The following set of questions and answers will help every salaried employee to get answers to their problems relating to taxation of Salary Income for the financial year 2014-15.
Question 1: Please explain us in detail the provisions of a big circular of Central Board of Direct Taxes specially which has been issued for the salaried employees.
Answer 1 : Yes, a very very exhaustive Circular running into more than sixty six pages has been issued by the Central Board of Direct Taxes vide Circular No. 17 of 2014 dated 10th December 2014. Every year the Finance Ministry issues a very detailed and exhaustive circular to explain for the benefit of salaried employees in detail the aspects connected with taxation of Salary income. This circular is in respect of the salaries paid to the salaried employees during the Financial Year 2014-15. I would suggest every employee to read this circular in greater detail. You can obtain a free copy of the circular sitting at home if you log in to the website of the Government namely www.incometaxindia.gov.in.
Question 2: We understand that on Salary income income tax is payable. Cess is also payable being the Education Cess & Secondary & Higher Education Cess and the Circular also states that Surcharge is also payable. We have never heard about this surcharge concept. Can you please explain it?
Answer 2 : The salaried employees are required to pay income tax on their salary income together with other income at the slab rates of income tax. They are also required to make payment of two types of Education Cesses totalling to 3 per cent of the total tax payable. However, when we talk of the surcharge please note that the applicability of surcharge for the individual tax payer will arise only when the taxable income of the individual exceeds Rs. 1 crore during the financial year 2014-15. Only then the Surcharge of 10% is payable.
Question 3: The Circular speaks about the tax which the employer can pay for non-monetary perquisites.of the employee. Is this a new concept or what is the impact and meaning of this provision?
Answer 3: The concept is old one and this means that on non monetary perquisites which are given to an employee the employer can make payment of income tax on those perquisites by including it in the Salary income of the employee. However, the TDS will be required to be deducted at the same time when such tax was otherwise payable.
Question 4: What is the concept of computation of average income tax for the salaried employees and how far it is relevant in tax deduction of the salaried employee?
Answer 4: Firstly let us calculate the yearly salary of the employee, Then add to it the value of different types of perquisites the value of which is to be added as per Income tax Rules. Now arrives your total taxable salary. Calculate the tax and education cesses payable thereon. Now divide the total yearly tax payable by 12 and now the amount which comes in that is the amount which is to be deducted every month by the employer.
Question 5: Does this circular give any specific guidelines with regard to salary taxation from more than one employer?
Answer 5: Yes this is very very exhaustive circular giving details of all aspects of taxation of the salaried employee. It is provided in the circular that when the individual is working under more than one employer during the financial year or has changed from one employer to another employer, then it is the duty of the employee to submit to the new employer the details of income under the Head ‘Salaries’ which is due or received from the previous employer so that the present employer may deduct tax at source on the aggregate amount of salary. If, however, the employee does not submit the same, then both the employers will deduct tax according to the salary paid by them. But it will be the obligation of the employee to pay tax on the total amount at the slab rate which has been received during the financial year by way of salary.
Question 6: Whether the employer can grant relief when salary is paid in arrears or in advance and what is the procedure for the same?
Answer 6: The employer can grant relief when salary is paid in arrear or advance. This is available in terms of the provisions contained in section 89(1) of the Income tax Act, 1961 and for this purpose it is the duty of the employee to submit relevant particulars in Form No. 10E.
However, it may be noted that now a days the relief under section 89(1) cannot be granted on any amount received or receivable by the assessee on voluntary retirement or termination of the service.
Question 7: A salaried employee may have income other than salary income also. Is it the duty of the employer to deduct tax on the same or what is the procedure for this purpose?
Answer 7: Well it is not at all the duty of the employer to enquire from the employee as to what his other income is. However, if the employee desires, he can send information regarding income under any other head of income and request the employer to deduct TDS on the same. The only advantage of this is that the employee will be free from compliance with regard to advance payment of tax etc. For this purpose the employee is required to annex a simple statement and should give the details in computation of income arising to him other than salary income. Only then the employer will deduct tax on the same. If, however, the employee desires that he will not like to disclose his other income, then no problem at all. Let him make payment of taxes by way of Advance Tax.
