RATES OF INCOME-TAX AS PER FINANCE ACT, 2015: TDS From Salary u/s 192

As per the Finance Act, 2015, income-tax is required to be deducted under Section 192 of the Act from income chargeable under the head “Salaries” for the financial year 2015-16 (i.e. Assessment Year 2016-17) at the following rates:

The amount of income tax deductible is required to be calculated at the average rate of income tax computed on the basis of rates in force. No tax is required to be deducted at source in any case unless estimated salary income including value of perquisites and/or profit in lieu of salary paid or allowed during the financial year exceeds the maximum amount not chargeable to tax for the individual relevant for the Financial Year.

Tax shall be deducted at the time of making payment of salary.

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 taxpayer 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 there from, 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).

Deposit of Tax Deducted:

Rule 30 prescribes time and mode of payment of tax deducted at source to the account of Central Government.

Prescribed time of payment/deposit of TDS made to the credit of Central Government account is as under:

(a) In case of an Office of Government:

(b) In any case other than an Officer of Government

However, if a DDO applies before the jurisdictional Additional/Joint Commissioner of Income Tax to permit quarterly payments of TDS u/s 192, the Rule 30(3) allow for payments on quarterly basis and time given in Table below:

If a person fails to deduct the whole or any part of the tax at source, or, after deducting, fails to pay the whole or any part of the tax to the credit of the Central Government within the prescribed time as under:

He shall be liable to action in accordance with the provisions of S. 201. Section 201(1A) lays down that such person shall be liable to pay simple interest.

(i)  at 1% for every month or part of the month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted and

(ii)  at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Such interest, if chargeable, is mandatory in nature and has to be paid before furnishing of quarterly statement of TDS for respective quarter.

S. 271C lays down that if any person fails to deduct whole or any part of tax at source or fails to pay the whole or part of tax deducted, he shall be liable to pay, by way of penalty, a sum equal to the amount of tax not deducted or paid by him.

Further, S. 276B lays down that if a person fails to pay to the credit of the Central Government within the prescribed time, as above, the tax deducted at source by him, he shall be punishable with rigorous imprisonment for a term which shall be between 3 months and 7 years, along fine.

Related Cases:

S. 192, 201, 207, 209, 234B & 234C of IT Act, 1961—Interest—No interest can be charged from the employee u/s 234B or 234C of the Act if the employer has already discharged tax liability along with interest u/s 201(1A) owing to default in TDS—CIT vs. Emilio Ruiz Bermejo (2010) 228 CTR 145 (Bom)

S. 4 & 192 of IT Act, 1961—TDS—The assessee is a Japanese organization set up for transmission of news and broadcasting and pays salary to its employee and housing allowance. The controversy in the present case is that citizen tax is a statutory levy in Japan on Japanese citizens constituting an overriding charge. Since the provisions of Citizen Individual Inhabitant Tax Act which is a Japanese law have not been examined and, therefore, the matter is required to be remitted to be considered afresh by Tribunal—CIT vs. NHK Japan Broadcasting Corporation (2009) 225 CTR 258 (SC)

S. 192, 194J & 201 of IT Act, 1961—TDS—The assessee is engaged in providing and facilitating health care services and engaged the services of resident doctors and full time/part time senior consultant/consultant attending the in-patients. These consultants are paid remuneration for the services provided to the assessee after deducting tax at source as per the provisions of the Act and such remuneration is deducted in the P&L a/c of the assessee as consultation fee paid to the doctors. In respect of each payment, the assessee has a fee for services arrangement with the doctors/consultants whereby chambers in the hospital premises are provided to the doctors/consultants on rent along with specified secretarial facilities. Since there is no contractual relationship with the service provider and the service recipient between the consultants and the assessee when attending to our patients, therefore,, the hospital cannot be treated as assessee in default  for not deducting tax from such payments—ACIT vs. Indraprastha Medical Corpn. Ltd. [2010] 128 TTJ 500 (DELHI)

S. 40(a)(i), 40(a)(iii), 192 & 195 of the IT Act, 1961—Business expenditure—In respect of the crew members appointed by assessee on deputation to operate drilling ship in shore Indian water, who did not stay in India exceeding 90 days, the payment made to them chargeable to tax under head “salary” would be exempted, and the assessee is not liable to deduct tax at source in respect of the said payment chargeable under the head “salary” u/s 192; the payment by way of reimbursement of salary or expenses of crew members employed by the assessee are not to be treated as fee for technical services” but are the remittances by way of “salaries” chargeable to tax under the head “salaries”, in respect of which tax was deductible at source u/s 192 and not u/s 195, and since whatever tax found to be payable in India on “salaries” paid to crew members has been deducted u/s 192, there is no reason to impute default on the part of the assessee for failure to deduct tax at source u/s 195 as the case in covered by S. 40(a)(iii) and not S. 40(a)(i)—Dolphin Drilling Ltd. vs. ACIT (2009) 121 TTJ 433 (ITAT-Delhi)

