A presentation about TDS on Salary (S192B of Income Tax Act, 1961)

1. Tax Deducted at Source on Salary
Gayathri R Iyyer, D.G.Vaishnav college

2. What is Tax Deducted at Source?
• Collection of revenue at the very source of
income
• “Pay as you earn and collect as it is being
earned” principle
• Rates being specified in the Income Tax Act,
1961, Income Tax rules and amendments
Gayathri R Iyyer, D.G.Vaishnav college

3. Salary
• Basis of Charge: Section 15
• Section 17 of ITA,1961 provides for an inclusive definition
of the term Salary
• Salary includes
 Wages
 Annuity or pension
 Gratuity
 Fees, commission, perks, profits in lieu of salary
 Advance salary
 Leave encashment
 Provident fund and pension fund contribution
• Salary is taxable based on its receipt or accrual whichever falls
earlier
Gayathri R Iyyer, D.G.Vaishnav college

4. TDS on Salary
• Section 192 of Income Tax Act, 1961 deals
with TDS on salary
• The person responsible for paying any
amount chargeable u/h Salaries shall deduct
tax at the source base on the estimated
income of the assessee.
• Deduction shall me made at the time of
payment
Gayathri R Iyyer, D.G.Vaishnav college

5. Filing of TDS returns
• The deducted amount of tax shall be remitted
to the government account
• Form 16 to be issued to the employee
• Employer to file TDS returns in FORM 26Q on
quarterly basis
Gayathri R Iyyer, D.G.Vaishnav college

6. Structure of a Pay slip
• Basic Wages : All emoluments paid to an employee
in cash in respect of his employment.
• Dearness Allowance: Paid to an employee to meet
inflation effects
• House Rent Allowance
• Other allowances
• Perquisites – rent free accommodation, Car,
Appointment of Servants and helpers, etc.
Gayathri R Iyyer, D.G.Vaishnav college

7. • Gross Salary: Aggregate of all amounts payable to
the employee
• Deductions
 Provident fund contribution
 ESI contribution
 Insurance
 Tax
 Interest on Loan repayable by the employee
 Entertainment allowance(Govt. employees)
 Professional Tax
Gayathri R Iyyer, D.G.Vaishnav college

8. Allowances-Taxability
S.No. Nature of Allowance Exempt Value of allowances
1 Transport Allowance Rs.800/- per month(Rs.1600 for differently
abled employees)
2 Education Allowance Rs.100/- per month per child for two children
3 House Rent Allowance Least of the following is exempt
1) 50% (in case of metro cities) and 40% (in
case of non metro cities) of Salary(Basic +
DA + Turnover based commission)
2) Actual HRA received
3) Actual rent paid
Gayathri R Iyyer, D.G.Vaishnav college

9. S.No. Nature of Allowance Exempt Value of allowances
4 Leave Travel
Allowance
The exemption shall be allowed subject to the following
constraints
1) Where journey is performed by air- Max up to
economy fair charged by a national carrier by the
shortest route can be exempted
2) Where the place of origin of journey and destination
are connected by rail and the journey is made by
other means of transport, exemption is restricted to
the fare of economy class of airways or first class of
railways by the shortest route
3) Two journeys in a block of four years
4) One journey in an year
5 Leave Encashment 1) Any payment received by the employees of central
and state government are exempt
2) In case of other employees, the least of the following
is exempt
• Cash equivalent of unutilized earned leave (can not
exceed 30days)
• 10months average salary
• Leave encashment actually received
• Rs.300000(retirements after 02.04.1998)
Gayathri R Iyyer, D.G.Vaishnav college

10. S.No. Nature of Allowance Exempt Value of allowances
6 Medical Reimbursement Up to Rs15000/-
7 Medical Allowance Fully Taxable
8 Gratuity 1) Gratuity received by employees of central
and state government, Defence employees
and employees in local authorities are fully
exempt
2) For employees covered under POGA,1972,
exemption shall be
• Fifteen days salary for every completed year
of service based on the rate of last drawn
salary restricted to a maximum of Rs.10lakhs
3) In case of other employees, least of the
following is exempt
• Half a month’s average salary (immediately
preceding 10months) for every completed
year of service
• 10lakhs
Gayathri R Iyyer, D.G.Vaishnav college

11. Motor Car
SN Usage Expenses
incurred
Taxable Value of Perks
Motor car is owned by the
employer Up to 1600CC Above 1600CC
1. Official Employer Fully exempt
2 Personal Employer Actual amount of expenditure including
remuneration to the driver plus depreciation
@10%p.a
3
Partly
personal
Employer Rs.1800 plus
Rs.900(driver’s
salary)
Rs.2400 plus
Rs.900(driver’s
salary)
4 Employee Rs.600 plus Rs.900 Rs. 900 plus Rs.900
Gayathri R Iyyer, D.G.Vaishnav college

12. SN Usage Expenses
incurred
Taxable Value of Perks
Motor car is owned by the
employee Up to 1600CC Above 1600CC
1. Official Employer Fully exempt
2 Partly
personal
Employer Actual expenditure
incurred by the
employer less the
amount used for
official
purpose@Rs.1800 plus
Rs.900(driver’s salary)
Actual expenditure
incurred by the
employer less the
amount used for
official
purpose@Rs.2400
plus Rs.900(driver’s
salary)
Gayathri R Iyyer, D.G.Vaishnav college

