Section 192 of Income Tax Act

Section 192 of the Income Tax Act mandates TDS deduction on salary at the time of actual payment, not accrual. This means tax is withheld when your employer disburses your salary, whether in advance, on time, or as arrears for delayed payments.
192 of Income Tax Act
3 min
14-Feburary-2025

As per Section 192, TDS on salary is deducted when the salary is actually paid, not when it accrues. This means tax is withheld at the time of payment—whether the salary is paid in advance, on time, or as arrears (delayed payment).

This article will help you understand section 192 of the Income Tax Act, including its processes and provisions.

What is section 192 of the Income Tax Act?

Section 192 of the Income Tax Act, 1961, mandates that any person responsible for paying income under the head "salary" must deduct tax on the employee’s estimated salary income.

The tax is calculated based on the applicable income tax slab and deducted at the time of actual salary payment.

The deducted TDS must be deposited with the government, and a tax deduction certificate (Form 16) is issued to the employee. Additionally, the employer (or deductor) must file quarterly TDS returns in Form 24Q with the Income Tax Department.

Formula to calculate TDS on salary

The formula to calculate TDS on salary is:

TDS rate: Income tax payable (calculated as per tax slab) / Total revenue for the year

Who deducts TDS under section 192?

Here are the entities that are responsible for deducting TDS under section 192 of the Income Tax Act:

  • Individuals
  • HUFs
  • Public or private companies
  • Trusts
  • Partnership firms
  • Central/state government/PSUs
  • Proprietorship concern
  • Co-operative societies

When is TDS deducted under Section 192?

Under section 192 of the Income Tax Act, employers are required to deduct TDS from the salaries of employees every month and deposit the amount with the Indian government within a specified period. Employers are required to deduct the TDS amount at the time of actual salary payment, whether it is advance salary or late payment.

Employers are not required to deduct TDS if the salary doesn’t exceed the specific minimum limit, as no tax is payable by the employee. The basic exemption limit is based on age and is as follows:

  • Income up to ₹2.5 lakhs: No tax (Nil)
  • Income between ₹2,50,000 and ₹5,00,000: 5% tax
  • Income between ₹5,00,000 and ₹7,50,000: 10% tax
  • Income between ₹7,50,000 and ₹10,00,000: 15% tax
  • Income between ₹10,00,001 and ₹12,50,000: 20% tax
  • Income between ₹12,50,001 and ₹15,00,000: 25% tax
  • Income above ₹15,00,000: 30% tax

What is TDS computed on?

The salary amount for an employee is based on the Cost to the Company (CTC), which includes actual constant salary and variable perks. The variable perks include extra benefits such as travel allowance, house rent allowance, medical allowance, etc. However, as the TDS is deducted from the salary amount, employees use the deductions for such extra benefits to save tax.

For example, you can get a medical allowance if you submit medical bills and get an exemption for a house rent allowance if you attach monthly rent receipts. Hence, you can minimise your tax burden by making the most of your CTC.

Also read about: What is direct tax code

How to calculate TDS on salary under section 192 ?

Here is how an employer can calculate TDS on your salary under section 192 of the Income Tax Act:

Calculate earnings

Determine the total amount an employee makes annually. This amount should include their basic salary and additional earnings through commissions, bonuses, perks, etc.

Collect and verify investment declarations

Communicate with the employees and ask them to submit investment proofs for investments such as insurance, mutual funds, etc.

Compute exemptions

Based on employees' investment declarations, determine if they are eligible for any tax exemption. Reduce the exemption amount from their total salary to calculate their taxable income.

Deduct TDS

Once you have calculated the taxable income for all the employees individually, calculate the TDS based on the applicable tax slabs. Deduct the TDS from the salary amounts afterwards.

Deposit TDS

Once you have deducted the TDS, ensure that you have deposited the TDS amount with the government before the due date.

Example of Section 192 deduction:

Consider an individual with the following income sources:

Particulars

Amount

Salary Income

Rs. 4,00,000

Other Income

Rs. 20,000

Interest on Self-Occupied Home Loan

Rs. 2,15,000


In this scenario, taxable income is calculated as Rs. 2,20,000 (Rs. 4,00,000 + Rs. 20,000 - Rs. 2,15,000). Since this amount is below the basic exemption limit, no Tax Deducted at Source (TDS) is required by the employer.

