Section 192 of Income Tax Act

The Income Tax 192 section details the process of employers deducting tax at source (TDS) from salary. The employer calculates the TDS based on the employee’s estimated annual income and applicable tax slab rate.

TDS deducted from the salary is crucial as the government can collect tax from the source directly, reducing the chances of missed payments. Moreover, paying the TDS monthly reduces the burden of paying huge taxes at year-end.

Key Points:

• Applicability: TDS under Section 192 applies only to salary income and when the annual income exceeds the basic exemption limit.
• Calculation: Employers account for allowances, exemptions and deductions (like those under Section 80C) when calculating TDS.
• Monthly Deductions: The employer deducts TDS from the employee’s salary every month and deposits it with the government.

Employers also provide a Form 16, which helps employees understand their tax deductions and file returns easily.

Also Read: Form 16A in Income Tax – TDS Certificate

TDS deduction on salary is a tax provision under Section 192, where employers are entitled to deduct tax at source on an employee’s salary. The salary received from the employer is categorised as income and attracts TDS based on the prevailing tax rates.

ITA requires employers to deduct TDS from salaries if they pay compensation to their employees. However, the deduction can only be made if the salaried income exceeds the exempted limit.

Remember that TDS on salary is usually refundable. Still, the refund is only possible if the amount of tax deducted is more than the employee’s tax liability. Another condition is that the investment details declared at a fiscal year’s beginning are not the same as the investments that were made at year-end. In this situation, the TDS amount on salary is deducted.

Suppose an employee earns ₹8,00,000 annually. After the standard deduction of ₹75,000, the taxable income becomes ₹7,25,000.

Tax Calculation (as per 2025 slab rates):

• Up to ₹3,00,000: No tax
• ₹3,00,001 to ₹7,00,000 (₹4,00,000): 5% = ₹20,000
• ₹7,00,001 to ₹7,25,000 (₹25,000): 10% = ₹2,500

Total Tax Liability: ₹22,500

Monthly TDS Deduction: ₹22,500 ÷ 12 = ₹1,875

The employer deducts ₹1,875 as TDS each month and provides a Form 16 for filing returns.

TDS under Section 192 is deducted by any person who is responsible for making an employee’s salary payment as per the prescribed average rate of tax on the estimated total income of the employee.

Here is the list of individuals responsible for making payments under the head salaries and tax deduction:

TDS under section 192 of the Income Tax Act is deducted when an employee’s total income from salary exceeds the basic exemption limit set under the Income Tax Act.

• Monthly Salary Payments: Employers deduct TDS every month based on the estimated annual taxable income.
• Income Exceeding Exemption Limit: TDS applies only if the employee’s annual income crosses the basic exemption limit.
• Considering Deductions and Exemptions: Employers calculate taxable income by accounting for deductions (like those under Section 80C) and exemptions (e.g., HRA).
• Declaration by Employee: Employees must declare their investments, loans and deductions to their employer for accurate TDS calculation.
• No Fixed Percentage: TDS is deducted as per the applicable income tax slab, not at a flat rate.

Also Read: TDS in India: Rates, Compliance, and Filing Explained

TDS on salary is computed based on the employee's estimated taxable income for the financial year, considering various components.

• Gross Salary: Includes basic pay, allowances, bonuses, commissions and perquisites.
• Exemptions: Certain components, such as the House Rent Allowance (HRA), Leave Travel Allowance (LTA) and other specified allowances, may be exempt, subject to conditions and proof of expenses.
• Deductions: Amounts eligible under sections like 80C (investments in specified instruments), 80D (medical insurance premiums), and interest on home loans are deducted from gross salary to arrive at taxable income.
• Standard Deduction: All salaried employees can take a flat deduction (e.g., ₹50,000), which reduces their gross salary.
• Perquisites and Benefits: Non-monetary benefits provided by the employer, such as accommodation or vehicle facilities, are valued as per prescribed rules and added to the salary.

