How to Reduce TDS on Salary Income with New Income Tax Form 12BAA
Income from salary is a specific head of income under the income tax law on which the employer is required to deduct TDS under section 192. The TDS was deducted considering all the components of the salary of the employee as well as any deductions claimed by him. However, The CBDT has recently rolled out a new form that can help reduce the TDS deducted from the salary by adjusting TDS/TCS from non-salary sources against the same. Let’s dig deeper!
Form 12BAA: Adjusting TCS Against Salary
The CBDT has rolled out Form 12BAA which will allow the employees to adjust TDS and TCS collected from non-salary sources against their salary TDS. It will function as a statement that will help furnish the details for Section 192(2B) of the Income Tax Act. Employees shall furnish this form to their employers, reporting TDS and TCS deducted/collected from various sources and income other than salaries. Such sources usually include dividend income, interest on FD, insurance commissions, TCS collected during major purchases etc.
Form 12BAA under income tax is a comprehensive form that will provide a clearer picture for their employees. It will include a provision to deduct both the TDS and TCS collected from the employee from other income sources.
Particulars of Form 12BAA
Here are the particulars in Form 12BAA that can simplify the reporting process:
For Tax Deducted at Source (TDS)
- Section under which TDS was deducted
- Name and address of the diductor
- Tax Deduction and Collection Account Number of the person deducting the tax
- Amount of TDS deducted
- The amount of income credited or received
- Any other relevant details
For Tax Collected at Source
- Section under which TCS was collected
- Name and address of the collector
- Tax Deduction and Collection Account Number of the person collecting the tax
- Amount of TDS collected
- Any other relevant details
How it will work?
Here’s a quick illustration of how this form will work. Suppose you are an employee whose employer is deducting Rs. 12,000 TDS per month from your salary. This sums up to Rs. 1,44,000 during the financial year. You have made a major purchase on which TCS of Rs. 30,000 is collected. Therefore, after you furnish Form 12BAA, disclosing the income and consequent details, you will be allowed to adjust this TDS of Rs. 30,000 against the salary TDS of Rs. 1,44,000.
Also, Check "New Grandfathering Rule in Capital Gain Tax"
How Does it Benefit Employees?
Until now, TDS on salary considered only the salary income and deductions claimed by the employee, without considering the taxes paid on other income sources. Employees usually face the issue of blocking of money due to TDS on salary if they are not liable to pay tax. This can be due to several reasons like claiming of deductions or even TDS/TCS credits from non-salary sources. For such employees, Form 12BAA will prove to be quite useful as it will allow them to adjust TDS/TCS credits from non-salary sources against their salary TDS. Further, allowing TCS adjustment is a significant benefit as it also allows employees to adjust taxes collected on major purchases against salary TDS. For more such useful information like this, contact the ASC Group.
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