13. Chapter VIA-S80C
1) Contribution to LIC/ULIP/ELSS
• The insurance shall be taken in the name of the
employee, spouse and children
• Late fee shall not be allowed as a deduction
• Deduction shall be restricted to 20% of Sum assured
for policies taken before 01.04.12 and 10% for
policies taken after 01.04.12
Gayathri R Iyyer, D.G.Vaishnav college

14. 2) Investment in National Savings Certificate
• The investment should have been made in the
current year
• The investment shall be made in the name of
the employee, spouse or children
• Investment should have been made in VIII or IX
issue of NSC
• Accrued interest shall be treated as income
from other sources
Gayathri R Iyyer, D.G.Vaishnav college

15. 3) Contribution to Provident fund
• Employee’s contribution towards employees’
provident fund or a recognized provident fund
scheme shall be allowed as a deduction
• The account shall be in the name of the
employee
• Interest can not be claimed as a deduction
Gayathri R Iyyer, D.G.Vaishnav college

16. 4) Tuition Fee
• Tuition fees paid to two legitimate children are
considered
• Only components relating to education like tuition fee,
lab fee, library fee shall be allowed as a deduction
• Fees paid to a school/college/educational institution
that provides full time education in India shall be
considered
• Fees paid for the current year alone shall be allowed as
a deduction
Gayathri R Iyyer, D.G.Vaishnav college

17. 5) Investment in Mutual Funds/Fixed
deposit/Tax advantage Funds
• Bank deposits shall not be for less than five years
• Only deposits relating to current year shall be
allowed as a deduction
• Deposits must be made with a scheduled bank
• The deposit must hold an evidence for being
eligible for tax deduction
Gayathri R Iyyer, D.G.Vaishnav college

18. 6)Housing Loan Principal
• Repayment of Principal can be allowed as a deduction only if
Income from House Property chargeable to tax
• Payment towards cost of house will not include admission fee, cost
of share and initial deposit or Cost of addition/alteration/
renovation/repair incurred after the house is occupied/ let-out by
the Employee
• Housing Loan Repayment to other than approved Institutions shall
not be allowed
• Loan in Joint Names – Certificate should specify individual share of
the employee’s principal repayment.
• If the employee owns more than one house property, principal shall
be allowed in respect of one house property only
Gayathri R Iyyer, D.G.Vaishnav college

19. 80CCC & 80CCD-Pension Schemes
• Contribution made by the employee shall be
allowed as a deduction
• The fund shall be in the name of the employee
Note: The aggregate of deductions allowable u/s
80C 80CCC and 80CCD shall not exceed
Rs.100000(amended to Rs.150000 w.e.f AY
2015-2016)
Gayathri R Iyyer, D.G.Vaishnav college

20. Mediclaim 80D
1) 80D
• The mediclaim policy shall be taken in the
name of the employee spouse and children
• Mode of payment of premium should be other
than in cash
• Deduction shall be restricted to Rs.15000
• Mediclaim taken in the name of the
parents(senior citizens)-Deduction shall be
restricted to Rs.20000
Gayathri R Iyyer, D.G.Vaishnav college

21. 80DD and 80DDB
Disabled dependents(80DD)
• Severe disablement-Rs.100000
• Partial Disablement-Rs.50000
Medical treatment of self/dependents
• List of diseases are provided in the act
• Application must be made along with FORM 10I
• Should be certified by a specialist as specified in
the act
• For senior citizens deduction shall be upto a max
of Rs.50000 and for other it shall be Rs.40000
Gayathri R Iyyer, D.G.Vaishnav college

22. 80E-Interest on higher Education loan
• Only Interest amount can be allowed as
deduction
• Interest amount shall be carried forward to
eight assessment years
• Loan should be for the purpose of higher
education of self, spouse or a dependent
Gayathri R Iyyer, D.G.Vaishnav college

23. 80EE- Interest on loan for acquiring
first residential house property
• Loan should have been sanctioned in the FY 2013-
2014
• Loan amount shall not exceed Rs.25L
• Assessee must not own any Residential House
Property on the date of sanction of loan
• The value of the house property should not exceed
40L
• This deduction shall be allowed only during AY 2014-
15 and 2015-16
• Deduction limited to Rs.1,00,000/- per year
Gayathri R Iyyer, D.G.Vaishnav college

24. Donation-80G
• Not to be considered for TDS(192)
• Employee shall claim deduction at the time of
filing of returns
Gayathri R Iyyer, D.G.Vaishnav college

25. 80U-Disabled employees.
• Severe disability Rs.100000
• Partial Disability Rs.50000
Gayathri R Iyyer, D.G.Vaishnav college

26. Interest on Housing loan
• Deduction u/s 24
• Interest on Self Occupied property restricted
to Rs.1,50,000/-
• Premium paid on Insurance of Building is not
an allowable deduction in computing income
from house property.
• Pre construction interest shall be allowed as a
deduction in five equal installments.
Gayathri R Iyyer, D.G.Vaishnav college