The employer calculates TDS by estimating the annual taxable income, applying the relevant income tax slabs, and dividing the total tax liability by the number of salary payments (typically monthly) to determine the TDS amount per pay period.

Also Read: All About TDS Tax Deducted at Source

When an employee switches jobs or works for multiple employers in a financial year, TDS is calculated based on the combined income according to the 192 section of income tax.

• Declaration to New Employer: Employees should use Form 12 B to inform the new employer about their previous salary and TDS deductions.
• Consolidated Income: The new employer adds the previous income to the current income to compute TDS.
• Avoid Double TDS: Failure to declare earlier income may lead to incorrect deductions or tax liabilities during filing.
• Employee’s Responsibility: If both employers deduct TDS separately without considering combined income, the employee must pay any remaining tax when filing returns.

Employees should ensure accurate disclosure to avoid discrepancies in TDS calculations.

Employers deduct TDS from their employees' salaries, and thus, they have certain responsibilities to fulfil. As per the 192 section of income tax, employers are required to take out TDS each month and deposit it to the government within the allotted due date. If any government employer deducts TDS, then they are required to deposit the money on the same day.

If the employer other than the government employer deducts TDS and does so in March, then they must deposit the TDS by April 30th at the latest. However, the Hindu Undivided Family (HUF) firm or company status of the employer has no applicability to the tax deduction at the source allowed by this section. The relationship between the employer and employee is the only one that counts.

TDS Return Filed by Employer

Employers are required to file a return for TDS on salary in Form 24Q, which is said to be submitted every quarter. The Form 24Q includes the compensation paid to the employees and the TDS deducted.

The Form 24Q consists of two annexures: Annexure 1 and Annexure 2. Submitting Annexure 1 is mandatory for all the quarters of an FY, but there is no requirement to submit Annexure 2 for the first three quarters.

Moreover, if the employer does not deduct TDS or deducts TDS at a lower rate, they must provide appropriate reasons for this non-deduction or lower deduction.

Employers are required to deposit the TDS deducted from an employee's salary to the government within the stipulated time. The key timelines are as follows:

• Monthly Deposit Deadline: TDS deducted during a particular month must be deposited by the 7th of the following month.
• March Deadline: For deductions made in March (the last month of the financial year), the due date is April 30th of the same year.
• Quarterly Filing: Employers must file a quarterly TDS return (Form 24Q) to report the salary details and deductions.

Late deposits or filing can attract penalties and interest under Sections 234E and 201(1A). Employers are advised to ensure timely compliance to avoid such penalties.

The following components are exempted from TDS on salary under the 192 section of income tax, subject to conditions:

Saving tax on your salary is possible by planning your finances and utilising available tax-saving provisions under the Income Tax Act. Here are effective ways to reduce your tax burden:

Invest in Tax-Saving Instruments

Utilise deductions under Section 80C by investing in the Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), or paying life insurance premiums. You can claim up to ₹1.5 lakh annually.

Claim HRA Benefits

If you live in a rented house, claim HRA exemption. Ensure you provide rent receipts to your employer to maximise this benefit.

Utilise Section 80D

Deduct premiums paid for medical insurance for yourself and your family. You can save up to ₹25,000 (₹50,000 for senior citizens).

Opt for Tax-Free Perquisites

Choose allowances like meal coupons, phone reimbursements, and education fee reimbursement, which are tax-exempt.

Use Section 80E

Deduct interest paid on education loans for higher studies, with no maximum limit.

Contribute to the National Pension Scheme (NPS)

Avail of an additional ₹50,000 deduction under Section 80CCD(1B) for NPS contributions.

By leveraging these strategies, you can reduce taxable income effectively.

Also Read: Health Insurance Tax Benefit - Section 80D

Understanding TDS deductions under section 192 of the Income Tax Act and tax-saving strategies is crucial for maximising your take-home salary. By utilising exemptions, deductions, and investment options, you can significantly reduce your tax liability. Proper planning ensures that your salary aligns with your financial goals and complies with tax laws.

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