Feb 142023

Every year an employer is obliged to deduct TDS from the salary payable by him to his employees. There are many practical difficulties faced by him in deducting TDS on estimated salary in determining the rate of TDS and estimated salary income on which such rate shall be applied. These difficulties are further increased due to amendments made by the authorities every year. Therefore an attempt is made to clarify all the practical difficulties faced by the employer.

1.      Method of Tax Calculation

A. 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 2022-23.

B. The income tax is required to be calculated on the basis of the rates given in the image attached to this blog.

C. Person deducted tax as above shall ensure that the provisions related to the requirement to furnish PAN or Aadhaar number, as the case may be, as per sec 206AA of the Act,

D. TDS u/s 192 shall be deducted at the time of each payment.

E. The tax paid by the employer shall be deemed to be TDS made from the salary of the It may be noted that tax liability may not be the same in case the employee opts for a concessional tax regime under section 115BAC of the Act. Thus, it is not always open to an employee to deduct the tax of an employee under the new tax regime as this option is open to employees at the time of filing income tax returns for the relevant assessment year.

F. Any employee intending to opt for the concessional rates of tax under section 115BAC of the Act may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC. The intimation made to the deductor shall be only for TDS during the previous year and cannot be modified during that year.

G. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 115BAC of the Act.

H. No tax, however, will be required to be deducted at source in a case unless the estimated salary income including the value of perquisites is taxable after giving effect to the exemptions, deductions, and relief as applicable.

2. Salary payable in foreign currency:

I. 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 and Rule 115).

3. Adjustment for Excess or Shortfall of Deduction

J. The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in Tax deduction arising out of any previous deduction or failure to deduct during the financial year.

4. Case

The income chargeable under the head “salaries” of an employee below sixty years of age during the Financial Year 2021-22, is Rs. 6,00,000/- (inclusive of all perquisites), out of which, Rs. 50,000/- is an 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.

Income Chargeable under the head ―” Salaries” inclusive of all perquisites Rs. 6,00,000/-
Tax as per normal rates on Total Salary (including Cess) Rs. 33,800/-
Average Rate of Tax [(33, 800/6,00,000) X100] 5.63%
Tax payable on Rs.50,000/= (5.63% of 50,000) Rs. 2815
The amount required to be deposited each month

(subject to adjustments in tax payable on account of change in salary structure)

Rs. 235= 2815/12

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