Question 8: For most of the salaried employee the important point is getting a tax deduction for income from house property. Can you please explain in detail as to what the provisions of the circular are with reference to the deduction to be allowed to an employee regarding house property?
Answer 8: The circular gives detailed guidelines on computation of the income under the head ‘Income from House Property’. It specifically says that if the employee has taken the house property by taking a loan, in that event deduction on account of interest on loan will be allowed during the financial year 2014-15 up to the maximum extent of Rs. 2 lakhs. This benefit of granting deduction for interest on housing loan which will bring tax deduction or lower tax for the salaried employee and the benefit can be granted by the employer. For this purpose certain conditions have been laid down in the circular whereby the employee is required to give the details of the house property for which possession must have been received. Likewise, in case a new loan is taken to repay the earlier loan, in that situation the certificate should show the details of the principal and interest of the loan so repaid and the continuance of deduction will follow. If there are more than one houses and if they are given on rent and if there is by chance rental income but the interest payment is much higher, then the income resulting into loss then the benefit of this loss can also be given by the employer. However, apart from loss arising from house property income, no other types of losses can be granted benefit by the employer.
Question 9: By the way is it possible under any circumstances to deduct tax on salary income even at a lower rate of income tax then what is prescribed under Income tax Law?
Answer 9: Yes it is possible for the Assessing Officer of the tax payer to issue a certificate of either no deduction or lower deduction of TDS in terms of section 197 of the Income tax Act, 1961. For this purpose the assessee must file an application in Form No. 13 and once the certificate has been received from the Assessing Officer, then the tax may be deducted at lower rate also.
Question 10: We understand that generally TDS is required to be deducted on monthly basis. But is there any provision whereby the TDS may be deducted at one single go in the month of March only or if not then can it be deducted only on quarterly basis?
Answer10: The Circular states that the DDO of your employer may apply before the Assessing Officer of your company to permit deduction of TDS in terms of section 192. In the Income tax Law there is a specific mention of Rule 30(3) which allows for payment of TDS on quarterly basis also. So in certain circumstances if you find payment of TDS on monthly basis is a problem for your employer, then the employer may get in touch with its Assessing Officer and get permission to deduct TDS on quarterly basis.
Question 11: What is the impact of non- payment of tax deducted at source on the salary income of the employee specially when there is financial constraint on the employer?
Answer 11 : Financial constraint or no constraint please do remember the tax which is deducted on the salary income must be paid by the employer in time. If, however, the same cannot be paid or is not paid either intentionally or otherwise, then penal interest would be applicable on the employer and this penal interest will be payable by your employer and not by the salaried employee. Similarly, non-payment of the TDS deducted at source will even attract penalty in terms of section 271(C) of the Income tax Act, 1961 and this penalty would be payable by the employer. Likewise, the provisions relating to prosecution for a term between three months to seven years along with fine will also be applicable on the employer. Hence, those employers who are required to deduct tax at source should deduct the TDS amount on the salary income of the employee and make payment of the same within the time limit prescribed under the Income tax Law.
Question 12: Is the TDS Certificate required to be issued to each and every employee? Answer 12: The Government has clearly stated that it is the duty of the employer to provide TDS Certificate to the employee. This certificate should generally be provided by 31st of May. If. However, the DDO fails to issue the certificates to the person concerned as required by the provisions of the Income tax Law, in that case he will be liable to pay by way of penalty a sum equal to Rs. 100 for every day during which the failure continued. However, it may be noted that there is no obligation to issue the TDS Certificate in case TDS is not required to be deducted in view of the claim of the employee by way of exemptions and deductions in which event the TDS Certificate may not be issued to such an employee.
Question 13: Once the details of TDS have been submitted in the Quarterly Return, is it possible to carry out corrections if any in those Quarterly Returns?
Answer 13: Yes certain facilities have been provided to the tax deductors on the Government website which even takes care of online corrections of some typographical mistake in the TDS statement already submitted by them.
Question 14 : Earlier we remember that the TDS to be deducted was rounded off. Is there any change on this point in the new circular?
