Section 192 of Income Tax Act

What is Section 192 of the Income Tax Act?

Section 192 states that any person (employer) paying a salary to an individual (employee) must deduct TDS if the taxable income exceeds the basic exemption limit. This TDS is calculated based on the employee’s applicable income tax slab.

Key points about Section 192:

• Applies only to salary income (not professional fees, contract payments, or business income).
• Tax is deducted at the time of payment (not when it is accrued).
• TDS rate is based on income slabs applicable to the financial year.
• Employers must issue Form 16 to employees as proof of TDS deduction.

Who is Responsible for Deducting TDS Under Section 192?

The employer is responsible for deducting TDS on salaries. Employers can be:

• Private or public sector companies
• Government organizations
• Partnership firms
• Hindu Undivided Families (HUF)
• Individuals employing salaried staff

If an individual employs a household worker (e.g., domestic help, driver, cook), Section 192 does not apply as they are not formal employers under tax laws.

How is TDS Calculated Under Section 192?

TDS under Section 192 is deducted based on the income tax slab rates applicable for the financial year. The employer must:

• Calculate the gross salary (basic salary + allowances + perquisites).
• Deduct exemptions (HRA, travel allowance, etc.).
• Subtract eligible deductions under Section 80C, 80D, etc.
• Compute taxable income after deductions.
• Apply the income tax slab rates to determine tax liability.
• Divide the total tax liability over the remaining months of the financial year and deduct TDS accordingly.

Example of TDS Calculation Under Section 192

Let’s assume Rahul earns ₹20,00,000 per year as gross salary. Below is an illustrative calculation of how TDS may be computed under Section 192, assuming he opts for the old tax regime and claims commonly used deductions.

Deductions & Exemptions Available Under Section 192

Employees can reduce their TDS liability by claiming tax deductions and exemptions. Here are some key benefits:

1. Standard Deduction (₹50,000)

• Available to all salaried individuals.
• Automatically deducted from gross salary.

2. House Rent Allowance (HRA) Exemption

• If an employee pays rent and receives HRA, they can claim HRA exemption under Section 10(13A).
• The exemption amount depends on salary, actual rent paid, and city of residence.

3. Deductions Under Section 80C (Up to ₹1.5 Lakh)

• Investments like EPF, PPF, LIC, ELSS, NSC, Home Loan Principal qualify for tax benefits.

4. Deductions Under Section 80D (Health Insurance)

• Premiums paid for self, spouse, children, or parents can be deducted (₹25,000 for self & ₹50,000 for senior citizen parents).

5. Deductions Under Section 80E (Education Loan)

• Interest paid on education loans for self, spouse, or children is fully deductible.

Difference Between Section 192 and Other TDS Sections

Time Limit To Deposit The Tax Under Section 192

Under Section 192, employers are responsible for deducting and depositing TDS on salary payments within the prescribed timelines. The due date depends on when the salary is paid or credited and the nature of the deductor.

In general:

• For non-government employers: TDS deducted on salary must be deposited on or before the 7th of the following month.
• For the month of March: The due date is extended to 30th April of the next financial year.
• For government employers: The timelines vary slightly depending on whether tax is deposited with or without a challan, as per applicable rules.

Meeting these timelines is important because salary-related TDS is closely tracked through employer filings and employee Form 26AS records. Even short delays can trigger interest liabilities.

How Employees Can Check TDS Deduction?

Employees can verify if TDS has been deducted correctly by:

• Checking their salary slips for monthly TDS deductions.
• Logging into the TRACES website to download Form 26AS (TDS statement).
• Cross-checking Form 16 with their income tax return (ITR).

Consequences Of Non-Compliance Under Section 192

Non-compliance with Section 192 can lead to financial costs and administrative complications for employers. The nature of the consequence depends on whether the failure relates to deduction, deposit, or reporting.

Common consequences include:

• Interest liability: Interest may be charged for failure to deduct tax or for delayed deposit after deduction, calculated for the period of default.
• Late fees and penalties: Delays or errors in filing TDS returns related to salary payments can attract statutory late fees and penalties.
• Disallowance of expenses: In certain cases, salary expenses may face scrutiny if TDS compliance is not properly followed.
• Compliance notices and follow-ups: Repeated non-compliance can lead to notices from tax authorities and closer examination of payroll practices.
• Employee impact: Incorrect or delayed TDS reporting can cause mismatches in employees’ tax records, leading to grievances and additional clarifications.

In practical terms, timely deduction, prompt deposit, and accurate reporting under Section 192 help avoid unnecessary costs and ensure smooth payroll and tax compliance.

How to Claim Refund for Excess TDS Deducted?

If an employer deducts excess TDS, employees can:

• File an Income Tax Return (ITR) and claim a refund.
• Declare additional deductions in ITR to adjust the tax liability.
• Monitor Form 26AS to ensure correct TDS reporting.

Conclusion

Section 192 of the Income Tax Act is crucial for salaried employees, ensuring that TDS is deducted correctly from salaries. Employees can optimize their tax liability by claiming deductions and exemptions while ensuring compliance with tax laws.
Employers must calculate, deduct, deposit TDS on time, and issue Form 16 to avoid penalties. Understanding how TDS on salary works under Section 192 can help taxpayers avoid surprises during tax filing and maximize tax savings.