CBDT Circular On TDS From Salaries--Points to Be Taken Care of By Tax Deductors

CA. Manoj Gupta

Every year the CBDT issues a Circular on source income-tax deduction from salaries under section 192 of the Income Tax Act, 1961. This year is no different and Circular Number 24/2022 dated 07-12-2022 has been issued. This circular details out the provisions relating to salaries and procedure for deduction of tax by DDOs. At the same time this circular details out certain points to be kept in mind by DDOs while deducting tax. All these points are being discussed in this update.

1. TDS on family pension

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.

2. Method of Tax Calculation

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.

3. 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).

4. Information regarding Income under any other head

It is reiterated that the Drawing and disbursing officer (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.

5. 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:

(a) Gross annual rent/value

(b) Municipal Taxes paid, if any

(c) Deduction claimed for interest paid, if any

(d) Other deductions claimed

(e) 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).

6. 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 :

i. 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.

ii. the quantum of deduction allowed as per table below:

	Sl. No.	Purpose of borrowing capital	Date of borrowing capital	Maximum Deduction Allowable
	1	Repair or renewal or reconstruction of the house	Any time	Rs. 30,000/-
	2	Acquisition or construction of the house	Before 01.04.1999	Rs. 30,000/-
	3	Acquisition or construction of the house	On or after 01.04.1999	Rs. 1,50,000/-(upto AY 2014-15)
				Rs. 2,00,000/-(w. e. f. AY 2015-16)
	4	Aggregate deduction of Sl. 1 and Sl. 3 of the table above shall not exceed Rs.2,00,000/- from the Financial Year 2019-20.

In case of Serial No. 3 above:

(a) 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.

(b) 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.

(c) 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.

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

(i) Interest payable or paid

(ii) Name of the lender

(iii) Address of the lender

(iv) 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.

7. Points to be kept in mind while filling up Form No. 16

Vide CBDT Notification 36/2019, dated 12-04-2019, Income-Tax (3rd Amendment Rules) 2019 were notified in which the 'Part-B (Annexure)' of Form 16 under Appendix-II of the Income Tax Rules, was modified. Form 16 has been further modified vide Income-tax (26th Amendment) Rules, 2021 notified on 02.09.2021.

Following points are to be kept in mind while filling amended Form 16:

1. Government deductors are required to fill information in item I of Part A if tax is paid without production of an income-tax challan and in item II of Part A if tax is paid accompanied by an income-tax challan.

2. Non-Government deductors are to fill information in item II of Part A.

3. The deductor shall furnish the address of the Commissioner of Income-tax (TDS) having jurisdiction as regards TDS statements of the assessee.

4. If an assessee is employed under one employer only during the year, certificate in Form No. 16 issued for the quarter ending on 31st March of the financial year shall contain the details of tax deducted and deposited for all the quarters of the financial year.

5. (i) If an assessee is employed under more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers.

(ii) Part B (Annexure-I) of the certificate in Form No.16 may be issued by each of the employers or the last employer at the option of the assessee.

(iii) Part B (Annexure-II) of the certificate in Form 16 may be issued by the specified bank to a specified senior citizen (refer section 194P of the Act).

6. In Part A, in items I and II, in the column for tax deposited in respect of deductee, furnish total amount of tax, surcharge and health and education cess.

7. Deductor shall duly fill details, where available, in item numbers 2(f) and 10(k) before furnishing of Part B (Annexure) to the employee.

8. If an assessee is employed by more than one employer during the year, each of the employers shall issue Part A of the certificate in Form No. 16 pertaining to the period for which such assessee was employed with each of the employers and Part B may be issued by each of the employers or the last employer at the option of the assessee.

9. TDS certificate (Form 16) would be generated for the deductee only if Valid PAN or Aadhaar number as the case may be, is correctly mentioned in the Annexure II of Form 24Q in Quarter 4 filed by the deductor. Moreover, employers are advised to ensure in Form 16 that the status of 'matching' with respect to 'Form 24G/OLTAS' is 'F'. If the status of matching is other than 'F', kindly take necessary action promptly to rectify the same. It is pertinent to mention here that certain facilities have been provided to the deductors at website www.tdscpc.gov.in/including online correction of statements (Form 24Q).