S. 10(5), 10(14) & 192 of the IT Act, 1961—TDS—Whether the assessee was under statutory obligation under IT Act, 1961 and/or the rules to collect evidence to show that its employee had actually utilized the amount paid towards leave travel concession/conveyance allowance? Held that there is no circular of CBDT regarding the employer u/s 192 to collect and examine the supporting evidence to the declaration to be submitted by the employee—CIT vs. ITI Ltd. (SC)

S. 10(5), 10(14) & 192 of the IT Act, 1961—TDS—Whether the assessee was under statutory obligation under IT Act, 1961 and/or the rules to collect evidence to show that its employee had actually utilized the amount paid towards leave travel concession/conveyance allowance? Held that there is no circular of CBDT regarding the employer u/s 192 to collect and examine the supporting evidence to the declaration to be submitted by the employee.

S. 192, r/w s. 201, of the IT Act, 1961—Deduction of tax at source—Sub-s. (3) of S. 192 makes it abundantly clear that if there is a failure to deduct tax in a financial year, the same can be deducted by way of adjustment during the financial year. The obligation to deduct tax at the time of payment, which is the mandate of sub-s. (1) of S. 192, extends upto the end of the financial year by virtue of the provisions contained in sub-s. (3) of S. 192. The right to adjust, granted by sub-s. (3) does not extend beyond the financial year. S. 201(1A) applies only when during the financial year whole or any part of the tax deductible has not been deducted—CIT vs. Enron Expat Services Inc.

S. 192 & 271C of IT Act, 1961—TDS—The assessee has paid salary to the employees who were deputed from a foreign company and deducted the tax u/s 192 of the Act. The foreign company also paying certain amounts to it employee on which no tax is paid. In absence of any material on record that the amount is paid to its employee by foreign company through the assessee -company, the assessee-company is not liable to deduct tax u/s 192 at source on such payment and, therefore, in absence of violation of S. 192(1), no penalty can be made—CIT vs. Indo Nissin Foods Ltd. (2010) 231 CTR 440 (Kar)

S. 192, 201(1), (1A) of IT Act, 1961—Deduction of tax at source—The assessee company is not liable to deduct TDS u/s 192 of the Act over the issue of its shares under a stock option plan to its employees at a concessional rate as it cannot be treated as perquisite (salary), and, therefore, the assessee cannot be treated as a defaulter u/s 201(1) of the Act and consequently no interest u/s 201(1A) of the Act can be levied—CIT vs. Wipro Ltd. (2009) 319 ITR 156 (Delhi)

S. 9(1)(vii), 192 & 195 of the IT Act, 1961—TDS—The assessee is not liable to deduct tax from the amount representing of the salary paid by US company to its managing director who was appointed by US company under second agreement and seconded to its Indian subsidiary having already suffered tax at source, while remitting the same to US company u/s 195 of the IT Act—ITD software solutions (India) (P) (Ltd) vs. ITO (2009) 122 TTJ 410 (ITAT-Bang)

S. 17, 192, 201 of IT Act, 1961—Deduction of tax at source—The assessee company is not liable to deduct TDS u/s 192 of the Act over the issue of its share under stock option plan to its employees at a concessional rate as it cannot be treated as a perquisite (salary) and, therefore, the assessee cannot be treated as defaulter u/s 201(1A) of the Act and thus, no interest u/s 201(1A) of the Act can be levied—CIT vs. Wipro Ltd. (2009) 319 ITR 289 (Karn)

S. 192 & 201 (1A) of IT Act, 1961—Salary—While considering the issue of use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office and back, necessarily the same can be considered only vis-a-vis S. 2(24) of the Act and same does not constitute amenity or benefit for the purpose of S. 17 and, therefore, does not call TDS—Tran works Information services Ltd. vs. ITO (2010) 1 ITR (Trib) 58 (Mum.)

S. 9(1)(ii), 40(a)(iii) & 192 of IT Act, 1961—Business Expenditure—For the applicability of provisions of S. 40(a)(iii) the payment should be chargeable to tax under the head Salaries. Admittedly, the payment of salaries has been made by the assessee for the services rendered outside India to non-resident. Therefore, the salary payments are not chargeable to tax in India within the meaning of S. 192 and, thus, no tax at source is deductible. Since, the salary paid to non-residents for services rendered in Netherlands is not chargeable to tax in India, provisions of S. 40(a)(iii) will not be applicable and therefore, no disallowance u/s 40(a)(iii) can be made in respect of salary paid to non residents for the services rendered abroad—DCIT vs. Mother Dairy Fruits & Veg. (P) Ltd. (2011) 141 TTJ 97 (ITAT-Delhi)