Example of TDS Calculation on Salary:

Let's analyse the case of an individual with an estimated annual salary income of Rs. 9,60,000.

Particulars

Amount

Estimated Salary Income

Rs. 9,60,000

Less: Standard Deduction

Rs. 50,000

Estimated Gross Total Income

Rs. 9,10,000

Less: Deductions under Chapter VI-A (e.g., Section 80C)

Rs. 1,50,000

Estimated Total Income

Rs. 7,60,000

Estimated Tax Liability

Rs. 64,500

Add: Health and Education Cess (4% of Rs. 64,500)

Rs. 2,580

Estimated Total Tax Liability

Rs. 67,080


The monthly TDS to be deducted would be Rs. 67,080/12 = Rs. 5,590. Therefore, the employee's monthly in-hand salary would be Rs. 80,000 - Rs. 5,590 = Rs. 74,410.

Also read about: Difference Between Income Tax Act and Direct Tax Code

How is TDS deducted in case of multiple employers?

When an individual experiences a change in employment during a financial year or is engaged with multiple employers simultaneously, specific tax implications arise.

1. Change of employment

If an employee resigns from one position and accepts a new role within the same financial year, they must provide their previous employer's details in Form 12B to their new employer. This information enables the new employer to accurately calculate and deduct Tax Deducted at Source (TDS) based on the employee's combined income for the year.

2. Multiple employers

In cases where an employee works for multiple employers simultaneously, they are required to furnish details of their salary and TDS from each employer to one of those employers. The designated employer will then deduct TDS on the employee's aggregate income for the financial year.

Also read about: Long-term capital gains tax

What is the rate of TDS u/s 192?

Section 192 mandates the deduction of Tax Deducted at Source (TDS) on salary income based on an estimated average tax rate. Unlike other TDS sections, there's no fixed rate under Section 192. The TDS rate is determined by dividing the estimated total tax liability on the projected annual income by the duration of employment in months.

Calculation formula:

TDS on Salary = Estimated Total Tax Liability/Period of Employment (months)

TDS deposition timeline:

Month

Quarter

Date of Deduction

Date of deposit

Date of filling TDS return

Apr-Jun

Q1

Date of deduction should be the date of payment

7th of every next month in which payment is made
Note:- The Due Date for the last month (March) of the deposit will be 30th April

31st July

July-Sept

Q2

31st Oct

Oct-Dec

Q3

31st Jan

Jan-Mar

Q4

31st May

 

Time limit to deposit the tax under section 192

TDS must be deposited on the same day if deducted by government employers. For all other employers, here is the time limit:

  • If TDS is deducted in March, the employer must deposit the TDS amount by 30th April.
  • If the employer has deducted the TDS in a month other than March, it must be deposited within 7 days from the date of deduction.

Also read about: What is dearness allowance

Consequences of non-compliance under section 192

If an employer fails to deduct and deposit TDS with the government, they may have to face the following consequences:

  • The employer is liable to pay a late fee of Rs. 200 per day as per section 234E. The penalty is capped at the total TDS amount liability.
  • If the employer fails to deduct TDS at the time of salary payment, an interest of 1% per month is levied on the amount of TDS not deducted from the day on which the TDS becomes deductible until the date it is actually deducted.
  • If the employer fails to deposit the TDS before the 7th of the following month, an interest of 1.5% is levied per month from the date of the TDS deduction until the TDS deposit date.

Also read about: Short term capital gains tax

Some important points for TDS Deduction

  1. TDS on tips paid to waiters: When customers pay tips directly to waiters or via the employer (e.g., through a service charge), these tips are not considered part of the salary. Therefore, the employer is not obligated to deduct TDS on the tip amount.
  2. TDS on directors' remuneration: Remuneration paid to company directors does not fall under Section 192. Instead, TDS is deducted under Section 194J, provided there is no employer-employee relationship between the company and the director.
  3. TDS on payments to doctors: Payments made to doctors by hospitals are treated as professional fees, and TDS under Section 192 is not applicable. However, if the arrangement is a contract of service, TDS under Section 192 must be deducted.
  4. Tax on non-monetary perquisites: When the employer bears the tax liability on non-monetary perquisites, no TDS is required to be deducted from the employee's salary for that portion of the tax.

