Concessional rates can be applied for TDS against salary

Lubna Kably | TNN | Apr 13, 2020, 18:56 IST

(Representative image)

MUMBAI: The Central Board of Direct Taxes (CBDT), in a notification issued on Monday, has clarified that employers can rely on a declaration from employees and deduct tax at source (TDS) against salary income, based on the concessional tax rates.
It may be recalled that the Finance Act, 2020, had given an option to individuals to opt for concessional tax rates, on taxable income up to Rs 15 lakh.
However, for this, the taxpayer had to forgo a host of exemptions and deductions – such as house rent allowance, leave travel allowance, standard deduction, deductions for various investments, medical insurance premium etc.
Payroll accountants and tax professionals have welcomed this timely notification, as April is the first month in which the new provisions come into effect. TDS would soon be required to be deducted against the April payouts.
A challenge was foreseen by employers, owing to the wordings of the section 2(9) of the Finance Act. A literal interpretation meant that employers would have to deduct tax at source under section 192, by applying the normal rates and not the concessional tax rates.
This would have resulted in disproportionate TDS and the employee would have had to claim a refund, after filing his tax returns.
CBDT goes on to clarify that if the intimation is not received from the employee of having opted for the new personal tax regime, then the employer shall deduct tax at source, without considering the provisions of Section 115BAC (concessional rates) of the Income-tax (I-T) Act.
Once the intimation has been made by the employee for a particular financial year, for the purpose of TDS it cannot be modified. However, at the time of filing the I-T return, the employee can chose to change his option.