S. 192—TDS—IT ACT, 1961—KAYAMKULAM NTPC EMPLOYEES UNION vs. NTPC LTD. & ANR. [2012] 249 CTR 439 (KER)

S. 192 of IT Act, 1961—TDS—If it is an accepted position between the parties that the respondent-assessee had distributed such meal coupons pursuant to an agreement with ‘Accor’ and such coupons were to be used by the employees only at the specified eating joints, including canteen at the Hajira premises of the respondent-assessee, such coupons were not transferable, and the value of each coupon did not exceed the specified monetary limit. In this context both Commissioner (Appeals) and the Tribunal have concurrently found that the assessee had taken all necessary steps to comply with the requirement of the provisions and no default could be ascribed to the assessee merely because some employees misused the facility provided, assessee company could not be treated to be in default for non-compliance with requirement of deducting tax at source u/s 192.

S. 201, r/w S. 192 and 80GGA of the IT Act, 1961 and Circular No. 6/2004—TDS—As per Circular No. 6/2004, deduction u/s 80G and 80GGA are clearly not admissible for the purpose of determination of tax deductible at source u/s 192 of the Act—Drawing & Disbursing Officer vs. ACIT

Income-tax Act, 1961, S. 192, 199, 203 and 205—TDS—Non-issue of TDS certificate—The question raised in this petition is, where a company deducts tax at source (“TDS” for short) from the salary payable to an employee, but fails to deposit the said amount into the Government treasury, whether, the Revenue can recover the TDS amount with interest from the concerned employee in spite of the express bar contained in S. 205 of the IT Act, 1961. While making the Rule absolute, the High Court of Bombay held that:—”In the present case the petitioner assessee has established that from his salary income, tax has been deducted at source by the employer respondent No. 6 and, therefore, the Revenue has to recover the said TDS amount with interest and penalty from the respondent No. 6 alone and the Revenue cannot seek to recover the said amount from the petitioner, assessee in view of the specific bar contained u/s 205 of the Act. The fact that the petitioner is not entitled to the credit of the TDS for the non-issuance of the TDS certificate by the respondent No. 6, cannot be a ground to recover the amount of TDS from the petitioner. In other words, even if the credit of the TDS amount is not available to the petitioner assessee for want of TDS certificate, the fact that the tax has been deducted at source from salary income of the petitioner would be sufficient to hold that as per S. 205 of the Act, the Revenue cannot recover the TDS amount with interest from the petitioner once again. Though the credit of the TDS is not available to the petitioner, since the said liability is not recoverable from the petitioner. The Revenue is directed to earmark the said TDS liability as “not recoverable” from the petitioner.” Yashpal Sahni vs. ACIT & Ors. (Bom)

S. 10(10)(iii) & 192 of IT Act,1961—TDS—In all the cases of payment of gratuity, an exclusion of gratuity amount is given from the total income, i.e., excluding the gratuity from the payment of tax to the extent of limit prescribed by notification issued by Central Government. Deduction of Income-tax by the corporation is per se contrary to the provisions of S. 10 sub-s. (10) cl. (iii) of the Act—North West Karnataka Road Transport Corporation vs. Dy. Labour Commissioner (2009) 224 CTR 106 (Cal)

Income Tax Act, 1961, S. 17, 192 and 201—Deductions of tax at source—Whether tax had to be deducted u/s 192 of the 1961 Act, by the respondent-assessee, on the amount earned by its employees from exercise of stock option granted to them by the company through the Trust, is the question which arises for determination in these civil appeals. While dismissing the civil appeals, the Supreme Court held that:—”Estimation of TDS u/s 192 in the absence of clear provisions on valuation of ‘perquisite’ in this case would not justify the Department in treating the respondent as assessee in default. Therefore, in our view, the AO and the CIT(A) had erred in treating the respondent as defaulter for not deducting TDS u/s 192. Consequently, S. 201(1) and 201(1A) were also not applicable to the facts of this case and that the Department had erred in invoking the said two sections against the assessee”. CIT, Bangalore vs. Infosys Technologies Ltd. (SC)

Income Tax Act, 1961, S. 15 r/w S. 192—Tax deducted at source—The following questions of law arose:—”(1) Whether the Tribunal was right in law in treating the payment to persons as professional charges instead of salary in the absence of any bills/ expense vouchers (2) whether the Tribunal was right in law in holding that these payments were not liable to deduction of tax u/s 192(1) of the Income-tax Act, 1961.” While dismissing the appeal, the High Court of Punjab and Haryana held that:—”We are of the considered view that the question with regard to employer-employee relationship is necessarily a question of fact. There are categorical findings that the doctors were visiting the assessee and were on call. In other words, they were not in the service of the hospital in their capacity as employee and such doctors were free to attend other hospitals as and when required. The revenue was not able to produce any evidence to show that there was employer-employee relationship. These are necessarily questions of facts and accordingly, the provisions of the Act concerning TDS and interest u/s 201(1A) of the Act would not be attracted.” CIT vs. Deep Nursing Home & Children Hospital [2007] 7 ITCD 114 (P&H)

