Income-Tax Deduction from Salaries during the Financial year 2022-23: IT Circular No. 24/2022

Income-Tax Deduction from Salaries during the Financial year 2022-23 under Section 192 of the Income Tax Act, 1961: CBDT IT Circular No. 24/2022

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)
CENTRAL BOARD OF DIRECT TAXES

DEDUCTION OF TAX AT SOURCE- INCOME-TAX
DEDUCTION FROM SALARIES
UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961

DURING THE FINANCIAL YEAR 2022-23

CIRCULAR NO. 24/2022

NEW DELHI, the 07th December, 2022

Table of Contents

1. Definition of “salary”, “perquisite” and “profit in lieu of salary” (section 17)

1.1 What is salary?

1.2 What is a Perquisite?

1.3 What is profit in lieu of salary ?

2. Rates of income-tax as per Finance Act, 2022

2.1 Rates of tax

2.2 Surcharge on Income-tax

2.3 Health and Education Cess

2.4 Concessional Rates of Tax u/s 115BAC

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

3.1 Method of Tax Calculation

3.2 Payment of Tax on Perquisites by Employer

3.3 Computation of Average Income Tax

3.4 Salary from more than one employer

3.5 Relief When Salary Paid in Arrear or Advance

3.6 Information regarding Income under any other head

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

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

3.8 Adjustment for Excess or Shortfall of Deduction

3.9 Salary Paid in Foreign Currency

4. Persons Responsible For Deducting Tax And Their Duties

4.1 Tax Deduction at Source

4.1.2 Rates for tax deduction at source

4.2 Deduction of Tax at Nil or Lower Rate

4.3 Deposit of Tax Deducted

4.3.1 Due dates for payment of TDS

4.4 Mode Of Payment Of TDS

4.4.1 Compulsory filing of Statement by PAO, Treasury Officer, etc in case of payment of TDS by Book Entry u/ s 200 (2A)

4.4.2 Payment by an Income Tax Challan

4.5 Interest, Penalty & Prosecution for Failure to Deposit Tax Deducted

4.6 Furnishing of Certificate for Tax Deducted (Section 203)

4.7 Furnishing of particulars pertaining to perquisites, etc. – Section 192(2C)

4.8 Mandatory Quoting of PAN or Aadhaar number as the case may be and TAN

4.9 Compulsory Requirement to furnish PAN or Aadhaar by employee (Section 206AA)

4.10 Statement of deduction of tax under section 200(3) [Quarterly Statement of TDS]

4.11 Fee for default in furnishing statements u/s 200(3) of the Act

4.12 Rectification of mistake in filing TDS Statement

4.13 Penalty for failure to furnishing statements or furnishing incorrect information (section 271H)

4.14 TDS on Income from Pension
4.15 Matters pertaining to the TDS made in case of Non-Resident

5. Computation Of Income Under The Head “Salaries”

5.1 Income chargeable under the head “Salaries”

5.2 Value of Perquisites as per Rule

5.3 Incomes not included under the head “Salaries” (Exemptions)

5.4 Deductions u/s 16 of the Act

5.5 Deductions Under Chapter VI-A of the Act

5.5.1 Deduction in respect of Life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. (section 80C)

5.5.2 Deduction in respect of contribution to certain pension funds (Section 80CCC)

5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD)

5.5.4 Deduction in respect of health insurance premia paid, etc. (Section 80D)

5.5.5 Deductions in respect of expenditure on persons or dependants with disability

5.5.6 Deduction in respect of medical treatment, etc. (Section 80DDB)

5.5.7 Deduction in respect of interest on loan taken for higher education (Section 80E)

5.5.8 Deduction in respect of interest on loan taken for certain house property (Section 80EEA)

5.5.9 Deduction in respect of the interest payable on loan taken for the purpose of purchase of an
electric vehicle (80EEB)

5.5.10 Deductions on respect of donations to certain funds, charitable institutions, etc. (Section 80G)

5.5.11 Deductions in respect of rents paid (Section 80GG)

5.5.12 Deductions in respect of certain donations for scientific research or rural development (Section 80 GGA)

5.5.13 Deduction in respect of interest on deposits in savings account (Section 80TTA)

5.5.14 Deduction in respect of interest on deposits in case of senior citizens (Section 80TTB)

6. Rebate Of Rs12,500 For Individuals Having Total Income Upto Rs 5 Lakh [Section 87A]

7. TDS on payment of accumulated balance under recognised provident fund and contribution from
approved superannuation fund

8. DDOs to obtain evidence/proof of claims

9. Calculation of income-tax to be deducted

10. Miscellaneous

ANNEXURE

1. Some Illustrations
2. Form No. 12BA
   IIA Form No. 12BB
3. Procedure of preparation and furnishing Form 24G at TIN-Facilitation Centres (TIN-FCs)
4. The procedure of furnishing Form 24G
5. Person responsible for filing Form 24G in case of State Government Departments/ Central Government Departments
6. Procedure of preparation of quarterly statement of Deduction of Tax u/s 200 (3) VII Deptt. of Economic Affairs Notification dated 22.12.2013
7. CBDT’s Notification dated 24.11.2000 IX CBDT’s Notification dated 29.01.2001 X Form No. 10 BA

Annexure B
Annexure C

CIRCULAR NO: 24/2022

F. No. 275/15/2022-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
******

North Block, New Delhi
Dated the 7th Dec, 2022

SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2022-23 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.