Answer 14: It is clearly mentioned in the detailed circular for salaried employees that the employer is advised to calculate total taxable income without rounding off and TDS should be deducted and quoted without rounding off of the TDS amount. This is a new provision which has been incorporated from this year.
Question 15: We understand that salaried employees are issued a certificate in respect of salary income in Form No. 16. But there is another one form known as Form No. 12BA. What is this?
Answer 15: It is true that Form No.. 16 is to be issued to the salaried employee. But Income tax Rules further provide that when the salary paid or payable is above Rs. 1,50,000, in that case the information should further be provided in Form No. 12BA with regard to the value of the perquisites. Hence, once the value of your perquisites exceeds Rs. 1,50,000, the employer will provide you Form No. 16 as also Form No. 12BA.
Question 16: We understand that new provisions have been introduced for TDS refund to Non Resident Indians. Can you please explain what these provisions are?
Answer 16: Generally speaking, for any tax payer if tax has been deducted of an higher amount, then the Income tax Department will refund the same to the assessee. However, the problem arises with regard to Non Resident Indians who may visit India for some time, receive the salary, tax on the same will be deducted at source and then they leave back to their country from India. In case some refund is due to such tax payers. It is very difficult for them to encash the refund amount. Hence, the circular provides specifically that for a Non-Resident Indian who has left India and has no bank account in India by the time the assessment orders are passed, in that situation the refund of any excess tax can be issued to the employer as the tax has been borne by him. This is a good provision which will help particularly the Non-Resident Indians.
Question 17: What are other important pointers in this circular.
Answer 17: Well the circular is already in sixty six pages., Hence, innumerable points are there which will help the tax payer particularly salaried employees to compute their tax liability in respect of salary income including perquisites etc. from time to time. Another important point is that all those persons who are going to receive House Rent Allowance and especially if the amount is received in the form of House Rent Allowance is up to Rs. 3000 per month, then the employee may be exempted from production of rent receipt. However, the definition of residential accommodation has been extended to cover accommodation for house, flat, farm house, hotel accommodation, motel, service apartment etc. etc. The Circular also contains detailed guidelines for claiming tax deductions under various sections.
Question 1: Please explain us in detail the provisions of a big circular of Central Board of Direct Taxes specially which has been issued for the salaried employees.
Answer 1 : Yes, a very very exhaustive Circular running into more than sixty six pages has been issued by the Central Board of Direct Taxes vide Circular No. 17 of 2014 dated 10th December 2014. Every year the Finance Ministry issues a very detailed and exhaustive circular to explain for the benefit of salaried employees in detail the aspects connected with taxation of Salary income. This circular is in respect of the salaries paid to the salaried employees during the Financial Year 2014-15. I would suggest every employee to read this circular in greater detail. You can obtain a free copy of the circular sitting at home if you log in to the website of the Government namely www.incometaxindia.gov.in.
Question 2: We understand that on Salary income income tax is payable. Cess is also payable being the Education Cess & Secondary & Higher Education Cess and the Circular also states that Surcharge is also payable. We have never heard about this surcharge concept. Can you please explain it?
Answer 2 : The salaried employees are required to pay income tax on their salary income together with other income at the slab rates of income tax. They are also required to make payment of two types of Education Cesses totalling to 3 per cent of the total tax payable. However, when we talk of the surcharge please note that the applicability of surcharge for the individual tax payer will arise only when the taxable income of the individual exceeds Rs. 1 crore during the financial year 2014-15. Only then the Surcharge of 10% is payable.
Question 3: The Circular speaks about the tax which the employer can pay for non-monetary perquisites.of the employee. Is this a new concept or what is the impact and meaning of this provision?
Answer 3: The concept is old one and this means that on non monetary perquisites which are given to an employee the employer can make payment of income tax on those perquisites by including it in the Salary income of the employee. However, the TDS will be required to be deducted at the same time when such tax was otherwise payable.
Question 4: What is the concept of computation of average income tax for the salaried employees and how far it is relevant in tax deduction of the salaried employee?
