Section 192 Of Income Tax Act: Overview, Rate of Tax Deduction, Importance

Section 192 of the Indian Income Tax act discusses the TDS or tax deducted at the source commonly implemented on an individual’s salary or income. Your employer must deduct TDS from the total amount of remuneration payable to you. You also need to remember that employers only deduct TDS from your taxable income.

The regular salary you receive from your employer is regarded as your income, and the income tax rates apply to your salary every financial year. The total amount deducted through TDS under section 192 of Income Tax act will be reflected in Form 16, which you can receive directly from your employer. TDS ensures that the government collects income tax from the source itself.

Without your PAN details, you will have to pay 20% TDS on your income.

An Overview of Section 192 of the Income Tax Act

Most of us who have worked for a company or an organization come across words like TDS. TDS is the acronym for tad deduction at the source, which applies to your salary as an employee of any company or organization. Section 192 of Income Tax act, 1961, directly refers to the TDS on your salary.

Depending on the tax rate imposed on your salary, your company needs to accurately deduct income tax from your taxable income for that particular financial year. At the end of the financial year, you will be able to receive Form 16, which will give you the particulars on the TDS that has been deducted from your salary.

Who is responsible for deducting TDS under section 192 of the Income Tax act?

According to section 192 of Income Tax act, 1961, the owner of a company or employer is responsible for abstracting TDS. Furthermore, to apply section 192, the employer-employee relationship is obligatory.

You also need to remember that the status of the employer and the total number of employees do not matter when it comes to the calculation and abstraction of the TDS (applicable under section 192).

The list of employers includes

  • Body of Individuals (BOIs)
  • Every artificial judicial person
  • Trusts
  • Local authorities
  • Co-operative Societies
  • Association of Persons (AOPs)
  • Partnership firms
  • Individuals
  • Companies (both public and private).

What is the Condition for Tax Deduction Under Section 192?

It is the employer’s responsibility to deduct TDS and credit it to the government account. Also, under the provisions of the Income Tax Act, 1961, employers need to deduct the TDS at the time of paying the salary of the employee. Furthermore, TDS is deducted from the previous salaries if you (as an employee) receive an advance salary payment.

More importantly, every employer needs to deduct TDS on the salary of any employee who has not furnished their Permanent Account Number (PAN) details. In contrast, their salaried income far surpasses the basic exemption limit. If you do not surpass the basic exemption limit, your employer is not obliged to deduct TDS from the same.

Let us look at the exemption limits where TDS is inapplicable:

  • Senior citizens aged more than 80 years: Exemption limit rupees 5 lakhs
  • Senior citizens aged between 60 to 80 years: Exemption limit rupees 3 lakhs
  • Residents of India aged less than 60 years: Exemption limit rupees 2.5 lakhs.

Tax Deduction Rate Under Section 192 of the Indian Income Tax Act

Section 192 of Income Tax act does not have any specified tax deduction rates but TDS will be applicable according to the income tax slab in a particular financial year. If you do not provide your PAN details to the employer, they can deduct 20 percent TDS from your salary.

Your employer will measure the total taxable income after going through various tax exemptions and deductions available under multiple sections of the Income Tax Act, 1961. After all the exemptions have been accounted for, you can deduct the TDS depending on the income tax slab rate.

At the beginning of any financial year, employers calculate the approximate amount of tax they must pay for that specific financial year. While determining TDS, the employer divides estimated tax liability by 12 (total number of months in a year). In this case, the employer must assume that you will continue working for the entire financial year.

What is the Importance of Section 192 of the Income Tax Act?

Section 192 of Income Tax act covers TDS from multiple income sources, such as the money you have withdrawn from your provident fund. If you have already submitted your PAN card details, you must pay 10 percent of the withdrawal amount. On the other hand, TDS will not be deducted if you have submitted Form 15G or Form 15H.

With the help of section 192 of Income Tax act, the government of India can easily collect income tax from the source and make sure that you have fulfilled your tax obligations as a resident of this country. Additionally, you won’t have to pay a huge tax to the government because of this act.

With the help of section 192 of Income Tax act, companies can estimate how much they need to deduct from their employees’ income and deposit it into the government’s account. It also keeps the individual’s tax burden light so they can properly manage their finances while not worrying about taxes.