Home > Income Tax, Payroll, Statutory Compliance > Considering TDS on Other Income while calculating tax on salary – Part II

Considering TDS on Other Income while calculating tax on salary – Part II

In the previous post, we said TDS on Other Income poses a problem to the employer from the point of view of issuing Form 16 and filing Form 24Q.

What is the problem?

In both Form 16 and the annexure in Form 24Q for the last quarter, the details of Other Income can be displayed, but there is no provision to display details of TDS on Other Income. As a result, in both Form 16 and Form 24Q, it would look as though there is a shortfall in tax deducted by the employer while in reality it is not the case. Let us take a look at an example to examine this.

A male employee receives an annual taxable salary of Rs 900,000 after all deductions. The employee has Other Income of Rs 100,000 and the TDS deducted on Other Income is Rs 10,000 (10% on Rs 100,000).

The total income including salary and Other Income is Rs 10,00,000 (Rs 900,000 plus Rs 100,000) for the year and the total tax on Rs 10,00,000 is Rs 158,620 for the year.

If the employer considers TDS on Other Income and deducts tax on salary accurately, the Form 16 issued by the employer will have the following amounts.

11. Total Income (8 – 10) Rs. 10,00,000
12. Tax on Total Income Rs. 154,000
13. Add Surcharge Rs. 0
14. Add Education Cess Rs. 4,620
15. Tax Payable (12+13+14) Rs. 158,620
16. Relief under section 89 (attach details) Rs. 0
17. Tax payable (15-16) Rs. 158,620
18. Less
(a) Tax deducted at source u/s 192(1) Rs. 148,620
(b) Tax paid by the employer on behalf of the
perquisites u/s 17(2)
19. Tax Payable/(Refundable) (17 – 18) Rs. 10,000

In the Form 16 excerpt presented above, the total income (No. 11) comprises both salary and Other Income while tax deducted (No. 18) contains only the amount deducted by the employer. There is no provision in Form 16 and Form 24Q to present TDS on Other income. As a result, No 19. above shows a Tax Payable amount of Rs 10,000. This, of course, is the TDS on Other Income and not the tax payable.

By taking a look at just Form 24Q — in its current format — the income tax department will not be able to figure out whether the Tax Payable figure is as a result of a genuine under deduction of tax by the employer, or due to TDS on Other Income.

If the tax department raises a query on the Tax Payable figure, the employer can always explain the same by submitting information on TDS on Other Income submitted by the employee. Instead of the tax department and the employer wasting time on raising and answering the query, why can’t the tax department simply modify the format of Form 16 and Form 24Q to include TDS on Other Income?

That way, the Tax Payable amount in Form 16 and Form 24Q will become zero and there will be no room for any doubt.

  1. May 3, 2011 at 3:32 pm

    This is a really good read for me, Must admit that you are one of the best bloggers I ever saw.Thanks for posting this informative article.. m looking for more post soon…

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