Background:
The Central Board of Direct Taxes (CBDT) on December 07, 2022 has notified a circular wherein all the provisions of the Income-Tax Act, 1961 (hereinafter referred as Act) and the Income-Tax Rules, 1962 (hereinafter referred as Rules) in respect of Income-Tax deduction from salaries, the corresponding rates of deduction of Income-tax from the payment of income chargeable under the head "Salaries", furnishing of related statutory returns etc. has been collated into an educative editorial.
Some Noteworthy Points of the Income Tax Act, 1961:
- The employer is required to deduct Income-Tax on the amount payable under the head “Salaries” or “Perquisites”, on the basis of the rates in force for the Financial Year in which the payment is made.
- The employee/ assessee is required to furnish the following information to his/her current employer:
- the details of his/her income under the head "Salaries" due or received from other employer(s), the tax deducted at source therefrom and such other particulars as may be required in Form No. 12B, if he/she was employed under more than one employer, during any financial year
- a statement comprising the details of any income chargeable under any head of income other than "Salaries", the tax deducted at source therefrom, and loss, if any under the head “Income from House Property”
- the evidence or proof or particulars of claims for House rent Allowance (where aggregate annual rent exceeds one lakh rupees), Leave Travel Concession or Assistance, Deduction of interest under the head Income from house property and deduction under Chapter VI-A pertaining to section 80C (Life Insurance Premia, Provident Fund Contribution, section 80D (Medical insurance), 80G (Donations) etc. in Form 12BB
- The employer shall furnish a statement in forms as stated below comprising the particulars of perquisites or profits in lieu of salary provided to its employees and the value thereof latest by 15th June:
- in Form 16, if the salary paid or payable is not more than Rs. 1,50,000/-
- in Form 12BA if the salary paid or payable is more than Rs. 1,50,000/- (which shall accompany the return of the employee).
- 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.
Allowable Deductions from Salaries under the Provisions of the Act:
- Standard deduction under Section 16(ia): From Financial year 2019-2020, a deduction of Rs. 50,000/- (Rupees Fifty Thousand Only) or the amount of salary whichever is less, shall be allowed as standard deduction.
- Entertainment Allowance under Section 16(ii): In case of Government employees, deduction of entertainment allowance shall be lower of the following:
- a sum equal to one-fifth of his salary exclusive of any allowance, benefit or other perquisite or
- five thousand rupees.
- Tax on Employment under Section 16(iii): Deduction on account of Professional Tax while computing the income under the head "Salaries".
- Deductions under Chapter VI-A (i.e., Section 80C to 80U):
| S/No. | Section of Chapter VI-A | Deduction in Respect of | Eligible Deduction | |||||
|---|---|---|---|---|---|---|---|---|
| 1. | Section 80C | Life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. | Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand Only) | |||||
| 2. | Section 80CCC | Amount paid or deposited towards any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the Fund | Rs. 1,50,000/- (Rupees One Lakh Fifty Thousand Only) | |||||
| 3. | Section 80CCD | Amount paid or deposited under a notified pension scheme | Rs. 50,000/- (Rupees Fifty Thousand Only) | |||||
| 4. | Section 80D | Amount paid or deposited for health insurance premia, etc. for self & family Note: * Includes contribution to the Central Government health Scheme/notified scheme for self & family and the amount paid for preventive health check-up up to Rs. 5,000/-. ** Allowable only if no amount is paid for medical insurance. |
Case-1:
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| 5. | Section 80DD | Maintenance including medical treatment of a dependent who is a person with disability | Rs 75,000/- (Rupees Seventy-Five Thousand Only) or Rs. 1,25,000/- (Rupees One Lac Twenty-Five Thousand Only) (subject to the specified conditions, where such dependent is a person with severe disability) | |||||
| 6. | Section 80DDB | Any amount actually paid for the medical treatment of such disease or ailment as may be specified for himself or a dependent | Lower of the two:
