Income tax Deduction from Salaries during FY 2022-23

Income tax Deduction from Salaries during FY 2022-23 Under Section 192 Of Income Tax Act, 1961

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF DIRECT TAXES

DEDUCTION OF TAX AT SOURCE- INCOME-TAX
DEDUCTION FROM SALARIES
UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961

DURING THE FINANCIAL YEAR 2022-23

CIRCULAR NO. 24/2022

NEW DELHI, the 07th December, 2022

Table of Contents

1. Definition of “salary”, “perquisite” and “profit in lieu of salary” (section 17)

1.1 What is salary?

1.2 What is a Perquisite?

1.3 What is profit in lieu of salary ?

2. Rates of income-tax as per Finance Act, 2022

2.1 Rates of tax

2.2 Surcharge on Income-tax

2.3 Health and Education Cess

2.4 Concessional Rates of Tax u/s 115BAC

3. Section 192 of the Income-tax Act, 1961: Broad scheme of Tax Deduction at Source from “Salaries”

3.1 Method of Tax Calculation

3.2 Payment of Tax on Perquisites by Employer

3.3 Computation of Average Income Tax

3.4 Salary from more than one employer

3.5 Relief When Salary Paid in Arrear or Advance

3.6 Information regarding Income under any other head

3.7 Computation of income under the head “Income from house property”

3.7.1 Conditions for claim of deduction of interest on borrowed capital for computation of Income from House Property [section 24(b)]

3.8 Adjustment for Excess or Shortfall of Deduction

3.9 Salary Paid in Foreign Currency

4. Persons Responsible For Deducting Tax And Their Duties

4.1 Tax Deduction at Source

4.1.2 Rates for tax deduction at source

4.2 Deduction of Tax at Nil or Lower Rate

4.3 Deposit of Tax Deducted

4.3.1 Due dates for payment of TDS

4.4 Mode Of Payment Of TDS

4.4.1 Compulsory filing of Statement by PAO, Treasury Officer, etc in case of payment of TDS by Book Entry u/ s 200 (2A)

4.4.2 Payment by an Income Tax Challan

4.5 Interest, Penalty & Prosecution for Failure to Deposit Tax Deducted

4.6 Furnishing of Certificate for Tax Deducted (Section 203)

4.7 Furnishing of particulars pertaining to perquisites, etc. – Section 192(2C)

4.8 Mandatory Quoting of PAN or Aadhaar number as the case may be and TAN

4.9 Compulsory Requirement to furnish PAN or Aadhaar by employee (Section 206AA)

4.10 Statement of deduction of tax under section 200(3) [Quarterly Statement of TDS]

4.11 Fee for default in furnishing statements u/s 200(3) of the Act

4.12 Rectification of mistake in filing TDS Statement

4.13 Penalty for failure to furnishing statements or furnishing incorrect information (section 271H)

4.14 TDS on Income from Pension
4.15 Matters pertaining to the TDS made in case of Non-Resident

5. Computation Of Income Under The Head “Salaries”

5.1 Income chargeable under the head “Salaries”

5.2 Value of Perquisites as per Rule

5.3 Incomes not included under the head “Salaries” (Exemptions)

5.4 Deductions u/s 16 of the Act

5.5 Deductions Under Chapter VI-A of the Act

5.5.1 Deduction in respect of Life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. (section 80C)

5.5.2 Deduction in respect of contribution to certain pension funds (Section 80CCC)

5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD)

5.5.4 Deduction in respect of health insurance premia paid, etc. (Section 80D)

5.5.5 Deductions in respect of expenditure on persons or dependants with disability

5.5.6 Deduction in respect of medical treatment, etc. (Section 80DDB)

5.5.7 Deduction in respect of interest on loan taken for higher education (Section 80E)

5.5.8 Deduction in respect of interest on loan taken for certain house property (Section 80EEA)

5.5.9 Deduction in respect of the interest payable on loan taken for the purpose of purchase of an
electric vehicle (80EEB)

5.5.10 Deductions on respect of donations to certain funds, charitable institutions, etc. (Section 80G)

5.5.11 Deductions in respect of rents paid (Section 80GG)

5.5.12 Deductions in respect of certain donations for scientific research or rural development (Section 80 GGA)

5.5.13 Deduction in respect of interest on deposits in savings account (Section 80TTA)

5.5.14 Deduction in respect of interest on deposits in case of senior citizens (Section 80TTB)

6. Rebate Of Rs12,500 For Individuals Having Total Income Upto Rs 5 Lakh [Section 87A]
7. TDS on payment of accumulated balance under recognised provident fund and contribution from
   approved superannuation fund
8. DDOs to obtain evidence/proof of claims
9. Calculation of income-tax to be deducted
10. Miscellaneous

CIRCULAR NO: 24/2022

F. No. 275/15/2022-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block, New Delhi
Dated the 7th Dec, 2022

SUBJECT: Income tax Deduction from Salaries during FY 2022-23 Under Section 192 Of Income Tax Act, 1961.

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Reference is invited to Circular No. 04/2022 dated 15.03.2022 whereby the rates of deduction of income-tax from the payment of income under the head “Salaries” under Section 192 of the Income-tax Act, 1961 (hereinafter ‘the Act’), during the financial year 2021-22, were intimated. The present Circular contains the rates of deduction of Income-tax from the payment of income chargeable under the head “Salaries” during the financial year 2022-23 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). All the sections and rules referred are of Income-tax Act, 1961 and Income-tax Rules, 1962 respectively unless otherwise specified. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department- www.incometaxindia.gov.in.

As per section 192(1) of the Act, 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 the head of Salary income for that financial year.

The section also provides that 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.

1. Definition of “salary”, “perquisite” and “profit in lieu of salary” (section 17)
   1.1 What is salary?
   As per section 15 of the Act, the following incomes are chargeable to income-tax under the head “Salaries”—

(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.

For any income to be called as Salary, the existence of employer-employee relation is must. As per section 17 of the Act, Salary includes the following:

i) wages;
ii) any annuity or pension;
iii) any gratuity;
iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;
v) any advance of salary;
vi) any payment received by an employee in respect of any period of leave not availed of by him;
vii) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule;

a) contributions made by the employer to the account of the employee in a recognized provident fund in excess of 12% of the salary of the employee, and

b) interest credited on the balance to the credit of the employee in so far as it is allowed at a rate exceeding such rate as may be fixed by Central Government by notification in the Official Gazette;

viii) the contribution made by the Central Government or any other employer to the account of the employee under the New Pension Scheme as notified vide Notification F.N.5/7/2003- ECB&PR dated 22.12.2003 (enclosed as Annexure VII) referred to in section 80CCD (para 5.5.3 of this Circular);

ix) the aggregate of all sums that are comprised in the transferred balance as referred to in sub rule (2) of rule 11 of Part A of the Fourth schedule of the Act in case of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof.

It may be noted that, since salary includes pension, tax at source would have to be deducted from pension also, unless otherwise so required. However, no tax is required to be deducted from the commuted portion of pension to the extent exempt under section 10 (10A).

Family Pension is chargeable to tax under the head “Income from other sources” and not under the head “Salaries”. Therefore, provisions of section 192 of the Act are not applicable. Hence, DDOs are not required to deduct TDS on family pension paid to person.

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