8. Issues in filing statement in Form No. 24Q

Certain essential points regarding the filing of the Statement in Form 24Q are mentioned below:

(a) The employer should quote the gross amount of salary (including any amount exempt under section 10 and the deductions under chapter VI A) in column 321 (Amount paid/credited) of Annexure I of Form 24Q as per NSDL RPU (hereafter Return Preparation Utility) and mentioned codes as per Form 24Q of IT Rules, 2022.

(b) The employer should quote the amount of salary excluding any amount exempt under section 10 in column 338 (Total amount of gross salary) of Annexure II of Form 24Q as per NSDL RPU.

(c) The reason for non-deduction, lower rate of deduction (as provided under section 197) or higher rate of deduction (on account of non-furnishing of PAN by the deductee) has to be mentioned in column 328 of Annexure I of Form 24Q.

(d) The total amount of salary received from other employer(s) to be quoted in column 339 of Annexure II of Form No. 24Q.

(e) Employer is advised to quote Total Taxable Income (Column 380) in Annexure II without rounding-off and TDS should be deducted and reported accordingly i.e. without rounding-off of TDS also.

(f) It is mandatory for non-Government deductors to quote PAN. In case of Government deductors,'PANNOTREQD' should be mentioned.

(g) Fee paid under section 234E for late filling of TDS statement to be mentioned in separate column of' Fee (column 306)

(h) In column 308, Government DDOs to mention the amount of TDS remitted by the PAO/TO/CDDO. Other deductors to write the exact amount of TDS deposited through challan.

(i) In column 309, Government deductors to write 'B' where TDS is remitted to the credit of Central Government through book adjustment. Other deductors to write'C'.

(j) Challan/Transfer Voucher (CIN/BIN) particulars, i.e. 310, 311, 312 should be exactly the same as available at Tax Information Network.

(k) In column 313, mention minor head as marked on the challan.

(l) Where an employer deducts from the emoluments paid to an employee or pays on his behalf any contributions of that employee to any approved superannuation fund, all such deductions or payments should be included in the statement.

(m) Permanent Account Number of landlord shall be mandatorily furnished where the aggregate rent paid during the previous year exceeds one lakh rupees.

(n) Permanent Account Number of lender shall be mandatorily furnished where the housing loan, on which interest is paid, is taken from a person other than a Financial Institution or the Employer.

9. Matters pertaining to the TDS made in case of Non-Resident

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/she 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].

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

Particulars	Case-1		Case-2		Case-3
	Self & Family (no one of them is a senior citizen)	Parents (no one of them is a senior citizen)	Self & Family (no one of them is a senior citizen)	Parents (at least one of them is a senior citizen)	Self & Family (at least one of them is a senior citizen)	Parents (at least one of them is a senior citizen)
Medical Insurance, etc.*	25,000	25,000	25,000	50,000	50,000	50,000
Medical Expenditure**	--	--	--	50,000	50,000	50,000
Maximum deduction allowable	25,000	25,000	25,000	50,000	50,000	50,000
Aggregate amount of deduction allowable under section 80D	50,000		75,000		1,00,000

* Includes (i) contribution to the Central Government health Scheme/notified scheme for self & family; and (ii) amount paid for preventive health check-up up to Rs. 5,000.

** Allowable only if no amount is paid for medical insurance.

Note 1 : The payment for preventive health check-up can be made either in cash or in any other mode, whereas payment other than preventive health checkup can be made only in non-cash mode.

Note 2 : Finance Act, 2018 amended section 80D of the Act to provide that in case of single premium health insurance policy having cover of more than one year, the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the monetary limits specified above.

Here

(i) 'family' means the spouse and dependent children of the employee.

(ii) 'Senior citizen' means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.