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| 7. | Section 80E | Payment of interest on loan taken from any financial institution or any approved charitable institution for higher education for the purpose of pursuing higher education for himself or his spouse or his children or the student for whom he/she is the legal guardian | Amount of interest so paid | |||||
| 8. | Section 80EEA | Payment of interest on loan taken from any financial institution for the acquisition of a residential house property subject to meeting certain specified conditions | Amount of interest so paid | |||||
| 9. | Section 80EEB | Payment of interest on loan taken from any financial institution for the purchase of an electric vehicle where the loan has been sanctioned during the period from 01.04.2019 to 31.03.2023 | Amount of interest so paid | |||||
| 10. | Section 80G | Amount of donation made to various eligible funds, charitable organizations etc. | Amount of donation | |||||
| 11 | Section 80GG | House rent paid for the assesse’s own residence | Amount of rent paid | |||||
| 12. | Section 80GGA | Amount of donations paid for scientific research or rural development to certain specified associations | Amount of donation | |||||
| 13. | Section 80TTA | Any income by way of interest on deposits (not being time deposits) in a savings account which is included in the total taxable income | Whole of such interest amount in case such income does not exceed Rs. 10,000/- (Rupees Ten Thousand Only), and in any other case, Rs. 10,000/- (Rupees Ten Thousand Only) | |||||
| 14. | Section 80TTB | Any income by way of interest on deposits with banking company, co-operative society, Post office etc. to senior citizen | Whole of such interest amount in case such income does not exceed Rs. 50,000/- (Rupees Fifty Thousand Only), and in any other case, Rs. 50,000/- (Rupees Fifty Thousand Only) | |||||
| 15. | Section 80U | Deduction to person with disability basis certification from the medical authority | Rs. 75, 000/- (Rupees Seventy-Five Thousand Only) or Rs 1,25,000/- (Rupees One Lakh Twenty-Five Thousand Only) (where such individual is a person with severe disability) | |||||
- The detailed provisions in respect of deductions under Chapter VI-A of the Act has been given under Annexure – A (Deductions under Chapter VI-A).
Rates of Income-Tax as per Finance Act, 2022 for Financial Year 2022-23:
| Rates of Tax under the Old Tax Regime | |||||
|---|---|---|---|---|---|
| (A) For Every Resident Individual Other than those referred in (B) and (C) |
(B) For Every Resident Individual who is 60 Years or More but less than 80 Years at any time during the Financial Year |
(C) For Every Resident Individual who is 80 Years or More at any time during the Financial Year |
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| Total Income | Rate of Tax | Total Income | Rate of Tax | Total Income | Rate of Tax |
| Up to Rs. 2,50,000/- | NIL | Up to Rs. 3,00,000/- | NIL | Up to Rs. 5,00,000/- | NIL |
| From Rs. 2,50,001/- to Rs. 5,00,000/- | 5% of the amount by which total income exceeds Rs. 2,50,000/- | From Rs. 3,00,001/- to Rs. 5,00,000/- | 5% of the amount by which total income exceeds Rs. 3,00,000/- | - | - |
| From Rs. 5,00,001/- to Rs. 10,00,000/- | Rs. 12,500/- plus 20% of the amount by which total income exceeds Rs. 5,00,000/- | From Rs. 5,00,001/- to Rs. 10,00,000/- | Rs. 10,000/- plus 20% of the amount by which total income exceeds Rs. 5,00,000/- | From Rs. 5,00,001/- to Rs. 10,00,000/- | 20% of the amount by which total income exceeds Rs. 5,00,000/- |
| Exceeds Rs. 10,00,000/- | Rs. 1,12,500/- plus 30% of the amount by which total income exceeds Rs. 10,00,000/- | Exceeds Rs. 10,00,000/- | Rs. 1,10,000/- plus 30% of the amount by which total income exceeds Rs. 10,00,000/- | Exceeds Rs. 10,00,000/- | Rs. 1,00,000/- plus 30% of the amount by which total income exceeds Rs. 10,00,000/- |
| Rates of Tax under the New Tax Regime | ||
|---|---|---|
| Under the New Tax Regime, any person being an individual or HUF shall have the option to get its Income-Tax computed at the concessional rates. | ||
| S/No. | Total Income | Rate of Tax |
| 1 | Up to Rs. 2,50,000 | NIL |
| 2 | From Rs. 2,50,001 to Rs. 5,00,000 | 5 per cent |
| 3 | From Rs. 5,00,001 to Rs. 7,50,000 | 10 per cent |
| 4 | From Rs. 7,50,001 to Rs. 10,00,000 | 15 per cent |
| 5 | From Rs. 10,00,001 to Rs. 12,50,000 | 20 per cent |
| 6 | From Rs. 12,50,001 to Rs. 15,00,000 | 25 per cent |
| 7 | Above Rs. 15,00,000 | 30 per cent |
- Any employee intending to opt for computation under the New Tax regime at concessional rates of tax is required to intimate the employer to this effect for each previous year.
