TDS on Salary Analysis 24Q (Section 192 Income Tax Act)

Section 192 Income Tax Act) TDS on Salary : Section 192 of the Income Tax Act deals with TDS on Salary Income. In the following Article, we have various critical aspects that arise in respect of TDS on Salary payments. We have also covered the applicable TDS Returns to be filed for salary payments. In our earlier articles, we have already provided detailed analysis on other Income Tax areas such as the Deductions from Gross Total Income and also recent changes in Section 44AD of the Income Tax Act. This editorial on TDS on Salary has been contributed by CA Ankita Jain.

Introduction : TDS on Salary

Section 192 of Income Tax deals with deduction of tax from salaries paid to the employees by certain tax payers like company, cooperative, trust, firm, govt authorities etc. Tax is not deductible if salary is not paid actually even if it is provided as payable in the accounts of tax payer.

Tax is deductible as “average tax payable” by employee which may be dependent on various conditions of the employee in each case. Therefore it may happen that any 2 employees drawing equal salary may suffer different tax liability to be deducted by the employer.

Since the quarterly TDS Return Form 24Q contains only net salary paid and tax deducted actually during a particular quarter, the Form 16 generated by system for the year contains only the salary net paid and tax actually deducted for a financial year which does not match with total salary income and tax deductible there from.

In other words, Form 16 provides a misleading data to the assessee as well as department and AO gets an opportunity to call for information from employer and employee both.

Therefore if Sec 192 is amended on the lines of other provisions of chapter that gross salary paid (without any deduction or exemption) for over 250000/- in one year shall suffer TDS @5% and return of 24Q shall be filed like 26Q. Then TDS return will show gross salary paid to employees for the year. All employees making eligible investments, deduction claim will file the ITR and will pay self assessment tax or claim refund.

This will absolve of the employers from problem of to discuss tax evasion and planning measures with employees,  pay cash salaries, employ on contract etc on one hand and will ensure reporting of correct wages paid by business entity on the other.

PAN : TDS on Salary

Like Sec 194C for transporters, employers must collect PAN of all employees whose wages exceed 250000/- pa and details of salary be included in TDS return, whether or not tax is deducted from it.

ITO may also verify the gross amount of specified payments made by tax deductor and Tax Audit report can endorse it also. It will help department to track individuals who escape tax by suffering TDS and not filing the ITR etc.

Conclusion : TDS on Salary

This write up on Tax Deducted at Source provisions related to Salary Payments was contributed by CA Mahesh Jain.