*****

Reference is invited to Circular No. 04/2022 dated 15.03.2022 whereby the rates of deduction of income-tax from the payment of income under the head “Salaries” under Section 192 of the Income-tax Act, 1961 (hereinafter ‘the Act’), during the financial year 2021-22, were intimated. The present Circular contains the rates of deduction of Income-tax from the payment of income chargeable under the head “Salaries” during the financial year 2022-23 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). All the sections and rules referred are of Income-tax Act, 1961 and Income-tax Rules, 1962 respectively unless otherwise specified. The relevant Acts, Rules, Forms and Notifications are available at the website of the Income Tax Department- www.incometaxindia.gov.in.

As per section 192(1) of the Act, any person responsible for paying any income chargeable under the head “Salaries” shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under the head of Salary income for that financial year.

The section also provides that a person responsible for paying any income chargeable under the head “Salaries” shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof.

1. Definition of “salary”, “perquisite” and “profit in lieu of salary” (section 17)

1.1 What is salary?

As per section 15 of the Act, the following incomes are chargeable to income-tax under the head “Salaries”—

(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.

For any income to be called as Salary, the existence of employer-employee relation is must. As per section 17 of the Act, Salary includes the following:

i) wages;
ii) any annuity or pension;
iii) any gratuity;
iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;
v) any advance of salary;
vi) any payment received by an employee in respect of any period of leave not availed of by him;
vii) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule;

a) contributions made by the employer to the account of the employee in a recognized provident fund in excess of 12% of the salary of the employee, and

b) interest credited on the balance to the credit of the employee in so far as it is allowed at a rate exceeding such rate as may be fixed by Central Government by notification in the Official Gazette;

viii) the contribution made by the Central Government or any other employer to the account of the employee under the New Pension Scheme as notified vide Notification F.N.5/7/2003- ECB&PR dated 22.12.2003 (enclosed as Annexure VII) referred to in section 80CCD (para 5.5.3 of this Circular);

ix) the aggregate of all sums that are comprised in the transferred balance as referred to in sub rule (2) of rule 11 of Part A of the Fourth schedule of the Act in case of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof.

It may be noted that, since salary includes pension, tax at source would have to be deducted from pension also, unless otherwise so required. However, no tax is required to be deducted from the commuted portion of pension to the extent exempt under section 10 (10A).
Family Pension is chargeable to tax under the head “Income from other sources” and not under the head “Salaries”. Therefore, provisions of section 192 of the Act are not applicable. Hence, DDOs are not required to deduct TDS on family pension paid to person.

1.2 What is a Perquisite?

As per Section 17(2) of the Act, perquisites include:

i) The value of rent-free accommodation provided to the employee by his employer;

ii) The value of any concession in the matter of rent in respect of any accommodation provided to the employee by his employer;

iii) The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases:

a) By a company to an employee who is a director of such company;

b) By a company to an employee who has a substantial interest in the company;

c) By an employer (including a company) to an employee, who is not covered by (a) or (b) above and whose income under the head “Salaries” (whether due from or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds Rs.50,000/-.

[What constitutes concession in the matter of rent have been prescribed in Explanations 1 to 4 below section 17(2)(ii) of the Act.]

iv) Any sum paid by the employer in respect of any obligation which would otherwise have been payable by the assessee.

v) Any sum payable by the employer, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund or other specified funds u/s 17, to effect an assurance on the life of an assessee or to effect a contract for an annuity.

vi) The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the employee. For this purpose,

(a) “specified security” means the securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 and, where employees’ stock option has been granted under any plan or scheme therefore, includes the securities offered under such plan or scheme;

(b) “sweat equity shares” means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for
providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;

(c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from the assessee in respect of such security or shares;

(d) “fair market value” means the value determined in accordance with the method as may be prescribed (refer Rule 3(9) of the IT Rules);

(e) “option” means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;

(vii) the amount or the aggregate of amounts of any contribution made to the account of the assessee by the employer—

(a) in a recognised provident fund;

(b) in the scheme referred to in sub-section (2) of section 80CCD; and

(c) in an approved superannuation fund,

to the extent it exceeds seven lakh and fifty thousand rupees in a previous year;

(viia) the annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme referred to in clause

(vii) above to the extent it relates to the contribution referred to in the said clause which is included in total income; and

(viii) the value of any other fringe benefit or amenity as prescribed in Rule 3.

