Section 192 of the the Income-tax Act, 1961: Broad scheme of Tax Deduction at Source from “Salaries”

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 2022-23. The income-tax is required to be calculated on the basis of the rates given in para 2 above, 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 TDS u/s 192 shall be deducted at the time of each payment. The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee. It may be noted that tax liability may not be the

same in case the employee opts for concessional tax regime under section 115BAC of the Act.

As per section 192(1C) of the Act, a person, being an eligible start-up referred to in section 80- IAC, responsible for paying any income to the assessee being perquisite of the nature specified in sub-clause (vi) of clause (2) of Section 17 in any previous year relevant to Assessment year 2021-22 and thereafter, shall deduct or pay, as the case may be, tax on such income within 14 days—

  1. after the expiry of 48 months from end of the relevant assessment year; or
  2. from the date of sale of such specified security or sweat equity share by the assessee; or
  3. from the date of the assessee ceasing to be the employee of the person,

whichever is the earliest, on the basis of rates in force for the financial year in which the said specified security or sweat equity share is allotted or transferred.

Any employee intending to opt for the concessional rates of tax under section 115BAC of the Act, may intimate the deductor, being his employer, of such intention for each previous year and upon such intimation, the deductor shall compute his total income, and make TDS thereon in accordance with the provisions of section 115BAC. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 115BAC of the Act. The intimation so made to the deductor shall be only for the purpose of TDS during the previous year and cannot be modified during that year. (CBDT Circular No. C1 of 2020 dated 13.04.2020)

No tax, however, will be required to be deducted at source in a case unless the estimated salary income including the value of perquisites is taxable after giving effect to the exemptions, deductions and relief as applicable. (Some typical illustrations of computation of tax are given at Annexure-I).

Payment of Tax on Perquisites by Employer

“Perquisite” may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. Perquisites may be in the form of cash or in the form of kind, but will always form part of the salary.

Perquisites are divided in two parts i.e. monetary perquisites and non-monetary perquisites. Monetary perquisites are taxable for all employees and non-monetary perquisites are taxable in the hands of specified employees. The following employees are deemed as specified


  1. A director-employee
  2. An employee who has substantial interest (i.e. beneficial owner of equity shares carrying 20% or more voting power) in the employer-company
  3. An employee whose monetary income under the salary exceeds Rs.50,000.

The taxable value of perquisites can be determined on the basis of specific rules for valuation of certain perquisites as laid down in Rule 3 of the Income-tax Rules

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. As per Section 10(10CC) of the Act, the tax paid on such non-monetary perquisites by the employer is exempt from tax in the hands 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.

Computation of Average Income Tax

For the purpose of making the payment of tax on the payment of any income in the nature of non-monetary perquisites, mentioned in para 3.2 above, tax payable is to be determined by calculating the average rate of tax on the income chargeable under the head “salaries”, including the value of perquisites for which tax has been paid by the employer himself.


The income chargeable  under the head “salaries” of an employee below  sixty years of age during the Financial Year 2021-22, is Rs. 6,00,000/- (inclusive of all perquisites), 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.


Income Chargeable under the head ―”Salaries” inclusive of all perquisitesRs. 6,00,000/-
Tax as per normal rates on Total Salary (including Cess)Rs. 33,800/-
Average Rate of Tax [(33, 800/6,00,000) X100]5.63%
Tax payable on Rs.50,000/= (5.63% of 50,000)Rs. 2815
Amount required to be deposited each monthRs. 235= 2815/12

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

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/employee 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).

Relief When Salary Paid in Arrear or Advance

Section 89 of the Act provides for relief to an assessee to whom salary is being paid in arrear or advance as a result of which, his total income is assessed at a higher rate than that at which it would otherwise have been assessed. Such an assessee can make an application to the Assessing Officer who shall grant relief in the prescribed manner. Rule 21A of the Rules provide the manner for computation of such relief.

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, he/she may furnish to the person responsible for making the payment referred to in Para (3.1), such particulars in Form No. 10E (Rule 21AA of the Income tax Rules) 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. Further, such assessee shall upload the aforesaid Form 10E electronically in the e-Filing portal along with the return of income.

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 purpose of that Act.

  • 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.

Information regarding Income under any other head

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 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. It may be noted that loss under the head “Income from house property” can be set off only up to Rs. 2.00 lakh with the income under any other head of income in view of the amendment to section 71 of the Act vide Finance Act, 2017. Hence, loss under the head “Income from house property” in excess of Rs. 2.00 lakh is to be ignored for calculating the amount of tax deduction.

Computation of income under the head “Income from house property”

Section 192(2D) enables the person responsible for making the payment, to obtain the evidence or proof of the prescribed claims, including claim for set-off of loss. While taking into account the loss from House Property, the DDO shall ensure that the employee files the declaration referred to above and encloses therewith a computation of such loss from house property. Following details shall be obtained and kept by the employer in respect of loss claimed under the head “Income from House Property” separately for each house property:

  1. Gross annual rent/value
  2. Municipal Taxes paid, if any
  3. Deduction claimed for interest paid, if any
  4. Other deductions claimed
  5. Address of the property

The DDO shall also ensure furnishing of the evidence or particulars in Form No. 12BB in respect of deduction of interest as specified in Rule 26C read with section 192 (2D).

Conditions for claim of deduction of interest on borrowed capital for computation of Income from House Property [section 24(b)]

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under :

  1. the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. In case the house property is not occupied by the employee in view of his place of the employment being at other place, then his residence in that other place should not be in a building belonging to him.
  2. the quantum of deduction allowed as per table below:

In case of Serial No. 3 above:

  • The acquisition or construction of the house should be completed within 5 years from the end of the FY in which the capital was borrowed. Hence, 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.
    • Further any prior period interest for the FYs upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments for the FY in question and subsequent four FYs.
      • The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest

payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the details of Principal and Interest of the loan so repaid.

As discussed in para 4.6.5 section 192(2D) read with rule 26C makes it mandatory for the DDO to obtain following details/evidences in respect of Interest deductible.

  • Interest payable or paid
  • Name of the lender
  • Address of the lender
  • PAN or Aadhaar number of the lender

PAN or Aadhaar number, as the case may be, of the lender being financial institution or employer, is to be provided if it is available with the employee. However, in case of other lenders, obtaining of PAN or Aadhaar number is mandatory by the DDO.

Adjustment for Excess or Shortfall of Deduction

The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in Tax deduction arising out of any previous deduction or failure to deduct during the financial year.

Salary Paid in Foreign Currency

For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source (see Rule 26 and Rule 115).

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