TDS ON SALARY
M. V. DAMANIA & CO
07/01/2012
SANJAY CHOKSHI
TDS ON SALARY
SYNOPSIS
1.
2.
3.
4.
5.
6.
7.
Tax Deduction as required u/s192
What salary is charged to Tax u/s15
Deductions in Salary as allowable
u/s 16
Salary as Defined u/s 17(1)
Perquisites as Defined u/s 17(2)
Profit in lieu of Salary as defined
u/s 17(3)
Valuation of Perquisites under rule
3
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(1)
 Person
responsible for Payment of
Salary
 At the time of Payment
 Average rate of Tax as per the Rates
in Force
 Estimated income under this head
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(1A) and (1B)
 In
case of Perquisites
 Payment of the whole or part of the
tax without deduction of Tax
 To be deducted on the basis of other
salary at the time of such payment
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(2)
 If
the Employee is employed with
more than one employer
• Simultaneously
• Successively
 Employee may provide the details of
his salary and TDS thereon
 Rule 26 Form 12B
 Employer
to account for that
income for TDS
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(2B)
 Relief
to be granted u/s 89(1) if applicable by:
 Government
 Company
 Co-op. Society
 Local Authority
 University
 Institution
 Association or Body
 Rule 21 Form 10E
 Employee to account for such relief and
deduct tax accordingly
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(2B)
 If
the Employee has income other than
Salary
 Income should not be a loss
 Loss in case of House Property
 Provide information of such income
and TDS thereon to the Employer
 Rule 26B Form No. 12C
 Employer to account for such income
for the Purpose of TDS
 Result should not reduce the TDS
otherwise deductible
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(2C)
 Employer
to furnish to the employee
statement
giving
correct
and
complete details:
 Particulars of Salary
 Particulars of Perquisites
 Profit in lieu of Salary
 Rule 26, Form 16 and 12BA
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(3)
 Permits
adjustments to be made
during the F. Y. in relation to excess
or shortage in deduction during the
earlier deductions
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(4)
 Trustees
of Recognised Provident
Fund to deduct TDS
 On
payment
of
accumulated
balances as per Rule 9(1) of Part A
of Fourth Schedule
 TDS as provided in Rule 10 of Part A
of Fourth Schedule
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(5)
 Trustees
of
Recognised
Superannuation Fund to deduct
TDS
 On
payment
of
accumulated
balances from such fund in relation
to contribution made by the
employer and interest thereon
 TDS as provided in Rule 6 of Part B
of Fourth Schedule
SANJAY CHOKSHI
TDS ON SALARY U/S. 192
SS
(6)
 In
case the salary is paid in Foreign
Exchange, the same is to be
converted to rupees as per the rates
prescribed under RR 26 and 115
SANJAY CHOKSHI
ISSUES ON TDS ON SALARY
U/S. 192
 Internal
Private
Agreement
between Employer and Employee
that The Employer need not deduct
Tax and that the employee shall
take care of his IT dues
 TDS on Judgment Debts
 Payment made for securing services
of a person
 Furlough Pay
 Tax on Tax Exclusive Income
SANJAY CHOKSHI
SECTION 15 – CHARGING
SECTION
IN CASE OF SALARIES
 Salary
due from an employer or former
employer in the previous year
 Advance Salary
 Arrears of Salary


Salary shall not be taxed on accrual if
the same is taxed on the basis of
advance payment.
Salary paid to partner is taxable as
business income and not salary
SANJAY CHOKSHI
SECTION 16 – DEDUCTIONS
FROM SALARIES
 Entertainment
allowance paid to
government employees
1/5th
of salary (inclusive of any
allowance, benefit or other
perquisites
Tax on Employment (Profession
Tax)
Lower of the two above
SANJAY CHOKSHI
DISTINCTION BETWEEN EMPLOYEE
AND AGENT
EMPLOYEE
AGENT
Instructions with not
only what he has to do
but also how he has to
do
 More direct control
 No authority to enter
into contract on behalf
of the employer
 Payment in terms of
wages and salaries

Instructions with only
what he has to do and
not how he has to do
 More indirect control
 Normally enters into
contract on behalf of
the principal
 Payment by
commission

SANJAY CHOKSHI
WHETHER EMPLOYEES OR
OTHERWISE
Director
of a Company
Managing Director of a Company
Whole time Director of a company
Financial Advisor
Official Liquidator
Film Artist
Lawyer or professional
A doctor working in a hospital
A Chauffer driving a car
SANJAY CHOKSHI
WHETHER SALARY OR
OTHERWISE
Director
Sitting Fees
Professional
Fees
Paid
to
Director for services rendered
Salary
paid
to
Managing
Director
Salary
paid to Whole time
Director
Temporary
Labour on daily
wages
SANJAY CHOKSHI
WHETHER SALARY OR
OTHERWISE
Payment
on
piece
rate
employees
Payment
to Professional
time basis
Salary to part time workers
SANJAY CHOKSHI
to
on
SECTION 17(1)– DEFINITION
OF
SALARIES INCLUDES
Wages
 Annuities and/or Pension
 Gratuity
 Fees, commission, perquisites or
profit in lieu of or in addition to any
salary or wages
 Advance salary
 Leave encashment