S. 17(2)(ii), 192, 201(1), 201(1A) of IT Act, 1961, r. 3 of IT Rules 1962—TDS—The assessee cannot be treated as assessee-in-default retrospectively and interest u/s 201(1A) cannot be charged on a liability which came into existence by a retrospective amendment—Canara Bank vs. ITO [2009] 125 TTJ 819 (ITAT-Nag)

S.192, 194J, 201(1A), of IT Act, 1961—Deduction of tax at source—The assessee-company is running a hospital and it engaged certain professional doctors for service rendered with them. The professional doctors shares fees received from the patients, their remuneration was not fixed and they were free to render service to the patients as they considered appropriate in terms of time or duration. The assessee company deducted tax u/s 194J from the payments made to them treating the payments as professional fees. The doctors were never under the employment of the Hospital and, therefore, any consultation fees received could not take the character of salary and therefore, deductible at source. Mere holding of an office does not create a relationship of employer-employee. The relationship between doctors and the hospital is essentially that of a professional consultant and a client and there was no employer-employee relationship.—DCIT vs. Ivy Health Life Sciences P. Ltd. [2012] 20 ITR (Trib) 179 (ITAT-Chandigarh)

S. 192 of IT Act, 1961—Deduction of tax at source—Provident fund, pension, insurance and similarly any cash, bank balance, shares, fixed deposits, etc., are all a “Pecuniary advantage” receivable by the heirs on account of one’s death but all these have no correlation with the amount receivable under a statute occasioned only on account of accidental death. Such an amount will not come within the periphery of Motor Vehicles Act to be termed as “Pecuniary advantage”, liable for deduction.—Vimal Kanwar vs. Kishore Dan. [2013] 354 ITR 95 (SC)

S. 192 of the Income-tax Act, 1961—Deduction of tax at source—CIT vs. Tej Quebecor Printing Ltd.

S. 192 of the Income-tax Act, 1961—Deduction of tax at source—Narain Singh vs. Bharat Sanchar Nigam Ltd.

S. 192 of the Income-tax Act, 1961—Deduction of tax at source—CIT vs. Coastal Power Co.

Reference:

As Per Section 192-

1.  (1) Any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the [rates in force] for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year.

(1A) Without prejudice to the provisions contained in sub-section (1), the person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in clause (2) of S. 17, may pay, at his option, tax on the whole or part of such income without making any deduction therefrom at the time when such tax was otherwise deductible under the provisions of sub-section (1).

(1B) For the purpose of paying tax under sub-section (1A), 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” including the income referred to in sub-section (1A), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head “Salaries” as per the provisions of sub-section (1), and shall be subject to the provisions of this Chapter.

(2) Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case, choose), such details of the income under the head “Salaries” due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1).

(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 sub-section (1) of S. 89, he may furnish to the person responsible for making the payment referred to in sub-section (1), such particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take it into account in making the deduction under sub-section (1).

—For the purposes of this sub-section, “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 (3 of 1956), to be a University for the purposes of that Act.

(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 (not being a loss under any such head other than the loss under the head “Income from house property”) for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1) the particulars of—

(a)  such other income and of any tax deducted thereon under any other provision of this Chapter;

(b)  the loss, if any, under the head “Income from house property”,

in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall take—

(i)  such other income and tax, if any, deducted thereon; and

(ii)  the loss, if any, under the head “Income from house property”,

also into account for the purposes of making the deduction under sub- section (1) :

Provided that this sub-section shall not in any case have the effect of reducing the tax deductible except where the loss under the head “Income from house property” has been taken into account, from income under the head “Salaries” below the amount that would be so deductible if the other income and the tax deducted thereon had not been taken into account.

(2C) A person responsible for paying any income chargeable under the head “Salaries” shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed^.

(3) The person responsible for making the payment referred to in sub-section (1) [or sub-section (1A)] [or sub-section (2) or sub-section (2A) or sub-section (2B)] may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.

(4) The trustees of a recognised provident fund, or any person authorised by the regulations of the fund to make payment of accumulated balances due to employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth Schedule applies, at the time an accumulated balance due to an employee is paid, make therefrom the deduction provided in rule 10 of Part A of the Fourth Schedule.

(5) Where any contribution made by an employer, including interest on such contributions, if any, in an approved superannuation fund is paid to the employee,[tax] on the amount so paid shall be deducted by the trustees of the fund to the extent provided in rule 6 of Part B of the Fourth Schedule.

(6) 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 prescribed rate of exchange.