CBDT Circular on deduction of Tax ( TDS ) on Salaries u/s 192 of the Income Tax Act, 1961 during FY 2020-21
CBDT has issued circular no. 20/2020 specifying guidelines for TDS on Salaries for the Financial Year 2019-20.
CBDT Circular – TDS on Salaries during FY 2020-21
The Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head “Salaries” during the financial year 2020-21 and explains certain related provisions of the Income Tax Act 1961 and Income-tax Rules, 1962.
Every person who is responsible for paying any income chargeable under the head “Salaries” is required to deduct income-tax on the estimated income of the assessee under the head “Salaries” for the financial year 2020-21.
The TDS is required to be calculated on the basis of the salary paid on the tax slab the employee fall , subject to the provisions related to requirement to furnish PAN or Aadhaar number, as the case may be, 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 a case unless the estimated salary income including the value of perquisites, for the financial year exceeds the normal tax slabs or if so opted by the employee in Form under the new Tax Regime u/s 115BAC.
For the purpose of making the payment of tax it 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.
In case of the employee has received salary from more than one employer, the employee shall furnish to the present/chosen employer details 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).
Where with respect to arrears, the employee is entitled to the relief under Section 89 he may furnish to the employer, such particulars in Form No. 10E duly verified by him.
The Particulars in respect to income under any other head to be furnished by the employee to the employer in a simple statement, which is properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2) and shall be annexed to the simple statement.
Loss under any head (other than house property) cannot be considered by the DDO for calculating the amount of tax to be deducted.
For taking into account loss from House Property up to Rs. 2 lakhs , the DDO shall ensure filing of the above said declaration along with computation of the loss. The DDO should keep the details of address of property Gross Annual Rent, Municipal Taxes paid, interest paid and claimed as deduction etc.
The Circular also specifies the conditions for claim of deduction of interest on borrowed capital for computation of income from house property u/s 24(b). It is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
Where Non-Residents are deputed to work in India and taxes are borne by the employer, if any refund becomes due to the employee after he has already left India and has no bank account in India by the time the assessment orders are passed, the refund can be issued to the employer as the tax has been borne by it [Circular No. 707 dated 11.07.1995].
In respect of non-residents, the salary paid for services rendered in India shall be regarded as income earned in India. It has been specifically provided in the Act that any salary payable for rest period or leave period which is both preceded or succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India.
The Circular list outs the relaxations provided by the Taxation and other Laws (Relaxation of Certain Provisions) Act, 2020 in respect of interest, penalty and prosecution for late deposit of TDS and issue of Form 16.
While filing TDS returns and / or for the purpose of Form 16, the employee shall quote the gross amount of salary including any amount exempt u/s 10. Employee should quote total taxable income in TDS return without rounding off and TDS should be deducted accordingly, without rounding off of TDS also.
For the purpose of deduction u/s 80C it is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature.
The Circular Circular mandates that DDO should obtain the proof/evidence of various claims by the employee, i.e. HRA (where rent exceeds Rs. 1 lakhs) , housing loan interest and deductions claimed under Chapter VIA
The Circular contains various provisions, illustrations and sample forms for ready reference.
Download CBDT Circular No. 20/2020 Click Here >>
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