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    Unit 5 - Note03 - TDS

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    Sumit Bain
    The document discusses TDS or tax deducted at source under the Income Tax Act. It explains that TDS is a measure where those making certain payments deduct tax from the payment amount at specified rates. It then discusses key aspects of TDS on salary under section 192 such as when tax is deducted, the applicable tax rates, and other points employers need to keep in mind regarding TDS on salary.

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    Unit 5 - Note03 - TDS

    Uploaded by

    Sumit Bain
    4 views3 pages
    The document discusses TDS or tax deducted at source under the Income Tax Act. It explains that TDS is a measure where those making certain payments deduct tax from the payment amount at specified rates. It then discusses key aspects of TDS on salary under section 192 such as when tax is deducted, the applicable tax rates, and other points employers need to keep in mind regarding TDS on salary.

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    Unit 5_ Note03__TDS

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    The document discusses TDS or tax deducted at source under the Income Tax Act. It explains that TDS is a measure where those making certain payments deduct tax from the payment amount at specified rates. It then discusses key aspects of TDS on salary under section 192 such as when tax is deducted, the applicable tax rates, and other points employers need to keep in mind regarding TDS on salary.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    4 views3 pages

    Unit 5 - Note03 - TDS

    Uploaded by

    Sumit Bain
    The document discusses TDS or tax deducted at source under the Income Tax Act. It explains that TDS is a measure where those making certain payments deduct tax from the payment amount at specified rates. It then discusses key aspects of TDS on salary under section 192 such as when tax is deducted, the applicable tax rates, and other points employers need to keep in mind regarding TDS on salary.

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    Income Tax Page |1

    B.COM. 2nd YEAR/ IV SEMESTER DATE: 07/08/2021

    INCOME TAX
    UNIT-V NOTE- 03
    TDS (Tax Deducted at Source)
    MEANING
    It is a measure, in which person who are making payment of income are responsible to
    deduct tax from such income (at specified rates) and pay only net amount. Tax so
    deducted (called TDS) shall be deposited with the Government’s treasury within the
    stipulated time. The payer will issue a certificate in Form 16 or 16A1 to the payee and
    the payee will get credit for TDS and his tax liability shall be reduced to that extent. In
    nutshell, the provisions are merely a mode of collection of income tax and a check on
    tax evasion through proper control and information.

    Objects
    • Quicker realisation of tax.
    • Effective realisation of tax.
    There are several provisions in the Act for TDS2, being discussed infra:

    TDS ON SALARY [Sec. 192]


    Any person responsible for paying any income chargeable under the head “Salaries”
    (i.e. employer) is required to deduct tax at source.

    When tax shall be deducted


    Tax shall be deducted at the time of payment of such income.

    Rate of TDS
    Tax shall be deducted at the average rate of tax, computed on basis of prescribed rates
    in force for the financial year in which payment to employee is made.

    Other Points
    Following points shall be kept in mind by the person responsible to deduct tax at
    source u/s 192 -
    1. Maximum exempted limit: Tax shall not be deducted if taxable salary is less than
    basic exemption limit.
    2. Payment of tax by employer: The employer paying any income in the nature of
    non-monetary perquisite may pay, at his option, tax on such income without making
    any deduction therefrom at the time when such tax was otherwise deductible. For this
    purpose, tax shall be determined at the average of income-tax computed on the basis
    of the rates in force for the financial year, on the income chargeable under the head
    “Salaries”. It is to be noted that tax paid on non-monetary perquisites by the employer
    shall not be considered as income of the employee.
    3. Particulars of perquisites: The employer shall furnish a statement to the
    employee (whose salary exceeds Rs.1,50,000) giving correct and complete particulars

    B. Com. 2nd Year/ IV Semester, Dept. Of Commerce, JNRM, Port Blair-744104


    Income Tax Page |2

    of perquisites or profits in lieu of salary provided to employee and the value thereof in
    Form 12BA provided salary of such employee exceeds Rs. 2,00,000.
    4. Salary from more than one source: As per Sec. 192(2), where assessee is working
    simultaneously with more than one employer, he may furnish to any one employer at
    his choice, details (in Form No. 12B) of income taxable under the head “Salaries” due
    to or received by him from other employer(s) and such employer shall deduct tax on
    aggregate salary.
    5. Treatment of other income: As per Sec. 192(2B), where an assessee who receives
    any income chargeable under the head “Salaries” has, in addition, any income
    chargeable under any other head of income for the same financial year, he may (or
    may not) furnish to employer the particulars (in plain paper) of—
    • such other income (only income and not loss)
    • tax deducted on such other income as per provision of this chapter;
    • the loss, if any, under the head “Income from house property” (Losses under any
    other head are not to be considered)

    Tax deducted u/s 192 shall be higher of the following:


    • Tax deductible from income, that would be so deductible, if loss under the head
    ‘Income from House Property’, other income (only income) and the tax deducted
    thereon had been taken into account.
    • Tax deductible from income under the head “Salaries”, that would be so
    deductible (after adjusting loss under the head Income from house property), if
    the other income (or loss) and the tax deducted thereon had not been taken into
    account.

    6. Evidence of claim: The responsible person shall, for the purposes of estimating
    income of the assessee or computing tax deductible, obtain the evidence or proof or
    particulars of prescribed claims (including claim for set-off of loss) from the assessee
    in such form and manner as may be prescribed.

    7. TDS on ESOP: ESOPs have been a significant component of the compensation for
    the employees of start-ups, as it allows the founders and start-ups to employ highly
    talented employees at a relatively low salary amount with balance being made up via
    ESOPs. ESOPs are taxed as perquisites u/s 17(2). The taxation of ESOPs is split into
    two components:

    (i) Tax on perquisite as income from salary at the time of exercise.


    (ii) Tax on income from capital gain at the time of sale.

    The tax on perquisite is required to be paid at the time of exercising of option which
    may lead to cash flow problem as this benefit of ESOP is in kind. In order to ease the
    burden of payment of taxes by the employees of the eligible start-ups or TDS by the
    start-up employer, it is provided that for the purpose of deducting or paying tax, a
    person, being an eligible start-up [u/s 80-IAC], responsible for paying any income to
    the assessee being such perquisite, deduct or pay, as the case may be, tax on such
    income within 14 days:

    B. Com. 2nd Year/ IV Semester, Dept. Of Commerce, JNRM, Port Blair-744104


    Income Tax Page |3

     after the expiry of 48 months from the end of the relevant assessment year; or
     from the date of the sale of such specified security or sweat equity share by the
    assessee; or
     from the date of which the assessee ceases to be the employee of the person;
    ̶ whichever is the earlier.

    The tax shall be deducted or paid at the rates in force of the financial year in which the
    said security or sweat equity share is allotted or transferred.
    Similar provision is applicable, in case, employee is paying tax directly (in case tax is
    not deducted).

    B. Com. 2nd Year/ IV Semester, Dept. Of Commerce, JNRM, Port Blair-744104

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