However, the following are not included as perquisite,—

(i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;

(ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family—

(a) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;

(b) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed guidelines;

[(c) in respect of any illness relating to COVID-19 subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf. This has been inserted as amendment through Finance Act 2022 with retrospective effect from 01.04.2020 and thus accordingly, applies in relation to the assessment year 2020-2021 and subsequent assessment years. The conditions have been notified vide CBDT Notification No. [S.O. 3703(E)] 90/2022 dated: 05.08.2022.

1.3 What is profit in lieu of salary ?

As per Section 17(2) of the Act, ‘Profits in lieu of salary’ include:

I. the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto;

II. any payment (other than any payment referred to in clauses (10), (10A), (10B), (11),
(12) (13) or (13A) of section 10) due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.

“Keyman insurance policy” shall have the same meaning as assigned to it in section 10(10D);

III. any amount due to or received, whether in lump sum or otherwise, by any assessee from any person—

(A) before his joining any employment with that person; or
(B) after cessation of his employment with that person.

2. Rates of Income-tax as per Finance Act, 2022

As per the Finance Act, 2022, the rates of income tax for the FY 2022-23 (i.e. Assessment Year 2023-24) are as follows:

2.1 Rates of tax

A. Normal Rates of tax: In the case of every individual other than the individuals referred to in para (B) and (C) below:

B. Rates of tax for every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the financial year:

C. In case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the financial year:

2.2 Surcharge on Income-tax

The amount of Income-tax computed in accordance with the provisions of section 111A or section 112 or section 112A or the provisions of section 115BAC of the Income-tax Act, shall be increased by a surcharge for the purposes of the Union, calculated, in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act 1961—

(a) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent. of such income- tax;

(b) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding one crore rupees but not exceeding two crore rupees, at the rate of fifteen per cent. of such income-tax;

(c) having a total income (excluding the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent. of such income-tax;

(d) having a total income (excluding the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding five crore rupees, at the rate of thirty-five per cent of such income-tax; and

(e) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A) exceeding two crore rupees, but is not covered under clauses (c) and (d), shall be applicable at the rate of fifteen per cent. of such income-tax:

Provided that in case where the total income includes any income by way of dividend or income chargeable under section 111A, section 112 and section 112A of the Income-tax Act, the rate of surcharge on the amount of Income-tax computed in respect of that part of income shall not exceed fifteen per cent.:

Provided further that in the case of persons mentioned above having total income exceeding,
—
(a) fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income- tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees;

(b) one crore rupees but does not exceed two crore rupees, the total amount payable as income- tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees;

(c) two crore rupees but does not exceed five crore rupees, the total amount payable as income- tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of two crore rupees by more than the amount of income that exceeds two crore rupees;

(d) five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of five crore rupees by more than the amount of income that exceeds five crore rupees.

2.3 Health and Education Cess

The amount of Income tax as increased by the applicable surcharge shall be further increased by an additional surcharge, for the purposes of Union, to be called “Health and Education Cess on Income-tax”.
Health and Education Cess on Income-tax shall be levied at the rate of four percent of income tax including surcharge wherever applicable. No marginal relief shall be available in respect of such cess.

2.4 Concessional Rates of Tax u/s 115BAC

Section 115BAC of the Income-tax Act, 1961 was inserted by the Finance Act, 2020 w.e.f. Assessment Year 2021-22. The new section 115BAC provides that the income-tax payable in respect of the total income of a person, being an individual or a HUF, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, shall, at the option of such person, be computed at the concessional rates as given in table below:

Such person is required to exercise the option in the prescribed manner along with the return of income to be furnished under section 139(1) of the Act for the previous year relevant to the assessment year. The concessional rates of tax provided under section 115BAC are subject to the condition that the total income of the individual or HUF shall be computed without any exemption or deduction specified under clause (i) of sub-section (2) of section 115BAC and without set off of any loss specified in clause (ii) of sub-section 2 of the said section. Further, surcharge on income-tax as contained in Para 2.2 shall be applicable in case of person opting for concessional tax regime.

Furthermore, in case of a person having income from business or profession, such person is required to exercise the option in prescribed manner on or before the due date specified under such-section (1) of section 139 of the Act for any previous year relevant to assessment year commencing on or after 01.04.2021 and such option once exercised shall apply to subsequent assessment years. However, in case of such persons, the option once exercised can be withdrawn only once and such person shall never be eligible to exercise the option again unless such person ceases to have income from business or profession.

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