According to Section 10 of Income Tax Act, some portion of allowances and perks are exempt from taxation. For instance – Upto Rs. 800/- per month is exempt on conveyance allowance, then there are HRA exemptions and so on.
The money which is deducted as Tax Deducted at Source from an employee’s salary is reflected in Form 16. It is issued to the employee by the employer at the end of the financial year. Moreover, the employee/ taxpayer can check the details of TDS deducted and deposited by his/her employer.
After verifying his/her details through Form 26AS the taxpayer can easily check the details online. If the employee’s income is less than the income mentioned in tax slab then, he/she is not liable to pay income tax, in that case TDS will not be deducted from his/her income.
If the taxpayer is an employee with more than one employer, it may happen that the taxpayer has switched jobs and joined a new organization. In that case, he/she must furnish a statement in Form 12B (Form 12B is an income tax form, which should be furnished by an employee who has changed jobs, the main purpose of this form is to give your current employer, your income details from your previous job. Furnishing Form 12B is not compulsory.) Based on the information provided the new employer will deduct TDS on Salary.
This deducted TDS on Salary is deposited to the Central Government account by the employer before the prescribed due date, where the employer needs to mention his/her TAN number on the deposited challan 281.
The employer needs to mention the salary paid to each employee and the tax deducted thereon while depositing TDS on Salary to the Government.
It is also mandatory to quote employee’s PAN number while depositing the TDS. In case, if an employer fails to deduct TDS from his/her employee or fails to pay the deducted TDS on Salary to the government, the employer is liable to pay interest or penalty.
Further, if an employer has deducted lower TDS on salary in the initial months as compared to the amount he/she needs to deduct, then the employer can adjust the TDS amount by deducting higher amount in the remaining months and vice-versa.
The TDS on Salary deducted annually should be equal to the tax on salary payable by the employee based on his/her income bracket. If the TDS on salary is more than the tax paid then the employee can claim a tax refund.
The employer/deductor should have TAN Registration. TAN is an alphanumeric 10-digit number used for tracking all TDS deductions on Salary by the IT- Department.
However, there are certain limits to the maximum amount that can be considered for tax exemption.
After the deduction of the TDS on Salary the employer should provide Form 16 to the employee, as a proof of the deducted TDS, with his/her salary breakup in the Form 12BA.
Form 12BA: This form is used when an employee receives perquisites from his/her job. This form is provided to employee by his/her employer. Perquisites are the benefits that an employee gets as an addition to his/her salary depending on the job and position he/she is working in.
If the employee is eligible for any tax relief/exemption under Section 89(1) of the Income Tax Act, then the employee should furnish the details in Form no. 10E. Primarily, an individual can save taxes or enjoy the above-mentioned benefits when there is a change in her salary bracket.