| Surcharge and/ or Health and Education Cess | |||
|---|---|---|---|
| (A) Surcharge on Income-Tax (Additional Charge or tax levied on the amount of Income-Tax so computed) |
(B) Health and Education Cess (Additional Surcharge levied on the amount of Income-Tax) |
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| Total Income | Rate of Surcharge | Levied On | Rate of Tax |
| From Rs. 50,00,000/- (Rupees Fifty Lakhs Only) to Rs. 1,00,00,000/- (Rupees One Crore Only) | 10% of Income-Tax | Amount calculated by adding the amount of Income-Tax and the applicable surcharge | 4% of income tax including surcharge wherever applicable |
| From Rs. 1,00,00,001/- (Rupees One Crore and One Only) to Rs. 2,00,00,000/- (Rupees Two Crores Only) | 15% of Income-Tax | - | - |
| From Rs. 2,00,00,001/- (Rupees Two Crore and One Only) to Rs. 5,00,00,000/- (Rupees Five Crores Only) | 25% of Income-Tax | - | - |
| Exceeds Rs. 5,00,00,000/- (Rupees Five Crores Only) | 35% of Income-Tax | - | - |
- Rebate under Section 87A: Section 87A of the Act provides benefit on tax payment to the resident individual taxpayers, who are in lower income bracket, i.e., the total taxable income does not exceed Rs 5,00,000/- (Rupees Five Lacs Only). The amount of rebate shall be lower of the following:
- Rs. 12,500/- (Rupees Twelve Thousand Five Hundred Only) or
- Amount of tax payable.
Example to understand the calculation of Total Taxable Income for rebate u/s 87A:
| Particulars | Case 1 | Case 2 |
|---|---|---|
| Total Income | Rs. 5,75,000/- | Rs. 7,75,000/- |
| Less: Deductions u/s 80C | Rs. 1,50,000/- | Rs. 1,50,000/- |
| Less: Deductions u/s 80D | Rs. 25,000/- | Rs. 25,000/- |
| Total Taxable Income | Rs. 4,00,000/- | Rs. 6,00,000/- |
| Less: Basic Exemption Limit | Rs. 2,50,000/- | Rs. 2,50,000/- |
| Taxable Income after Basic exemption limit | Rs. 1,50,000/- | Rs. 3,50,000/- |
| Tax Payable | Rs. 7,500/- | Rs. 32,500/- |
| Rebate u/s 87A | Rs. 7,500/- | NIL* |
* Since the total taxable income exceeds Rs. 5, 00,000/-, the assessee shall not be eligible for rebate u/s 87A.
Tax Payments, Filing, and Disclosure Obligations:
| Applicable for | ITR Form | Return to be Filed by Date |
|---|---|---|
| Resident Individuals (other than not ordinarily resident) having total income up to Rs. 50 lakh, from Salaries, one house property, other sources (Interest etc.), and agricultural income up to Rs. 5,000/- | Form SAHAJ ITR-1 | 31st July |
| Individuals and HUFs not having income from profits and gains of business or profession | Form ITR 2 | 31st July |
| Individuals and HUFs having income from profits and gains of business or profession | Form ITR 3 | In case accounts are not required to be audited- 31st July In case accounts are required to be audited |
| Individuals, HUFs and Firms (other than LLP) being a resident and having total income up to Rs.50 lakh from business and profession which is computed under sections 44AD, 44ADA or 44AE and agricultural income up to Rs. 5,000/- | Form SUGAM ITR 4 | In case accounts are not required to be audited- 31st July In case accounts are required to be audited |
| Persons other than individual, HUF, company and persons filing Form ITR-7 | Form ITR 5 | In case accounts are not required to be audited- 31st July In case accounts are required to be audited |
| Companies other than companies claiming exemption for Income from property held for charitable or religious purposes | Form ITR 6 | In case accounts are not required to be audited- 31st July In case accounts are required to be audited |
| Persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only | Form ITR 7 | In case accounts are not required to be audited- 31st July In case accounts are required to be audited |
| Due Dates for Payment of Advance Tax | |
|---|---|
| Advance tax shall be payable during a financial year in every case where the amount of such tax Rs. 10,000/- or more. | |
| Due Date of Instalment | Amount Payable |
| On or before the 15th June | 15% of such advance tax |
| On or before the 15th September | 45% of such advance tax, as reduced by the amount, if any, paid in the earlier instalment |
| On or before the 15th December | 75% of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment(s) |
