ACCOUNTING & TAXATION
TDS on Salary for FY: 2020-21 & Format to Opt Tax Regime
Finance Act, 2020 has introduced optional based filing for individual and HUF whereby these types of assesses have to choose option amongst new and old tax slab rates at the time of filing of ITR. This type of filing is unique in case of Indian Taxation System till date.
This type of filing has created doubt in the mind of both employees and tax deductors (employers). Employees are confused regarding- which method would be beneficial to them? Employers are worried about compliance. In this article we shall try to solve the problem of both employees as assesses and employer as tax deductors.
New Vs Old Tax Slab Rate
Before making any conclusion, we should know and compare New and old tax slab rate applicable for non-senior individual as under: –
NEW TAX SLAB RATE (NON-SENIOR CITIZENS)
| Income Range | Tax Rate |
| Upto Rs. 2,50,000.00 | NIL |
| Rs. 2,50,001 to Rs. 5,00,000.00 | 5% (Tax rebate of Rs. 12,500.00 U/s. 87A is allowed) |
| Rs. 5,00,001.00 to Rs.7,50,000.00 | 10% |
| Rs.7,50,0001.00 to Rs.10,00,000.00 | 15% |
| Rs. 10,00,001.00 to Rs. 12,50,000.00 | 20% |
| Rs. 12,50,000.00 to Rs. 15,00,000.00 | 25% |
| Rs. 15,00,000.00 and above | 30% |
OLD TAX SLAB RATE (NON-SENIOR CITIZENS)
| Income Range | Tax Rate |
| UptoRs. 2,50,000.00 | NIL |
| Rs.2,50,001 to Rs. 5,00,000.00 | 5% (Tax rebate of Rs. 12,500.00 U/s. 87A is allowed) |
| Rs. 5,00,001.00 to Rs. 10,00,000.00 | 20% |
| Rs.10,00,000.00 and above | 30% |
Note: Add Health and education cess @4% on tax amount. Surcharge as applicable.
Exemptions and deductions not allowed under new tax slab rate
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Conveyance Allowance
- Daily expenses allowance in employment
- Relocation allowance
- Children education allowance
- Helper Allowance
- Other Allowance
- Standard Deduction
- Profession Tax
- Housing Loan EMI- Interest part
- Chapter VIA deductions such as LIC, PPF, Mediclaim etc.
Steps for computation of TDS by Employers
Following steps are to be followed by employer (Tax deductor) or Tax department of employer or Accounts department of employer or Tax Consultants for employer: –
- Receive a simple application from employees liable for TDS as a confirmation about new or old tax slab rate. (Application format is given as Annexure-A). If any employee provides application and choose old tax rate, ask him to provide form no. 12BB (Declaration for investment) along with application.
It is to be noted that if no application is received from an employee regarding old or new tax slab rate then employer should deduct TDS as per old tax slab rate.
It is to be further noted that if TDS is deducted as per old tax slab rate and employee wants to file ITR as per new tax slab rate or vice versa, there is no problem at all. Difference if any should be adjusted. It means if there is less TDS then employees should deposit the difference tax and if there is excess TDS, claim as refund. No interest is payable if ITR is filed within statutory or extended due date.
- Compute estimated total income and tax thereon for full Financial Year or during the tenor of employment as per available information, on the basis of options of new or old tax rate as applied by the employees.
- Divide the amount of tax as arrived in step (b) above by 12 months to get monthly TDS amount. Deduct this monthly TDS amount upto February-2021.
- In the month of March-2021, re-compute actual total income and tax thereon as per option exercised by the employees (i.e. new or old tax rate slab).
- Compare actual tax deductible as arrived in step (d) with estimated tax deducted as arrived in step (b).
- If there is short TDS, deduct the balance amount of TDS from the salary for the month of March-2021. If there is excess TDS then deduct very nominal amount say Rs.100.00, it will be helpful at the time of filing of TDS return (24Q) for the Quarter ending on 31-03-2021.
ANNEXURE-1
FORMAT OF SIMPLE APPLICATION BY EMPLOYEE TO EMPLOYER REGARDING INTIMATION FOR OPTING OLD/NEW TAX SLAB RATE: –
The HRA/Accounts Manager/Taxation M anager,
Company Name
Address
Ref: PAN-AIKPD4878F
Sub: Intimation for deduction of TDS as per New/Old tax rate slab for FY: 2020-21.
Dear Sir/Madam,
With reference to the captioned subject matter I would like to request you to deduct TDS as per New/Old tax slab rate for the FY: 2020-21 and oblige.
Thanking You
Yours Faithfully