Answer 4: Firstly let us calculate the yearly salary of the employee, Then add to it the value of different types of perquisites the value of which is to be added as per Income tax Rules. Now arrives your total taxable salary. Calculate the tax and education cesses payable thereon. Now divide the total yearly tax payable by 12 and now the amount which comes in that is the amount which is to be deducted every month by the employer.
Question 5: Does this circular give any specific guidelines with regard to salary taxation from more than one employer?
Answer 5: Yes this is very very exhaustive circular giving details of all aspects of taxation of the salaried employee. It is provided in the circular that when the individual is working under more than one employer during the financial year or has changed from one employer to another employer, then it is the duty of the employee to submit to the new employer the details of income under the Head ‘Salaries’ which is due or received from the previous employer so that the present employer may deduct tax at source on the aggregate amount of salary. If, however, the employee does not submit the same, then both the employers will deduct tax according to the salary paid by them. But it will be the obligation of the employee to pay tax on the total amount at the slab rate which has been received during the financial year by way of salary.
Question 6: Whether the employer can grant relief when salary is paid in arrears or in advance and what is the procedure for the same?
Answer 6: The employer can grant relief when salary is paid in arrear or advance. This is available in terms of the provisions contained in section 89(1) of the Income tax Act, 1961 and for this purpose it is the duty of the employee to submit relevant particulars in Form No. 10E.
However, it may be noted that now a days the relief under section 89(1) cannot be granted on any amount received or receivable by the assessee on voluntary retirement or termination of the service.
Question 7: A salaried employee may have income other than salary income also. Is it the duty of the employer to deduct tax on the same or what is the procedure for this purpose?
Answer 7: Well it is not at all the duty of the employer to enquire from the employee as to what his other income is. However, if the employee desires, he can send information regarding income under any other head of income and request the employer to deduct TDS on the same. The only advantage of this is that the employee will be free from compliance with regard to advance payment of tax etc. For this purpose the employee is required to annex a simple statement and should give the details in computation of income arising to him other than salary income. Only then the employer will deduct tax on the same. If, however, the employee desires that he will not like to disclose his other income, then no problem at all. Let him make payment of taxes by way of Advance Tax.
Question 8: For most of the salaried employee the important point is getting a tax deduction for income from house property. Can you please explain in detail as to what the provisions of the circular are with reference to the deduction to be allowed to an employee regarding house property?
Answer 8: The circular gives detailed guidelines on computation of the income under the head ‘Income from House Property’. It specifically says that if the employee has taken the house property by taking a loan, in that event deduction on account of interest on loan will be allowed during the financial year 2014-15 up to the maximum extent of Rs. 2 lakhs. This benefit of granting deduction for interest on housing loan which will bring tax deduction or lower tax for the salaried employee and the benefit can be granted by the employer. For this purpose certain conditions have been laid down in the circular whereby the employee is required to give the details of the house property for which possession must have been received. Likewise, in case a new loan is taken to repay the earlier loan, in that situation the certificate should show the details of the principal and interest of the loan so repaid and the continuance of deduction will follow. If there are more than one houses and if they are given on rent and if there is by chance rental income but the interest payment is much higher, then the income resulting into loss then the benefit of this loss can also be given by the employer. However, apart from loss arising from house property income, no other types of losses can be granted benefit by the employer.
Question 9: By the way is it possible under any circumstances to deduct tax on salary income even at a lower rate of income tax then what is prescribed under Income tax Law?
Answer 9: Yes it is possible for the Assessing Officer of the tax payer to issue a certificate of either no deduction or lower deduction of TDS in terms of section 197 of the Income tax Act, 1961. For this purpose the assessee must file an application in Form No. 13 and once the certificate has been received from the Assessing Officer, then the tax may be deducted at lower rate also.
Question 10: We understand that generally TDS is required to be deducted on monthly basis. But is there any provision whereby the TDS may be deducted at one single go in the month of March only or if not then can it be deducted only on quarterly basis?
Answer10: The Circular states that the DDO of your employer may apply before the Assessing Officer of your company to permit deduction of TDS in terms of section 192. In the Income tax Law there is a specific mention of Rule 30(3) which allows for payment of TDS on quarterly basis also. So in certain circumstances if you find payment of TDS on monthly basis is a problem for your employer, then the employer may get in touch with its Assessing Officer and get permission to deduct TDS on quarterly basis.
