Method of Income Tax Calculation for the year 2013-14

Method of Income Tax Calculation for the year 2013-14 (Assessment Year 2014-15) – Section 192 of the Income Tax Act 1961

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SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”:

3.1  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 2013-14. The income-tax is required to be calculated on the basis of the rates  given above, subject to the  provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be deducted at   the time of each payment. No tax, however, will 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. 2,00,000/- or Rs.2,50,000/- or Rs. 5,00,000/-, as the case may be, depending upon the age of the employee.(Some typical examples of computation of tax are given at Annexure-I).

3.2   Payment of Tax on 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 its option, make  payment of the tax on such perquisites himself  without making any TDS from the salary of the  employee. However, the employer will have to pay the 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.

3.2.1  Computation of Average Income Tax:

For the purpose  of  making  the  payment  of  tax mentioned in para 3.2 above, tax  is to be determined at the  average  of   income  tax  computed on the  basis of 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.

3.2.2    Illustration:

The income chargeable under the head “salaries” of an employee below sixty years of age for the year inclusive of all perquisites is Rs.4,50,000/-, out of which, Rs.50,000/- is on account of non-monetary perquisites and  the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.

STEPS:

The    tax  so   paid  by  the  employer shall be deemed to be TDS made from the salary of the employee.

3.3  Salary From More Than One Employer:

Section 192(2) deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction  of  tax at source by such employer (as the   tax payer may choose)   from the aggregate salary of   the employee,  who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head “Salaries” due or received from   the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The

present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

3.4 Relief When Salary Paid in Arrear or Advance:

3.4.1    Under  section  192(2A)  where  the  assessee,  being    a  Government  servant  or  an employee  in  a     company,  co-operative  society,  local  authority,  university,  institution, association or body is entitled to the relief under  Section 89(1)  he may furnish to the person responsible  for making the payment referred to  in Para (3.1), such particulars in  Form No.

10E duly verified by him,  and thereupon the person responsible, as aforesaid, shall  compute the relief on the basis of such  particulars and take the same into  account  in    making  the deduction  under Para(3.1) above.

Here “University means  a  University  established  or  incorporated  by  or  under  a Central, State  or  Provincial    Act,  and  includes    an institution  declared  under  section 3 of  the University Grants  Commission  Act, 1956, to be a University for the purposes of that Act.

3.4.2    With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.

3.5  Information regarding Income under any other head:

(i) Section 192(2B)  enables a taxpayer to furnish  particulars  of income under any head other than “Salaries” ( not being a loss under any such head other than the loss under the head “ Income from house property”) received by the taxpayer for the same financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is properly signed and verified by the taxpayer in the  manner as prescribed under Rule

26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under:

I, …………………. (name of the assessee), do declare that what is stated above is true to the best of my information and belief.

It is reiterated that the DDO can take into account any loss only under the head “Income from house  property”.  Loss under any other head cannot be considered by the DDO for calculating the  amount  of  tax  to be deducted.

Download Income Tax Circular No: 8/2013 dated 10.10.2013 for instructions on Calculation of Income Tax for Salaried Employees

Click here for online GConnect Income Tax Calculator 2013-14 (Assessment Year 2014-15)