CBDT Issues Circular for ‘TDS on Salaries' for FY 2011-12
CBDT has issued a Circular, which contains the rates of deduction of income tax from the payment of income chargeable under the head "Salaries" during the financial year 2011-2012 and explains certain related provisions of the Income tax Act.
BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM "SALARIES"
Method of Tax Calculation:
Every person who is responsible for paying any income chargeable under the head "Salaries" shall deduct income tax on the estimated income of the assessee under the head "Salaries" for the financial year 2011-2012. The income tax is required to be calculated on the basis of the rates given above subject to provisions of sec 206AA of the Income Tax Act and shall be deducted at the time of each payment. No tax will, however, be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs. 1,80,000/- or Rs.1,90,000/- or Rs. 2,50,000/- or Rs. 5,00,000/-, as the case may be, depending upon the gender and age of the employee.
Payment of Tax on Non-monetary 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 his option, make payment of the tax on such perquisites himself without making any TDS from the salary of the employee. The employer will have to pay such tax at the time when such tax was otherwise deductible i.e. at the time of payment of income chargeable under the head "salaries" to the employee.
Computation of Average Income Tax:
For making the payment of tax mentioned above, tax is to be determined at the average of income tax computed based on rate in force for the financial year, on the income chargeable under the head "salaries", including the value of perquisites for which tax has been paid by the employer himself.
Interest, Penalty & Prosecution for Failure to Deposit Tax Deducted:
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, he shall be liable to action in accordance with the provisions of section 201. Sub-section (1A) of section 201 lays down that such person shall be liable to pay simple interest (i) at one percent 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 percent 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, has to be paid before furnishing of quarterly statement of TDS for each quarter. Section 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, section 276B lays down that if a person fails to pay to the credit of the Central Government within the prescribed time 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.
It may be noted that under the new TDS procedure, the accuracy and availability of TAN, PAN and receipt number of TDS statement filed by the deductor will be unique identifier for granting online credit for TDS. Hence due care should be taken in filling these particulars.
If employee (deductee) fails to furnish his/her PAN to the deductor:
Then, the deductor shall make TDS at a higher of the following rates
++ at the rate specified in the relevant provision of this Act; or
++ at the rate or rates in force; or
++ at the rate of twenty per cent.
The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. This applies to any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVII-B of Income Tax Act.
Income chargeable under the head "Salaries”.
The following income shall be 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.
CBDT Circular No. 05/2011 in F.NO. 275/192/2011-IT(B)., Dated: August 16, 2011