Question 11: What is the impact of non- payment of tax deducted at source on the salary income of the employee specially when there is financial constraint on the employer?
Answer 11 : Financial constraint or no constraint please do remember the tax which is deducted on the salary income must be paid by the employer in time. If, however, the same cannot be paid or is not paid either intentionally or otherwise, then penal interest would be applicable on the employer and this penal interest will be payable by your employer and not by the salaried employee. Similarly, non-payment of the TDS deducted at source will even attract penalty in terms of section 271(C) of the Income tax Act, 1961 and this penalty would be payable by the employer. Likewise, the provisions relating to prosecution for a term between three months to seven years along with fine will also be applicable on the employer. Hence, those employers who are required to deduct tax at source should deduct the TDS amount on the salary income of the employee and make payment of the same within the time limit prescribed under the Income tax Law.
Question 12: Is the TDS Certificate required to be issued to each and every employee? Answer 12: The Government has clearly stated that it is the duty of the employer to provide TDS Certificate to the employee. This certificate should generally be provided by 31st of May. If. However, the DDO fails to issue the certificates to the person concerned as required by the provisions of the Income tax Law, in that case he will be liable to pay by way of penalty a sum equal to Rs. 100 for every day during which the failure continued. However, it may be noted that there is no obligation to issue the TDS Certificate in case TDS is not required to be deducted in view of the claim of the employee by way of exemptions and deductions in which event the TDS Certificate may not be issued to such an employee.
Question 13: Once the details of TDS have been submitted in the Quarterly Return, is it possible to carry out corrections if any in those Quarterly Returns?
Answer 13: Yes certain facilities have been provided to the tax deductors on the Government website which even takes care of online corrections of some typographical mistake in the TDS statement already submitted by them.
Question 14 : Earlier we remember that the TDS to be deducted was rounded off. Is there any change on this point in the new circular?
Answer 14: It is clearly mentioned in the detailed circular for salaried employees that the employer is advised to calculate total taxable income without rounding off and TDS should be deducted and quoted without rounding off of the TDS amount. This is a new provision which has been incorporated from this year.
Question 15: We understand that salaried employees are issued a certificate in respect of salary income in Form No. 16. But there is another one form known as Form No. 12BA. What is this?
Answer 15: It is true that Form No.. 16 is to be issued to the salaried employee. But Income tax Rules further provide that when the salary paid or payable is above Rs. 1,50,000, in that case the information should further be provided in Form No. 12BA with regard to the value of the perquisites. Hence, once the value of your perquisites exceeds Rs. 1,50,000, the employer will provide you Form No. 16 as also Form No. 12BA.
Question 16: We understand that new provisions have been introduced for TDS refund to Non Resident Indians. Can you please explain what these provisions are?
Answer 16: Generally speaking, for any tax payer if tax has been deducted of an higher amount, then the Income tax Department will refund the same to the assessee. However, the problem arises with regard to Non Resident Indians who may visit India for some time, receive the salary, tax on the same will be deducted at source and then they leave back to their country from India. In case some refund is due to such tax payers. It is very difficult for them to encash the refund amount. Hence, the circular provides specifically that for a Non-Resident Indian who has left India and has no bank account in India by the time the assessment orders are passed, in that situation the refund of any excess tax can be issued to the employer as the tax has been borne by him. This is a good provision which will help particularly the Non-Resident Indians.
Question 17: What are other important pointers in this circular.
Answer 17: Well the circular is already in sixty six pages., Hence, innumerable points are there which will help the tax payer particularly salaried employees to compute their tax liability in respect of salary income including perquisites etc. from time to time. Another important point is that all those persons who are going to receive House Rent Allowance and especially if the amount is received in the form of House Rent Allowance is up to Rs. 3000 per month, then the employee may be exempted from production of rent receipt. However, the definition of residential accommodation has been extended to cover accommodation for house, flat, farm house, hotel accommodation, motel, service apartment etc. etc. The Circular also contains detailed guidelines for claiming tax deductions under various sections.
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