1. The DDO must ensure that the medical insurance referred to above shall be in accordance with a scheme made in this behalf by --

(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 and approved by the Central Government in this behalf; or

(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999.

2. Lump sum payment of health insurance premium.

In case, a lump sum amount is paid to effect or to keep in force an insurance on health for more than a year, proportionate deduction (appropriate fraction) will be allowable for the year in which it was paid and for subsequent year/years in accordance with sub- section (4A) of Section 80D.

11. Deductions in respect of expenditure on persons or dependents with disability

(i) Deductions in respect of maintenance including medical treatment of a dependent who is a person with disability (section 80DD):

Under section 80DD, where an employee, who is a resident in India, has, during the previous year --

(a) incurred any expenditure for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability; or

(b) paid or deposited any amount under a scheme framed in this behalf by the Life Insurance Corporation or any other insurer or the Administrator or the specified company subject to the conditions specified in this regard and approved by the Board in this behalf for the maintenance of a dependent, being a person with disability, the employee shall be allowed a deduction of a sum of Rs. 75,000 from his gross total income of that year.

However, where such dependent is a person with severe disability, an amount Rs. 1,25,000 shall be allowed as deduction subject to the specified conditions.

The deduction under (b) above was earlier to be allowed only if the following condition was fulfilled:

(i) the scheme referred to in (b) above provides for payment of annuity or lump sum amount for the benefit of a dependent, being a person with disability, in the event of the death of the individual in whose name subscription to the scheme has been made;

With effect from 01-04-2022, the provision has been amended and allows for the deduction on satisfaction of either of the conditions (i) or (ii) mentioned in subclause (a) of clause 2 of section 80DD. The same is as under:

(a) the scheme referred to in clause (b) of sub-section (1) provides for payment of annuity or lump sum amount for the benefit of a dependant, being a person with disability,--

(i) in the event of the death of the individual or the member of the Hindu undivided family in whose name subscription to the scheme has been made; or

(ii) on attaining the age of sixty years or more by such individual or the member of the Hindu undivided family, and the payment or deposit to such scheme has been discontinued;

(b) the assessee nominates either the dependent, being a person with disability, or any other person or a trust to receive the payment on his behalf, for the benefit of the dependent, being a person with disability.

However, if the dependent, being a person with disability, predeceases the employee, an amount equal to the amount paid or deposited under sub-para(b) above shall be deemed to be the income of the employee of the previous year in which such amount is received by the employee and shall accordingly be chargeable to tax as the income of that previous year.

The assessee, claiming a deduction shall furnish a copy of the certificate issued by the medical authority in the prescribed form and manner, along with the return of income under section 139 in the assessment year in which the deduction is claimed. However, no deduction shall be allowed for any assessment year relating to any previous year beginning after the expiry of the previous year during which the said certificate of disability had expired, unless a new certificate in the prescribed form and manner, is obtained.

(ii) Deductions in respect of a person with disability [Section 80U]

Under section 80U, in computing the total income of an individual, being a resident, who, at any time during the previous year, is certified by the medical authority to be a person with disability, there shall be allowed a deduction of a sum of Rs. 75,000. However, where such individual is a person with severe disability, a higher deduction of Rs. 1,25,000 shall be allowable.

(iii) Duty of DDO

DDOs should note that 80DD deduction is in case of the dependent of the employee whereas 80U deduction is in case of the employee himself. However, under both the sections, the employee shall furnish to the DDO the following:

1. A copy of the certificate issued by the medical authority as defined in Rule 11A(1) in the prescribed form as per Rule 11A(2) of the Rules. The DDO has to allow deduction only after seeing that the Certificate furnished is from the Medical Authority defined in this Rule and the same is in the form as mentioned therein.

2. Further in cases where the condition of disability is temporary and requires reassessment of its extent after a period stipulated in the aforesaid certificate, no deduction under this section shall be allowed for any subsequent period unless a new certificate is obtained from the medical authority as in 1 above and furnished before the DDO.

