CBDT explains Broad Scheme of TDS from Salaries

The Central Board of Direct Taxes (CBDT) has explained broad scheme of Tax deduction at Source (TDS) from of persons who is responsible for paying any income chargeable under the head “Salaries”

The income-tax is required to be calculated on the basis of the rates subjected to the provisions related to the requirement to furnish PAN or Aadhaar number, as the case may be, 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 a 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.

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.

Salary From More Than One Employer:

In 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 taxpayer may choose) from the aggregate salary of the employee, who is or has been in receipt of a 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 deduction at source (TDS) therefrom, in writing and duly verified by him and by the former/other employers. 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 employers).

Salary Paid in Foreign Currency:

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.

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 he may furnish to the person responsible for making the payment, 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.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.