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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Dec 192022

Penalty under section 221 is levied when there is a default in payment of tax. Under sub-section (1) of section 221, the assessing officer is empowered to impose a penalty where an assessee is in default or is deemed to be in default in payment of tax. The said penalty is leviable in addition to the amount of the arrears and the amount of interest payable under section 220(2). Further, in the case of continuing default, the assessing officer may direct to pay further amount or amounts by way of penalty, so, however, that the total amount of penalty does not exceed the amount of tax in arrears. However, such a penalty is discretionary and can be waived where reasonable cause exists for such default.

Here an attempt is made to explain and examine what constitutes the reasonable cause for not levying a penalty under section 221.


Depends upon the facts of each case

The exercise of discretion u/s 221 is not to be arbitrary but is dependent on the facts and circumstances of the case


No penalty where the reasonable cause is proved

According to the second proviso to section 221(1), the penalty cannot be levied where the assessee proves to the satisfaction of the assessing officer that the default was for good and sufficient reason.


Penalty leviable even if the tax paid before levy of penalty

Penalty under section 221 will be exigible even in a case where the tax is paid after the due date but before the levy of penalty.


Impact of the outcome of final order regarding default in payment of tax

According to sub-section (2) of section 221 whereas a result of any final order, the amount of tax with respect to the default in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be canceled and the amount of penalty paid shall be refunded.


Financial crises for not levying penalties under section 221

The assessing officer passed an order under section 201 treating the assessee as the assessee in default as it had not remitted the amount collected by way of TDS to the government account during the relevant assessment year. The assessee did not file any appeal against the order under section 201 and remitted tax deducted at the source along with interest.

The assessing officer also initiated penalty proceedings under section 221.

The assessee said that it was facing severe financial hardship and the same constitutes a good and sufficient reason for not levying a penalty under section 221.

It is true that a mere default is not sufficient for the levy of penalty, but in the instant case, the assessee used the TDS amount to meet various business commitments. Further, it was continuously making defaults on payment of TDS to the government account, which is very serious in nature.

One can understand the financial difficulties the assessee was facing if it was in defaulter for a short period. But in this case, the assessee’s conduct was that it continuously defaulted the payment of the TDS amount to the government account.

The only reason the assessee mentioned for non-payment of TDS was financial difficulties, which under these circumstances, did not appear to be sufficient. Accordingly, the penalty was confirmed.


No waiver of penalty on grounds of payment of self-assessment tax

Penalty under section 221(1) cannot be waived merely on the ground that self-assessment tax is paid before such levy of penalty. There existed good and sufficient reasons to mitigate said default.

May 052022




Apr 062021


Download TDS Rate Chart FY 2020-2021 (AY 2021-2022)



Sep 262016

How to compute TDS, when a Employee has exited from the current company and joined a new company in a single financial year

Section 192(2) Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case, choose), such details of the income under the head “Salaries” due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1).

Under which circumstances an employee could work under more than employer?

Normally an employee is expected to work under one employer throughout the year. But in circumstances like change in employment in the middle of the year or in case there is shift based payment and employee in working under different employer in different shift or working on part time basis there could be more than one employer in a financial year.

What difficulties arouse when there are more than employers in a year?

In case employee work under more than one employer there is possibility of giving excess benefit of maximum amount not chargeable to tax or deduction being given more than allowed as given in the below diagram:

Employee working under

  • Employer 1
  • Employer 2
  • Employer 3

In the above circumstances all employer might have given employee the benefit of maximum amount not chargeable to tax (Rs. 250000/-) is given by all employers. Hence, TDS might have deducted at lower rate causing a delay in deposit of tax at departmental end and heavy burden of tax with interest to employee at the end of financial year on the other hand.

To prevent this sec 192(2) have introduces form Form 12B which will be given by employee to the employer of this choice so that any one employer have the knowledge of facts of tax being deducted by other employer(s) and correct computation and deposit of TDS taken place.

What are the contents of Form 12B?

Form 12B have following information:

  1. Name and address of the employee
  2. Permanent Account No.
  3. Residential status
  4. Name and address of employer(s)
  5. TAN of the employer(s) as allotted by the ITO
  6. Period of employment
  7. Particulars of salary as defined in section 17, paid or due to be paid to the employee during the year
  8. Amount deducted in respect of life insurance premium, provident fund contribution, etc., to which sec. 80Capplies (Give details)
  9. Total amount of tax deducted during the year (enclose certificate issued under section 203)
  10. Particulars of value of perquisites and amount of accretion to employee’s provident fund account

The form 12B is employee self declaration and not authentication is required from any of the current / previous employer.

