A Comprehensive Guide to Income Tax Deduction from Salaries (FY 2024-25) under Section 192

Income Tax Deduction from Salaries

Income Tax Deduction from Salaries The Income Tax Department has issued guidelines for the deduction of tax at source (TDS) on salaries under Section 192 of the Income Tax Act for the financial year 2024-25. These guidelines are essential for employers and salaried individuals to ensure compliance with tax regulations .Income Tax Deduction from Salaries This blog provides a detailed breakdown of the key provisions, tax rates, deductions, and exemptions applicable to salaried employees.

Understanding Section 192 of the Income Tax Act

Section 192 governs the deduction of TDS on salaries. Income Tax Deduction from Salaries An employer is required to deduct tax at the time of salary payment if the employee’s income exceeds the basic exemption limit. Unlike other TDS provisions that apply specific rates, Section 192 requires tax deduction based on the income tax slabs applicable to the individual taxpayer.

Who is Responsible for TDS Deduction?

• Any employer (government or private) paying salaries to employees is responsible for deducting TDS under Section 192.
• If an employee’s total income after deductions exceeds the taxable limit, TDS must be deducted monthly based on the estimated annual salary.

Tax Slabs and Rates for FY 2024-25

For the financial year 2024-25, employees have the option to choose between the Old Tax Regime and the New Tax Regime. The TDS calculation will depend on the regime chosen.

Old Tax Regime (with deductions and exemptions)

• Rebate under Section 87A is available for taxable income up to ₹5 lakh, making the tax liability zero.
• Deductions under Section 80C, 80D, HRA, LTA, Standard Deduction, etc., can be claimed.

New Tax Regime (Lower rates but fewer exemptions)

• Standard Deduction of ₹50,000 is available.
• Rebate under Section 87A makes taxable income up to ₹7 lakh tax-free.
• No deductions under Section 80C, 80D, HRA, LTA, etc.

Key Deductions & Exemptions Under Old Tax Regime

1. Standard Deduction – ₹50,000 for all salaried employees.
2. Section 80C – Up to ₹1.5 lakh deduction on investments like PPF, EPF, NSC, Life Insurance, ELSS, etc.
3. Section 80D – Deduction for health insurance premiums:
   • Self & family: ₹25,000
   • Senior citizen parents: ₹50,000
4. House Rent Allowance (HRA) – Income Tax Deduction from Salaries Deduction based on rent paid and salary structure.
5. Leave Travel Allowance (LTA) – Exemption for travel expenses for domestic trips.
6. Home Loan Interest (Section 24(b)) – Up to ₹2 lakh deduction on interest paid.
7. National Pension System (NPS – Section 80CCD(1B)) – Additional ₹50,000 deduction over and above 80C.

Employer’s Responsibility for TDS Deduction

• Employers must calculate TDS based on the tax regime chosen by the employee.
• The tax deducted must be deposited with the government before the due date.
• Form 16 must be issued to employees before June 15 of the following financial year.
• Employees must provide investment declarations and proofs before the deadline set by the employer.

TDS Calculation Example

Let’s assume an employee has a gross salary of ₹12,00,000 and opts for the Old Tax Regime:

1. Gross Salary: ₹12,00,000
2. Standard Deduction: ₹50,000
3. 80C Investments: ₹1,50,000
4. 80D Medical Insurance: ₹25,000
5. Taxable Income: ₹9,75,000
6. Tax Calculation:
   • ₹2,50,000 – Nil
   • ₹2,50,001 – ₹5,00,000 @5% = ₹12,500
   • ₹5,00,001 – ₹10,00,000 @20% = ₹95,000
   • Total Tax = ₹1,07,500
   • After 87A Rebate = ₹1,07,500 (No rebate as income is above ₹5 lakh)
   • Final Tax Payable (after cess): ₹1,11,800

For the New Tax Regime, taxable income remains ₹11,50,000 (₹50,000 standard deduction applicable), and tax liability is computed accordingly.

https://www.incometax.gov.in/iec/foportal/

Important Deadlines for Employers & Employees

• Investment Proof Submission: Usually by January-March each year.
• TDS Deposit by Employer: By the 7th of the following month.
• Quarterly TDS Return (Form 24Q): Must be filed on time.
• Form 16 Issuance: By June 15 every year.

Conclusion

Understanding TDS deduction under Section 192 is crucial for both employers and employees. Choosing between the old and new tax regimes significantly impacts tax savings, and proper planning can help minimize tax liabilities. Employees must declare investments and deductions timely, while employers should ensure accurate TDS deductions and compliance with due dates.

Stay updated with the latest tax changes to make informed financial decisions!

For More Information : https://taxgyany.com/