I run payroll. Section 192 has no threshold and no percentage in it like every other TDS section does — so how much am I supposed to deduct, and which of my employee's declarations am I actually obliged to act on?
Section 192 does not work like the rest of Chapter XVII-B: there is no threshold below which you need not deduct and no flat percentage to apply. You deduct, at the time of payment, "at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year" — that is, you build the employee's whole year's salary, work out the tax on it at the slab rates, divide that tax by that salary, and apply the resulting rate to each payment. Everything else in the section exists to make that estimate accurate: sub-section (2) lets the employee bring in salary from another employer in Form 12B, (2A) lets him bring in relief under section 89 in Form 10E, (2B) lets him bring in other income, other tax deducted or collected and a house property loss in Form 12BAA, (2D) obliges you to collect evidence of his claims in Form 12BB, and (2C) obliges you to give him back a statement of his perquisites in Form 12BA. Sub-sections (1A) and (1B) let you choose to pay the tax on a non-monetary perquisite yourself instead of deducting it, and section 115BAC(1A) is the default regime from assessment year 2024-25, so your estimate is made under it unless the employee tells you otherwise. This is the section as it stood after Act No. 15 of 2024 with effect from 1 October 2024; it governs salary paid up to 31 March 2026, after which section 392 of the Income-tax Act, 2025 takes over.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Section 192 of the Income-tax Act, 1961, as amended up to 2025. It bears on section 192, section 192(1), section 192(2B), section 192(2), section 192(2A), section 192(2C), section 192(2D), section 192(1A), section 192(1B), section 192(3), section 192(1C), section 115BAC(1A), section 115BAC(6), section 115BAC, section Rule 26A, section Rule 26B, section Rule 26C, section Rule 21AA, section 10(10CC), section 40(a)(v), section 17(2), section 89, section 392 (Act of 2025) of the Income Tax Act 1961, in TDS Defaults and Salary & Perquisites matters.
The average-rate mechanism is what makes section 192 unlike every other deduction provision, and it is why the two questions practitioners ask about other sections — has the threshold been crossed, and what percentage applies — have no answer here. The rate is an output of the employer's estimate, so the estimate is the whole of the obligation. That is why the litigation under this section is almost never about arithmetic and almost always about whether the estimate was honestly made. The library's separate entry on the bona fide estimate under s.192 collects the authorities on it. It is also why the declarations matter. Sub-sections (2), (2A) and (2B) are permissive for the employee — he "may" furnish or send them — but once he does, the employer "shall" take them into account. Sub-sections (2C) and (2D) are not permissive at all: the employer must collect the evidence and must issue the perquisite statement. Two limits in sub-section (2B) are missed often enough to be worth stating twice. The first is in the parenthesis: the other income an employee may report is "not being a loss under any such head other than the loss under the head 'Income from house property'". A business loss, a capital loss or a loss from other sources cannot be handed to the employer to set against salary, and an employer who allows one is deducting less than section 192 requires. The second is the proviso, which bars any reduction of the salary deduction except on account of the house property loss and tax deducted or collected under Parts B and BB. Reporting other income can only ever increase the deduction; the only things that can bring it down are the house property loss and credit for tax already deducted or collected. The 1 October 2024 substitution widened the second of those to take in tax COLLECTED at source — which is what makes Form 12BAA worth using for an employee who has borne TCS on a foreign remittance or a car purchase and would otherwise have to wait for the refund.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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The operative text of section 192 of the Income-tax Act, 1961, in Chapter XVII — Collection and recovery of tax, B.—Deduction at source, marginal note "Salary". 192.(1) "Any person responsible for paying any income chargeable under the head 'Salaries' shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year." (1A) "Without prejudice to the provisions contained in sub-section (1), the person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in clause (2) of section 17, may pay, at his option, tax on the whole or part of such income without making any deduction therefrom at the time when such tax was otherwise deductible under the provisions of sub-section (1)." (1B) "For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of income-tax computed on the basis of the rates in force for the financial year, on the income chargeable under the head 'Salaries' including the income referred to in sub-section (1A), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head 'Salaries' as per the provisions of sub-section (1), and shall be subject to the provisions of this Chapter." (1C) is the eligible start-up ESOP deferral. It is set out in full, with s.191(2) and s.156(2), on the library's separate entry for those three sub-sections, and is not repeated here. (2) "Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case choose), such details of the income under the head 