How Form 12A will work?

Where an employee has more than one employer, he is required by section 192(2) to furnish Form 12B to one of the employers the details of salary due / received by him from other employers.

Only after submission of information in form 12B, it becomes the obligation of the employer to deduct TDS after considering the information submitted by Form 12B.

What is the effective date of change is rate of TDS in case employee submitted in Form 12B?

As mentioned above it is only after submission of Form 12B employer is under obligation to alter his rate of TDS deduction.

For example in case Form 12B is submitted in the month of September 2016, only from September 2016 onwards, tax shall be deducted at the average rate determined after considering the details submitted in Form 12B.

Is the present employer is under obligation to declare the details of income earned by employee from previous employment(s) in form TDS certificate also (Form 16)?

No, Form 16 will be issued by each employer(s), including all previous employer(s), normally for income earned by employee from him and tax deducted by him.

Information given in Form 12B is only for the purpose of correct computation of TDS only.

Case study:

Case Study 1 – Employed simultaneously under more than one employer

Employee Name Mr. X
Previous Year 2016-17 Assessment Year 2017-18
Employed by Salary (pm) Total
A Ltd
Basic Salary Rs. 15,000.00
HRA Rs. 7,500.00
Conveyance Rs. 0.00
Special allowance Rs. 7,500.00
Taxable Salary Rs. 30,000.00 Rs. 360,000.00
B Ltd
Basic Salary Rs. 20,000.00
HRA Rs. 10,000.00
Conveyance Rs.  2,000.00
Special allowance Rs. 10,000.00
Taxable Salary Rs. 42,000.00 Rs. 504,000.00
Total Rs. 72,000.00 Rs. 864,000.00
Mr. X has the option to chose any one employer to whom Form 12B be submitted.
If he Chose B Ltd Total tax deductible
case 1 : If employee furnishes Form 12B at the time of appointment:
Total tax deductible Rate of deduction Monthly deduction
TDS to be deducted by A Ltd Rs. 6,180 1.72% Rs. 515.00
TDS to be deducted by B Ltd Rs. 94,554 18.76% Rs. 7,879.50
Case 2 : If employee furnishes Form 12B after one month of his appointment:
Total tax deductible Rate of deduction Deduction in 1st month Deduction from 2nd month onward
TDS to be deducted by A Ltd Rs. 6,180 1.72% Rs. 515.00 Rs. 515.00
TDS to be deducted by B Ltd Rs. 94,554 18.76% Rs. 2,214.50 ** Rs. 8,394.50
** Tax less deducted as employee have not furnished details of previous employer and hence TDS computed only on income given by employer B ltd, i.e., ₹ 5,04,000/-

Case Study 2 – Successively employment under more than one employer

Employee Name Mr. X
Previous Year 2016-17 Assessment Year 2017-18
Employed by Salary (pm) Period of employment Total
A Ltd Rs. 30,000.00 9 month Rs. 270,000.00
B Ltd Rs. 42,000.00 3 month Rs. 126,000.00
Total Rs. 72,000.00 12 month Rs. 396,000.00
Mr. X has no option but to submit Form 12B to his new employer B Ltd.
Suppose he submitted Form 12B in his appointing month.
TDS to be deducted by A Ltd Rs. 4,635
TDS to be deducted by B Ltd Rs. 96,099


Nov 012013
Due dates for the Month of November 2013
Service Tax
– Service Tax payments by Companies for October
Central Excise
– Payment of Excise Duty for all Assessees (other than SSI Units)
Income Tax
– TDS Payment for October
Central Excise
– Filing ER-1 Return (Other than SSI Units)
– Filing Quarterly ER-2 Return by 100% EOUs
– Filing monthly ER-6 Return by specified class of Assessees regarding principal inputs.
Providend Fund
– PF Payment for October
– TDS Payment for October
– ESIC Payment for October
– MVAT Monthly Return for October (TAX>1000000/-)

– Monthly payment of October
Central Excise
Filing Annual Financial information Statement in Form ER-4 by the specified Assessees.
Income Tax
– Return of Income & Wealth of all assessees covered under Transfer Pricing Regulations
– Audit Report in Form No. 704

Profession Tax
– Payment of October
*If payment of MVAT made as per time prescribed, additional 10 days are given for uploading e-return
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