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Income Tax Deduction at Source from Salaries under Section 192 of Income Tax 1961

Income Tax Deduction at Source from Salaries under Section 192 of Income Tax 1961 – Guidelines and instructions as per Income Tax Circular 20/2015 dated 02.12.2015

Method of Tax Calculation:

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 2015-16. The income-tax is required to be calculated on the basis of the rates  given above, subject to the  provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at  the time of each payment. No tax, however, will be required to be deducted at source  in  any  case unless the  estimated salary  income  including    the  value  of  perquisites,  for  the  financial  year  exceeds  Rs.
2,50,000/- or Rs.3,00,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical illustrations of computation of tax are given at Annexure-I).

Payment of Tax on Perquisites by Employer:

An option has been given to  the employer to pay the tax  on non-monetary perquisites given to an employee. The employer   may, at its option, make   payment of the tax on such perquisites  himself  without making any TDS from the salary of the  employee. However, the employer will have to pay the tax at the time when such tax  was  otherwise  deductible i.e. at the time of payment of income chargeable under the head “salaries” to the employee.

Computation of Average Income Tax:

For the purpose  of  making  the  payment  of  tax mentioned in para 3.2 above, tax  is to be determined at the  average  of   income  tax  computed on the  basis of rate in force  for  the financial  year, on  the  income  chargeable under   the  head  “salaries”, including the  value of perquisites for which tax  has been paid by the employer himself.


The income chargeable under the head “salaries” of an employee below sixty years of age for the year inclusive of all perquisites is Rs.4,50,000/-, out of which, Rs.50,000/- is on 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.  4,50,000/-
Tax on Total Salary (including Cess) Rs.    20,600/-
Average Rate of Tax [(20,600/4,50,000) X 100] 4.57%
Tax payable on Rs.50,000/= (4.57% of 50,000) Rs. 2285/-
Amount required to be deposited each month Rs.  190 ((Rs. 190.40) =2285/12)

The  tax  so  paid  by the employer shall be deemed to be TDS made from the salary of the employee.

Salary From More Than One Employer:

Section 192(2) deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction  of  tax at source by such employer (as the  tax payer may choose)  from the aggregate salary of  the employee,   who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head “Salaries” due or received from   the former/other employer and also tax deducted  at  source  therefrom,  in  writing  and  duly  verified  by  him  and  by  the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

Income Tax Relief When Salary Paid in Arrear or Advance:

Under section 192(2A) where the assessee, being   a Government servant or an employee in a   company, co-operative society, local authority, university, institution, association or body is entitled to the relief under   Section 89(1)   he may furnish to the person  responsible  for making the payment referred to  in Para (3.1), such particulars in Form No. 10E duly verified by him,  and thereupon the person responsible, as aforesaid, shall  compute the relief on the basis of such  particulars and take the same into  account  in making the deduction  under Para(3.1) above.

Here “university” means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under Section 3 of the University Grants Commission Act, 1956 to be a university for the purpose of that Act.

With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination  of  his  service,  in  accordance  with  any  scheme  or  schemes  of  voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received  or  receivable  on  such  voluntary  retirement  or  termination  of  his  service  or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.

Check also the following articles for more information on Income Tax 2015-16

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Download Income Tax Department Circular No.20/2015 (F.No. 275/192/2015-IT(B) dated 02.12.2015