'Salaries' due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1)." The printed text carries a footnote to this sub-section reading "See rule 26A and Form No. 12B." (2A) "Where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under [***] section 89, he may furnish to the person responsible for making the payment referred to in sub-section (1), such particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take it into account in making the deduction under sub-section (1)." There is an Explanation defining "University". The footnote to this sub-section reads "See rule 21AA and Form No. 10E." The omitted words at [***] are "sub-section (1) of". (2B) "Where an assessee who receives any income chargeable under the head 'Salaries' has, in addition, — (i) any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head 'Income from house property'); or (ii) any tax deducted or collected under the provisions of Part B or Part BB of this Chapter, as the case may be, for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1), the particulars of— (a) such other income; (b) any tax deducted or collected under any other provision of Part B or Part BB of this Chapter, as the case may be; and (c) the loss, if any, under the head 'Income from house property', in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall take into account the particulars referred to in clauses (a), (b) and (c) for the purposes of making the deduction under sub-section (1): Provided that this sub-section shall not in any case have the effect of reducing the tax deductible from income under the head 'Salaries', except where the loss under the head 'Income from house property' and the tax deducted in accordance with other provisions of Part B and tax collected in accordance with the provisions of Part BB, of this Chapter, has been taken into account." The footnote to this sub-section reads "See rule 26B." (2C) "A person responsible for paying any income chargeable under the head 'Salaries' shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed." The footnote to this sub-section reads "See rule 26A and Form Nos. 12BA and 16." (2D) "The person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed." (3) "The person responsible for making the payment referred to in sub-section (1) or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year." Sub-sections (4), (5) and (6) deal with accumulated balances of a recognised provident fund, payments out of an approved superannuation fund, and salary payable in foreign currency, and are not covered here. THE PRESCRIBED FORMS, from the Income-tax Rules, 1962. Rule 26A, "Furnishing of particulars of income under the head 'Salaries'": sub-rule (1) prescribes Form No. 12B for the s.192(2) declaration of salary from another employer; sub-rule (2) prescribes, for the s.192(2C) statement, "(a) relevant columns provided in Form No. 16, if the amount of salary paid or payable to the employee is not more than one lakh and fifty thousand rupees; or (b) Form No. 12BA, if the amount of salary paid or payable to the employee is more than one lakh and fifty thousand rupees, which shall accompany the return of income of the employee", with an Explanation that "'Salary' for the purposes of this rule shall have the same meaning as given in rule 3". Rule 26B, now headed "Statement of particulars of income under heads of income other than 'Salaries' or details of tax deducted at source or tax collected at source", prescribes Form No. 12BAA for the s.192(2B) declaration; that rule was substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024. Form No. 12BAA is titled "Statement showing particulars for the purposes of sub-section (2B) of section 192". Rule 26C, "Furnishing of evidence of claims by employee for deduction of tax under section 192", sub-rule (1): "The assessee shall furnish to the person responsible for making payment under sub-section (1) of section 192, the evidence or the particulars of the claims referred to in sub-rule (2), in Form No. 12BB for the purpose of estimating his income or computing the tax deduction at source"; sub-rule (2) sets out a table of four claims and the evidence for each — house rent allowance (name, address and permanent account number of the landlord where the aggregate rent paid during the previous year exceeds rupees one lakh), leave travel concession (evidence of expenditure), deduction of interest under the head income from house property (name, address and permanent account number of the lender) and deduction under Chapter VI-A (evidence of investment or expenditure). Rule 21AA, "Furnishing of particulars for claiming relief under section 89", prescribes Form No. 10E. THE TWO PROVISIONS THAT COMPLETE (1A) AND (1B). Section 10(10CC) exempts "in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee, notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)". Section 40(a)(v) disallows in computing business income "any tax actually paid by an employer referred to in clause (10CC) of section 10". THE DEFAULT REGIME. Section 115BAC(1A) opens "Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6)...". Sub-section (6) reads "Nothing contained in sub-section (1A) shall apply to a person where an option is exercised by such person, in the manner as may be prescribed, for any assessment year, and such option is exercised— (i) on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or (ii) along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in case of a person not having income referred to in clause (i)", followed by a proviso restricting withdrawal. The footnote against them records both sub-sections as inserted by Act No. 08 of 2023 with effect from 1 April 2024.