SANJAY CHOKSHI
SECTION 17(1)– DEFINITION
OF
SALARIES INCLUDES

Annual accretion to the balance of the
credit of the 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
 Contribution
by Employer in excess
of 12 %
 Interest accrued in excess of that
declared by the Government
SANJAY CHOKSHI
SECTION 17(1)– DEFINITION
OF
SALARIES INCLUDES
 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 For the Schedule of an
employee participating in a
recognised provident fund to
the extent to which it is
chargeable to tax under sub
rule 4 thereof.
SANJAY CHOKSHI
SECTION 17(1)– DEFINITION
OF
SALARIES INCLUDES

Calculation
balance:
of
taxable
 Recognisation
transferred
is granted to an
existing unrecognised Fund
 Calculation of the taxable amount
as per the earlier subsection as if
the fund was a recognised fund
since inception for each year till
date
 The sum of such taxable amount is
taxable in the current year
SANJAY CHOKSHI
SECTION 17(1)– DEFINITION
OF
SALARIES INCLUDES
 Contribution
by an employer to
a pension fund referred to in
section 80CCD
SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES
 Value
of
Rent
Free
Accommodation provided to the
assessee by his employer
 Value of any concession in the
matter of rent in relation to any
accommodation provided to the
assessee by his employer
SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES

The value of any benefit or amenity
granted or provided free of cost or at a
concessional rate in any of the following
cases:
To an employee director
 To an employee who is substantially
interested in the company
 Employee whose salary per annum
exceeds Rs. 1 lac.
Vehicle provided for journey from
residence to office and return is not
included as perquisite

SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES
•
•
any sum paid by the employer in respect of any
obligation which but for such payment, would
have been payable by the assessee
any sum payable by the employer, whether
directly or through a fund, other than a
recognised provident fund or an approved
superannuation fund or a Deposit-linked
Insurance Fund established under section 3G of
the
Coal
Mines
Provident
Fund
and
Miscellaneous Provisions Act, 1948 (46 of 1948),
or, section 6C of the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952
(19 of 1952)], to effect an assurance on the life
of the assessee or to effect a contract for an
annuity
SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES
•
the value of any specified
security or sweat equity
shares
allotted
or
transferred,
directly
or
indirectly, by the employer,
or former employer, free of
cost or at concessional rate
to the assessee.
SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES
Explanation : For the purposes of this subclause,—
(a) "specified security" means the securities as
defined in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956) and,
where employees' stock option has been granted
under any plan or scheme therefor, includes the
securities offered under such plan or scheme;
(b) "sweat equity shares" means equity shares
issued by a company to its employees or directors
at a discount or for consideration other than cash
for providing know-how or making available
rights in the nature of intellectual property rights
or value additions, by whatever name called;
SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES
(c) the value of any specified security or sweat
equity shares shall be the fair market value of the
specified security or sweat equity shares on the
date on which the option is exercised by the
assessee as reduced by the amount actually paid
by, or recovered from the assessee in respect of
such security or shares;
(d) "fair market value" means the value
determined in accordance with the method as
may be prescribed;
(e) "option" means a right but not an obligation
granted to an employee to apply for the specified
security
or
sweat
equity
shares
at
a
predetermined price;
SANJAY CHOKSHI
SECTION 17(2)– DEFINITION
OF
PERQUISITES INCLUDES
•
•
the
amount
of
any
contribution to an approved
superannuation fund by the
employer in respect of the
assessee, to the extent it
exceeds one lakh rupees; and
the value of any other fringe
benefit or amenity as may be
prescribed
SANJAY CHOKSHI
EXCLUSION FROM FRINGE
BENEFIT OR AMENITY
•
the value of any medical
treatment provided to an
employee or any member
of his family in any
hospital maintained by the
employer ;
SANJAY CHOKSHI
EXCLUSION FROM FRINGE
BENEFIT OR AMENITY
•
any sum paid by the employer in respect of any expenditure
actually incurred by the employee on his medical treatment
or treatment of any member of his family—
a.
in any hospital maintained by the Government or any local
authority or any other hospital approved by the
Government for the purposes of medical treatment of its
employees;
b.
in respect of the prescribed diseases or ailments in any
hospital approved by the Chief Commissioner having
regard to the prescribed guidelines :
Provided that, in a case falling in sub-clause (b), the employee
shall attach with his return of income a certificate from the
hospital specifying the disease or ailment for which medical
treatment was required and the receipt for the amount paid to
the hospital.
SANJAY CHOKSHI
EXCLUSION FROM FRINGE
BENEFIT OR AMENITY
•
any portion of the premium paid by an employer in
relation to an employee, to effect or to keep in force an
insurance on the health of such employee under any
scheme approved by the Central Government or the
Insurance Regulatory and Development Authority
established under sub-section (1) of section 3 of the
Insurance Regulatory and Development Authority Act,
1999 (41 of 1999), for the purposes of clause (ib) of subsection (1) of section 36 ;
•
any sum paid by the employer in respect of any premium
paid by the employee to effect or to keep in force an
insurance on his health or the health of any member of
his family under any scheme approved by the Central
Government
or
the
Insurance
Regulatory
and
Development Authority established under sub-section (1)
of section 3 of the Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999), for the purposes of
section 80D ;
SANJAY CHOKSHI
EXCLUSION FROM FRINGE
BENEFIT OR AMENITY
•
any sum paid by the employer
in respect of any expenditure
actually
incurred
by
the
employee
on
his
medical
treatment or treatment of any
member of his family other than
the treatment referred to in
clauses (i) and (ii); so, however,
that such sum does not exceed
fifteen thousand rupees in the
previous year.
SANJAY CHOKSHI
EXCLUSION FROM FRINGE
BENEFIT OR AMENITY
any expenditure incurred by the employer on—
1. medical treatment of the employee, or any member of the
family of such employee, outside India;
2. travel and stay abroad of the employee or any member of
the family of such employee for medical treatment ;
3. travel and stay abroad of one attendant who accompanies
the patient in connection with such treatment, subject to
the condition that—
(A)
the expenditure on medical treatment and stay abroad
shall be excluded from perquisite only to the
extent
permitted by the Reserve Bank of India; and
(B)
the expenditure on travel shall be excluded from
perquisite only in the case of an employee whose gross
total income, as computed before including therein the
said expenditure, does not exceed two lakh rupees.
•
SANJAY CHOKSHI
EXCLUSION FROM FRINGE
BENEFIT OR AMENITY
•
any sum paid by the
employer in respect of any
expenditure
actually
incurred by the employee
for any of the purposes
specified in clause (vi)
subject to the conditions
specified in or under that
clause.
SANJAY CHOKSHI
SECTION 17(3)– DEFINITION
OF
PROFIT IN LIEU OF SALARY
INCLUDES
•
The
amount
of
any
compensation due to or
received by an assessee from
his employer or former
employer at or in connection
with the termination of his
employment
or
the
modification of the terms
and
conditions
of
his
employment;
SANJAY CHOKSHI
SECTION 17(3)– DEFINITION
OF
PROFIT IN LIEU OF SALARY
INCLUDES
•
any payment [other than any payment
referred to in clause (10), (10A), (10B),
(11), (12) (13)] or (13A)] of section (10)],
due to or received by an assessee from
an employer or a former employer or
from a provident or other fund, to the
extent to which it does not consist of
contributions by the assessee or
interest on such contributions or any
sum
received
under
a
Keyman
insurance policy including the sum
allocated by way of bonus on such
policy.
SANJAY CHOKSHI
SECTION 17(3)– DEFINITION
OF
PROFIT IN LIEU OF SALARY
INCLUDES
•
any amount due to or
received, whether in lump
sum or otherwise, by any
assessee from any person
A. before
his joining any
employment
with
that
person; or
B. after
cessation of his
employment
with
that
person.
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation on the basis amount
paid or cost of manufacture, or
cost of providing such services:
•
•
•
•
•
Sweeper, Gardner, Watchmen or
Personal Attendant
Gas, Electric Energy or Water
Education to any member
Carriage of passengers
Travel, tour and accommodation.
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation in case of Loans:
• Interest on similar loans charged by
•
SBI as on 1/4 of that FY on the
maximum
outstanding
monthly
balance
No interest on loan given for medical
treatment of diseases specified in
rule 3A. If Loans are reimbursement
against Mediclaim, interest on such
outstanding shall be considered as
perquisites.
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation on the basis amount
paid or cost of manufacture or of
provision of services:
Food and non alcoholic beverages
provided by employer if the same
is in excess of Rs. 50/- per meal
or tea or snacks provided during
working hours
• Value of gifts or vouchers on
ceremonial occasions if the same
exceeds Rs. 5000/- p.a.
•
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation on the basis amount
paid or cost of manufacture or of
provision of services:
Personal Expenses paid through
credit
card
including
membership and annual fees.
• If exclusively for official purpose,
the valuation shall be nil.
• Proper records to be maintained
and a certificate to that effect to
be given by employer
•
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation in case of club membership:
Actual
expenditure
incurred
or
reimbursement
• In case of corporate membership, initial
fees paid for acquiring such membership
not to be included
• If exclusively for official purpose, the
valuation shall be nil, provided proper
records to be maintained and a
certificate to that effect to be given by
employer
• Not applicable to use of sports, health
club or similar facility provided
uniformly to all employees
•
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation
of
use
of
moveable asset other than
furniture and computers:
In
case
owned
by
employee – 10% of cost
• In case rented – actual
rent paid
•
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation in case of transfer of
moveable asset:
Actual cost of asset reduced
by depreciation @ 10% for
each completed year on WDV
method
• In case of Computers the rate
of Depreciation shall be 50%
• In case of Cars the rate of
Depreciation shall be 20%
•
SANJAY CHOKSHI
RULE 3– VALUATION
OF
PERQUISITES
•
Valuation of any other
benefit, amenity, right or
privilege:
Cost to employer under
an arm’s length price
• Not applicable in relation
to telephone and mobile
phone.
•
SANJAY CHOKSHI
THANK
YOU
SANJAY CHOKSHI