deducting tax at source to quote PAN of the persons from whose income tax has   been   deducted in the statement   furnished   u/s 192(2C), certificates furnished u/s 203 and   all   statements prepared and delivered as per the provisions of section

200(3) of the Act.

4.7.2    All tax deductors are required to file the TDS statements in Form No.24Q (for tax deducted from salaries). As the requirement of filing TDS certificates alongwith the return of income has been done away with, the lack of PAN of deductees is creating difficulties in giving credit for the tax deducted. Tax deductors are, therefore, advised to procure and quote correct PAN details of all deductees in the TDS statements for salaries in Form 24Q. Taxpayers are also liable to furnish their correct PAN to their deductors. Non-furnishing of PAN by the deductee (employee) to the deductor (employer) will result in deduction of TDS at higher rates u/s 206AA of the Act mentioned in para 4.8 below.

4.8       Compulsory Requirement to furnish PAN by employee (Section 206AA):

4.8.1    Section 206AA in the Act makes furnishing of PAN by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor has been made responsible to make TDS at higher of the following rates:

i)                           at the rate specified in the relevant provision of this Act; or ii)                          at the rate or rates in force; or

iii)                         at the rate of twenty per cent.

The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. However, where the income of the employee computed for TDS u/s 192 is below taxable limit, no tax will be deducted. But  where the income of the employee computed for TDS u/s 192 is above taxable limit, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to deducted at the average rate. Education cess @ 2% and Secondary and Higher Education Cess @ 1% is not to be deducted, in case the tax is deducted at 20% u/s 206AA of the Act.

4.9 Statement of deduction of tax under section 200(3) [Quarterly Statement of TDS]:

4.9.1     The person deducting the tax (employer in case of salary income), is required to file duly verified Quarterly Statements of TDS in  Form 24Q  for the periods [details in Table below] of each financial year, to the TIN/facilitation Centres authorized by DGIT (System‘s)  which is currently managed by   M/s National Securities Depository Ltd (NSDL). Particulars of e-TDS Intermediary at any of the TIN Facilitation Centres are available at http://www.incometaxindia.gov.in and  http://tin-nsdl.com portals. The requirement of filing an annual return of TDS has been done away with w.e.f. 1.4.2006. The quarterly statement for the

last quarter filed in Form 24Q (as amended by Notification No. S.O.704(E) dated 12.5.2006) shall be treated as the annual return of TDS. Due dates of filing this statement quarterwise is as in the Table below:

TABLE: Dates of filing Quarterly Statements E-TDS Return 24Q

Sl No	Return for Quarter ending	Due date for Government Offices	Due date for Other Deductors
1	30th June	31st July	15th July
2	30th September	31st October	15th October
3	31st December	31st January	15th January
4	31st March	15th May	15th May

4.9.2     The statements referred above may be furnished in paper form or electronically under digital signature or alongwith verification of the statement in Form 27A of verified through an electronic process in accordance with the procedures, formats and standards specified by the Director  General  of  Income‐tax  (Systems).  The  procedure  for  furnishing  the  e-TDS/TCS statement is detailed at Annexure VI.

4.9.3 All Returns in Form 24Q are required to be furnished in electronically  except in case where the number of deductee records is less than 20 and deductor is not an office of Government, or a company or a person who is required to get his accounts audited under section 44AB of the Act. [Notification No. 11 dated 19.02.2013].

4.9.4 Fee for default in furnishing statements (Section 234E):

If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) in respect of tax deducted at source on or after 1.07.2012 he shall be liable to pay, by way of fee a sum of Rs. 200 for every day during which  the failure continues. However, the amount of such fee shall not exceed the amount of tax which was deductible at source.  This fee is mandatory in nature and to be paid before furnishing of such statement.

4.9.5 Rectification of mistake in filing TDS Statement:

A DDO can also file a correction statement for rectification of any mistake or to add, delete or

update the information furnished in the statement delivered earlier.

4.9.6  Penalty  for  failure  in  furnishing  statements  or  furnishing  incorrect  information

(section 271H):

If a person fails to deliver or caused to be delivered a statement within the time prescribed in section 200(3) or furnishes an incorrect statement, in respect of tax deducted at source on or after

1.07.2012, he shall be liable to pay, by way of penalty a sum which shall not be less than Rs.

10,000/-  but which may extend to Rs 1,00,000/-.  However, the penalty shall not be levied if the person proves that after paying TDS with the fee and interest, if any, to the credit of Central Government,  he  had  delivered  such  statement  before  the  expiry of  one  year  from  the  time prescribed for delivering the statement.

4.9.7  At the time of preparing statements of tax deducted, the deductor is required to:

(i)  mandatorily quote his tax deduction and collection account number (TAN) in the statement;

(ii) mandatorily quote his permanent account number (PAN) in the statement except in the case where the deductor is an office of the Government( including State Government). In case of Government deductors “PANNOTREQD‖ to be quoted in the e-TDS statement;

(iii) mandatorily quote PAN of all deductees;

(iv)furnish particulars of the tax paid to the Central Government including book identification number or challan identification number, as the case may be.

(v) furnish particular of amounts paid or credited on which tax was not deducted in view of the issue of certificate of no deduction of tax u/s 197 by the assessing officer of the payee.

4.9.8    It may be noted that under the new TDS procedure, TAN of the deductor/ PAN of the deductee and receipt number of TDS statement filed by the deductor act as  unique identifier for granting online credit of TDS to the deductee. Hence due care should be taken in filling these particulars. Due care should also be taken in indicating correct CIN/ BIN  in TDS statements.

4.10     TDS on Income from Pension:

In  the case of pensioners who  receive  their pension (not being Family Pension paid to a spouse) from   a   nationalized bank,   the instructions contained in this circular shall apply in the same manner as they  apply  to salary-income.  The deductions from  the amount  of  pension under section 80C   on   account   of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioner furnishes the relevant details to the banks, may be allowed.  Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalized  Banks  vide  RBI's  Pension Circular(Central Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64 (11CVL)-/92) dated  the  27th  April 1992, and, these instructions should be followed by all the   branches of the   Banks,   which have been entrusted with the task  of payment of pensions.  Further all branches of the banks are  bound u/s 203 to issue certificate of tax deducted in Form  16 to the pensioners also vide CBDT circular no. 761 dated 13.1.1998.

4.11.   Matters pertaining to the TDS made in case of Non Resident:

4.11.1 Where Non-Residents are deputed to work  in India  and  taxes are borne by the employer, if any refund becomes due to the employee after he has already left India   and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the  tax has been borne by it [Circular No. 707 dated 11.07.1995].

4.11.2  In respect of non-residents, the salary paid for services rendered  in India shall be regarded as  income earned  in  India. It has been specifically provided in the Act that  any  salary  payable for rest period or leave period which   is both preceded   or   succeeded by service in India and forms part of  the  service contract of employment will  also  be regarded as income earned in India.


Download TDS on salary Circular No 17/2014 for Fy 2014-15