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

Section 80DDB allows a deduction in case of employee, who is resident in India, during the previous year, of any amount actually paid for the medical treatment of such disease or ailment as may be specified in the rules 11DD (1) for himself or a dependent. The deduction allowed is equal to the amount actually paid is in respect of the employee or his dependent or Rs. 40,000 whichever is less.

Now the deduction can be allowed on the basis of a prescription from an oncologist, a urologist, nephrologist, a hematologist, an immunologist or such other specialist, as mentioned in Rule 11DD. However, the amount of the claim shall be reduced by the amount if any received from the insurer or reimbursed by the employer. Further in case of the person against whom such claim is made is a senior citizen (60 age years or more) then the deduction up to one lakh rupees is allowed

For the purpose of this section, in the case of an employee, 'dependent' means individual, the spouse, children, parents, brothers and sisters of the employee or any of them, dependent wholly or mainly on the employee for his support and maintenance.

Vide Notification SO No. 2791(E), dated 12-10-2015, Rules 11DD has been amended to do away with the requirement of furnishing a certificate in Form 10-I. A prescription from a specialist as specified in the Rules containing the name and age the patient, name of the disease/ailment along with the name, address, registration number & qualification of the specialist issuing the prescription would now be required.

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

Section 80G provides for deductions on account of donation made to various funds, charitable organizations etc. In cases where employees make donations to the Prime Minister's National Relief Fund, the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund through their respective employers, it is not possible for such funds to issue separate certificate to every such employee in respect of donations made to such funds as contributions made to these funds are in the form of a consolidated cheque. An employee who makes donations towards these funds is eligible to claim deduction under section 80G. It is, hereby, clarified that the claim in respect of such donations as indicated above will be admissible under section 80G on the basis of the certificate issued by the Drawing and Disbursing Officer (DDO)/Employer in this behalf.-- Circular No. 2/2005, dated 12-1-2005.

No deduction under this section is allowable in case the amount of donation exceeds Rs. 2000 unless the amount is paid by any mode other than cash.

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

Section 80GGA allows deduction from total income of employee in respect of donations of any sum as given in the Table below:

Sl No.	Donations made to persons	Approval/Notification under Section	Authority granting approval/Notification
1.	A research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research	U/s 35(1)(ii)	Central Government
2.	A research association which has as its object the undertaking of research in social science or statistical research or to a university, college or other institution to be used for research in social science or statistical research	U/s 35(1)(iii)	Central Government
3.	An association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved for the purposes of section 35CCA	Furnishes the certificate u/s 35CCA (2)	Prescribed Authority under Rule 6AAA
4.	An association or institution which has as its object the training of persons for implementing programmes of rural development.	Furnishes the certificate u/s 35CCA (2A)	Prescribed Authority under Rule 6AAA
5.	A public sector company or a local authority or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme.	Furnishes the certificate u/s 35AC(2)(a)	National Committee for Promotion of Social & Economic Welfare
6.	An association or institution, which has as its object the undertaking of any programme of conservation of natural resources or of afforestation.	Approved for the purposes of section 35CCB.	Set up and notified by the Central Government
7.	A fund for afforestation	Notified under clause (b) of sub-section (1) of section 35CCB	Set up and notified by the Central Government
8.	A rural development fund	Notified u/s 35CCA (1)(c)	Set up and notified by the Central Government
9.	National Urban Poverty Eradication Fund	Notified u/s 35CCA (1)(d)	Set up and notified by the Central Government

No deduction under this section is allowable in case:

(i) The employee has gross total income which includes income which is chargeable under the head 'Profits and gains of business or profession'.

(ii) The amount of donation exceeds Rs. 2,000 unless such sum is paid by any mode other than cash.

The Drawing and Disbursing Authorities should satisfy themselves that all the conditions mentioned above are satisfied before such deduction is allowed by them to the employee. They should also satisfy themselves in this regard by insisting on production of evidence of actual payment of donation and a receipt from the person to whom donation has been made and ensure that the approval/notification has been issued by the right authority. DDO must ensure a self-declaration from the employee that he/she has no income from 'Profits and gains of business or profession'.

