Archive for the ‘Payroll’ Category
Form 16 : Erroneous reference to Form 12BB
For tax deducted on salaries , the employer has to issue Form 16 to the employees. The form was modified vide Notification 41/2010 dated 31.05.2010
In this form there is a reference to Form 12BB
Gross Salary Rs.
(a) Salary as per provisions contained in sec.17(1) Rs.
(b) Value of perquisites u/s 17(2) (as per Form No.12BB, wherever applicable) Rs.
(c) Profits in lieu of salary under section 17(3) (as per Form No.12BB ,wherever applicable
However there is no Form 12BB notified. It certainly is a typo error and it should read Form 12BA
Reference may also be made to Circular 8/2010 : Section 192 of the Income-tax Act, 1961 – Deduction of tax at source – Salaries – Income-tax deduction from salaries during the financial year 2010-11
In this circular , detailed guidelines for compliance with TDS on salary are given for the FY 2010-11
Paragraph 4.6.5 of above circular clearly states that
“…..information related to nature and value of perquisite is to be provided by employer in Form No 12BA……..”
Hence deductors may treat this as type error and replace 12BB with 12BA.
Perquisite Valuation :Interest free concessional loan
TDS calculation for employees without PAN u/s 206AA
Section 206AA requires TDS deduction at prescribed rates or @ 20% , if deductee does not submit valid PAN. The example below shows how to calculate TDS in such cases
| Amount | ||
| Taxable Salary for the year | 270000 | |
| Less : Interest on home loan | -20,000 | |
| Less : Deductions under chapter VIA | -70000 | |
| A | Taxable Income | 180000 |
| B | Tax at Normal Rate | 2000 |
| Add : Education cess @ 3% | 60 | |
| Total tax at normal rate | 2060 | |
| C | Tax @ 20% u/s 206AA on [A] | 36000 |
| D | TDS to be deducted | 36000 |
| Higher of [B] or [C] |
It is apparnet from the above example that
- Total taxable income is to be calculated after allowing deductions under chapter VIA and home loan interest
- Tax is to be calculated at prescribed rate and education cess is to be applied
- Tax u/s 206AA is to be calculated on taxable income . No need to add education cess.
- Tax at normal rate or u/s 206AA, whichever is higher will be considered for TDS purposes
Will penal rate be applied even if taxable income is below Rs. 1.60 Lacs
- If taxable income of employee does not exceed the exemption limit but he has not submitted PAN, should TDS be deducted @ 20% u/s 206AA. ?
- In response to a query, eminent author Dr. V. K. Singhania has opined that, in such a case TDS has to be deducted @ 20%, In case PAN is furnished, the rate will be 0%. Ref – [2010] 18 CPT 117
- A contrary view is that the in such case there is no need to deduct TDS.
- However, CBDT may clarify this issue in the annual circular about TDS on salaries. ( Last such circular is Circular 01 /2010 ) .Deducting TDS in such cases will cause undue hardship to employees