| On or before the 15th March | The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment(s) |
| Due-Dates for Monthly Payments of Tax Deducted at Source | |||
|---|---|---|---|
| In case of deduction by an Office of Government | In case of deduction by deductor other than an Office of Government | ||
| Description | Time up to which the Tax Deducted is to be Deposited | Description | Time up to which the Tax Deducted is to be Deposited |
| Tax deposited without Challan (Book Entry) | Same Day | Tax deducted in March | 30th April next financial year |
| Tax deposited with Challan | 7th day of next month | Tax deducted in any other month | 7th day of next month |
| Tax on perquisites opted to be deposited by the employer | 7th day of next month | Tax on perquisites opted to be deposited by the employer | 7th day of next month |
| Due-Dates for Quarterly Payments of Tax Deducted at Source | ||
|---|---|---|
| S/No. | Quarter of the Financial Year ended On | Due Date for Quarterly Payments |
| 1. | 30th June | 7th July |
| 2. | 30th September | 7th October |
| 3. | 31st December | 7th January |
| 4. | 31st March | 30th April of next financial year |
| Due-Dates for Filing TDS Return | ||
|---|---|---|
| The person deducting the tax including the employer in case of salary income, is required to file duly verified Quarterly Statements of TDS in Form 24Q for the periods of each financial year as detailed below, to the TIN Facilitation Centres. | ||
| S/No. | Date of Ending of Quarter of Financial Year | Due Date |
| 1. | 30th June | 31st July of the financial year |
| 2. | 30th September | 31st October of the financial year |
| 3. | 31st December | 31st January of the financial year |
| 4. | 31st March | 31st May of the financial year immediately following the financial year in which the deduction is made |
Relief available to Employees when salary, etc., is paid in arrears or in advance:
In case an assessee being a government servant or an employee in a company, co-operative society, local authority, university, institution, association or body receives any amount as stated below:
- salary, being paid in arrears or in advance or
- salary received in any financial year for more than twelve months or
- payment which is profit in lieu of salary, or
- family pension, being paid in arrears
due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, then he/she may furnish an application in Form 10E for claiming relief on such arrear or advance income prior to the filing of his/her income tax return.
Certificate for Deduction of Tax at Lower Rate or NIL Rate
- Any person on whose income, tax is required to be deducted can make an application for grant of a certificate for the deduction of income-tax at any lower rates or no deduction of income-tax, as the case may be, in Form No. 13 electronically.
- Any person claiming receipt of certain incomes under sections 192A, 193, 194, 194A, 194D, 194-I, 194K etc. shall furnish a declaration in Form No. 15G or Form No. 15H as the case may be.
Furnishing Evidence of Claim for Deduction of Tax u/s 192
- The Assessee shall furnish to his/ her employer, the evidence or the particulars of the claims as stated below, in Form No.12BB for the purpose of estimating his income or computing the tax deduction at source:
| S/No. | Nature of Claims | Evidence or Particulars to be Furnished |
|---|---|---|
| 1. | House Rent Allowance | Name, address and permanent account number of the landlord(s) where the aggregate rent paid during the previous year exceeds Rs. 1, 00,000/- (Rupees One Lac Only) |
| 2. | Leave Travel concession or assistance | Evidence of expenditure |
| 3. | Deduction of interest under the head Income from house property | Name, address and permanent account number of the lender |
| 4. | Deduction under Chapter VI-A | Evidence of investment or expenditure |
- The detailed provisions in respect of computation of income chargeable under the head “Salaries” and valuation of Perquisites in terms of the provisions of the Act and Rules is given under Annexure – B (Computation of Income Chargeable to Head -Salaries and Perquisites).
Disclaimer
The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.