Key Takeaways

  • TDS on salary is deducted at the time of payment, not accrual, ensuring timely tax collection.
  • TDS is calculated based on the applicable tax slabs, ranging from 5% to 30% depending on the income level.
  • Employers must deduct, deposit TDS with the government, and file quarterly TDS returns (Form 24Q).
  • Employees receive Form 16 as proof of TDS deduction for filing their income tax returns.
  • Employees can submit investment proofs to reduce their taxable income and claim deductions.
  • Delayed or non-payment of TDS leads to interest and late fees under Sections 234E and 201.

Conclusion

Section 192 of the Income Tax Act includes provisions that require every employer to deduct TDS from the employees’ salaries and deposit it with the government before the due date. It is important for employers to understand how to deduct the TDS and how to submit it to the government to avoid penalties. Furthermore, employees should understand the provisions of the section to know their rights and the tax benefits they can claim to reduce their tax burden.

If you are looking to invest in mutual fund schemes, you can visit the Bajaj Finserv Platform. You can browse through 1000+ mutual funds and use the mutual fund calculator to compare mutual funds and invest in the ideal ones.

Essential tools for all mutual fund investors

Lumpsum Calculator

SIP Return Calculator

Step Up SIP Calculator

SBI SIP Calculator

HDFC SIP Calculator

Axis Bank SIP Calculator

ICICI SIP Calculator

ABSL SIP Calculator

Tata SIP Calculator

BOI SIP Calculator

Motilal Oswal Mutual Fund SIP Calculator

Kotak Bank SIP Calculator

Frequently asked questions

What is section 192 in income tax?

Section 192 of the Income Tax Act requires employers to deduct TDS from employees’ salaries at the time of actual payment. This includes any advance or arrears of salary, which must be considered when calculating the TDS amount.

What is the time limit for depositing the tax under section 192?

Employers must deposit TDS deducted from salaries by the 7th of the following month. For TDS deducted in March, the deadline is extended to April 30 to account for the financial year-end.

Who is responsible for deducting tax under Section 192?
Entities responsible for deducting TDS are individuals, HUFs, public or private companies, trusts, partnership firms, central/state government/PSUs, proprietorship concerns, and co-operative societies.
How is the tax amount to be deducted calculated under Section 192?
The employers can calculate the tax amount to be deducted by finding the total taxable income of the employee and dividing it by the total annual earnings.
Is Section 192 applicable to all types of income?
Section 192 is applicable to incomes that are chargeable under the head ‘salary.’ Apart from this head, no income is chargeable under section 192.
When should the tax be deducted under Section 192?
The employer is liable to deduct the TDS every month from the salary payments made to employees.
Are there any exemptions or deductions considered under Section 192?
Yes. There are multiple exemptions and deductions applicable under section 192 of the Income Tax Act. Some of the most common ones are HRA, dearness allowance, medical allowance, travel allowance, and children’s education allowance.
What is the due date for depositing the TDS deducted under Section 192?
The due dates are 30th April if TDS is deducted in March and 7th of the next month if TDS is deducted in any month other than March.
What are the consequences of non-compliance with Section 192?
The consequences of non-compliance with section 192 are a late fee of Rs. 200 and interest penalties of 1% and 1.5%, depending on the nature of non-compliance.
Can employees claim refunds if excess tax is deducted under Section 192?

Yes, employees can claim a TDS refund while filing their income tax return if excess TDS is deducted by the employer.

What percentage of TDS is deducted from salary?

TDS on salary does not have a fixed percentage. It is calculated based on the average income tax rate applicable for that financial year. This average rate is determined according to the income tax slab rates in effect for that year.

When Can TDS On Salary Be Claimed?

Employees can claim TDS on salary for income paid or accrued in the same financial year in which the deduction was made. However, if the income relates to multiple financial years (e.g., advance payments), the credit may be carried over to the next financial year.

Show More Show Less

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.