15. DDOs to obtain evidence/proof of claims

For the purpose of estimating income of the assessee or computing tax deductions, section 192(2D) provides that person responsible for paying (DDOs) shall obtain from the assessee evidence or proof or particular of claims such as House rent Allowance (where aggregate annual rent exceeds one lakh rupees); Deduction of interest under the head 'Income from house property' and deduction under Chapter VI-A as per the prescribed Form 12BB laid down by Rule 26C of the Rules.

Further, as per section 192(2D) read with the rule 26C, it is mandatory for the DDOs to obtain details/evidence in respect of claim of exemption for leave travel concession or assistance before allowing the said exemption. The relevant form for furnishing details by employee is Form 12BB.

It may be noted that the DDOs shall allow income-tax exemption under section 10(5) after obtaining copies of invoices of specified expenditure incurred during the specified period.

16. DDOs empowered to obtain evidence of proof or particulars of the prescribed claim (including claim for set-off of loss) under the section 192(2D)

DDOs have been authorized u/s 192 to allow certain deductions, exemptions or allowances or set-off of certain loss as per the provisions of the Act for the purpose of estimating the income of the assessee or computing the amount of tax deductible under the said section. The evidence/proof/particulars for some of the deductions/exemptions/allowances/set-off of loss claimed by the employee such as rent receipt for claiming deduction in HRA, evidence of interest payments for claiming loss from self-occupied house property, etc. is not available to the DDO. To bring certainty and uniformity in this matter, section 192(2D) provides that person responsible for paying (DDOs) shall obtain from the assessee evidence or proof or particular of claims such as House rent Allowance (where aggregate annual rent exceeds one lakh rupees); Leave Travel Concession or Assistance; Deduction of interest under the head Income from house property and deduction under Chapter VI-A as per the prescribed form 12BB laid down by Rule 26C of the Rules.

17. Deduction of Tax at Nil or Lower Rate If the jurisdictional TDS officer of the employer issues a certificate of No Deduction or Lower

Deduction of Tax under section 197 of the Act, in response to the application filed before him in Form No 13 by the employee, then the DDO should take into account such certificate and deduct tax on the salary payable at the rates mentioned therein. (see Rule 28AA). The Unique Identification Number of the certificate is required to be reported in Quarterly Statement of TDS (Form 24Q).

18. Furnishing of Certificate for Tax Deducted (Section 203)

Section 203 requires the DDO to furnish to the employee a certificate in Form 16 detailing the amount of TDS and certain other particulars. Rule 31 prescribes that Form 16 should be furnished to the employee by 15th June after the end of the financial year in which the income was paid and tax deducted. Even the banks deducting tax at the time of payment of pension are required to issue such certificates.

If the DDO fails to issue these certificates to the person concerned, as required by section 203, he/she will be liable to pay, by way of penalty, under section 272A(2)(g), a sum which shall be Rs.500/- for every day during which the failure continues. However, the amount of such penalty shall not exceed the amount of tax which is deductible at source.

It is, however, clarified that there is no obligation to issue the TDS certificate in case tax at source is not deductible/deducted by virtue of claims of exemptions and deductions.

19. Rectification of mistake in filing TDS Statement

A DDO can also file a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered earlier.

20. Exemption under section 10(18)

Section 10(18) provides for exemption of any income by way of pension received by an individual who has been in the service of the Central Government or State Government and has been awarded 'Param Vir Chakra' or 'Maha Vir Chakra' or 'Vir Chakra' or such other gallantry award as may be specifically notified by the Central Government. Family pension received by any member of the family of such individual is also exempt [Notifications No.S.O.1948(E) dated 24.11.2000 and 81(E) dated 29.1.2001, which are enclosed as per Annexure VIII & IX]. Family for this purpose shall have the meaning assigned to it in Section 10(5) of the Act.

DDO may not deduct any tax in the case of recipients of such awards after satisfying himself about the veracity of the claim.