Not a judgment. In the text that took effect on 1 October 2024 and governed salary paid up to 31 March 2026, section 192 does four things. FIRST, it fixes a method rather than a rate. Deduction is made at the time of payment, at the average rate of income-tax for the financial year, applied to the payer's own estimate of the employee's income under the head 'Salaries' for that year. The average rate is the tax on the estimated salary divided by that salary. Because the rate is derived from the estimate, section 192 carries no monetary threshold and no prescribed percentage: an employee whose estimated salary attracts no tax has an average rate of nil, and nothing is deducted. SECOND, sub-sections (1A) and (1B) give the employer an option, for a perquisite not provided by way of monetary payment within clause (2) of section 17, to pay the tax himself instead of deducting it. The tax he pays is computed at the same average rate, on the salary including that perquisite, and is then treated as if it were tax deducted at source under sub-section (1) and is subject to the rest of Chapter XVII. Two other provisions complete the arrangement: section 10(10CC) exempts that tax in the employee's hands, so it is not itself a further perquisite; and section 40(a)(v) denies the employer a business deduction for it. The employer therefore bears the tax out of taxed profits. THIRD, sub-sections (2), (2A), (2B), (2C) and (2D) are the machinery for making the estimate right. Under (2) the employee with more than one employer in the year, simultaneous or successive, may choose one of them and give him the particulars of the other salary and the tax deducted from it, in Form No. 12B under rule 26A(1); that employer must then take those details into account. Under (2A) an employee entitled to relief under section 89 may furnish the particulars in Form No. 10E under rule 21AA, and the employer must compute the relief and give it. Under (2B) the employee may report other income, other tax deducted or collected, and a loss under the head 'Income from house property', in Form No. 12BAA under rule 26B; the sub-section carries its own two limits, which are the point of it — other income may be reported only if it is not a loss under a head other than house property, and the proviso forbids any reduction of the salary deduction except on account of the house property loss and the tax deducted or collected under Parts B and BB. Under (2D) the employer SHALL obtain the evidence or proof or particulars of prescribed claims, including a claim for set-off of loss, in Form No. 12BB under rule 26C. Under (2C) the employer SHALL give the employee a statement of the perquisites and profits in lieu of salary and their value — in the relevant columns of Form No. 16 where salary is not more than Rs 1,50,000, and in Form No. 12BA where it is more. FOURTH, sub-section (3) lets the employer correct himself within the year, increasing or reducing later deductions to absorb an earlier excess or shortfall. WHAT CHANGED AND WHEN. Sub-sections (1A) and (1B) were inserted by the Finance Act, 2002 with effect from 1 June 2002. Sub-section (2C) was inserted by the Finance Act, 2001 with effect from 1 June 2001. Sub-section (2B) was substituted by the Finance (No. 2) Act, 1998 with effect from 1 August 1998 and substituted again by Act No. 15 of 2024 with effect from 1 October 2024. Sub-section (2D) was inserted by the Finance Act, 2015 with effect from 1 June 2015. Sub-section (1C) was inserted by Act No. 12 of 2020 with effect from 1 April 2020, as the footnote attached to its opening words records; the library's separate entry on s.192(1C) identifies that Act as the Finance Act, 2020. The three changes made by Act No. 15 of 2024, all with effect from 1 October 2024, are: in (1C), "clause (vi) of sub-section (2)" was substituted by "sub-clause (vi) of clause (2)"; in (2A), the words "sub-section (1) of" were omitted before "section 89"; and the whole of (2B) was substituted. The substitution of (2B) is the one that matters. In the text before it the employee could report only "such other income and of any tax deducted thereon under any other provision of this Chapter" and the house property loss. In the substituted text he may report any tax deducted OR COLLECTED under Part B or Part BB of Chapter XVII, and the proviso now permits the salary deduction to be reduced on account of tax collected at source as well as tax deducted at source. Rule 26B was substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024 to prescribe Form No. 12BAA for that declaration. THE DEFAULT REGIME. Section 115BAC(1A) and section 115BAC(6) were both inserted by Act No. 08 of 2023 with effect from 1 April 2024, that is, for assessment year 2024-25 onwards. Sub-section (1A) applies of its own force to an individual or Hindu undivided family and the other persons it names, "other than a person who has exercised an option under sub-section (6)". It is therefore the default: an employer estimating salary income under section 192(1) computes tax under 115BAC(1A) unless the employee has opted out. For an employee with no business or professional income, sub-section (6)(ii) says the option out is exercised "along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year" — with the return, not with the employer. An intimation to the employer is therefore not the exercise of the option; it is an input into the employer's estimate. The Board addressed exactly that gap in Circular No. 4/2023 dated 5 April 2023, whose subject as printed on the departmental circular page is "Clarification regarding deduction of TDS under section 192 read with sub-section (1A) of section 115BAC of the Income-tax Act, 1961". Its body has not been read, and nothing from it is quoted here. WHEN IT STOPPED APPLYING. The Income-tax Act, 2025 (30 of 2025) provides by section 1(3) that "Save as otherwise provided in this Act, it shall come into force on the 1st April, 2026", and the Department's own release of 1 April 2026 is headed "Income-tax Act, 2025 comes into force from 1st April, 2026". Section 192 of the 1961 Act therefore governs salary paid up to 31 March 2026. Its successor is section 392 of the Income-tax Act, 2025, marginal note "Salary and accumulated balance due to an employee", which keeps the average-rate mechanism in sub-section (1) in materially the same words but restructures the rest: the (1A)/(1B) option becomes s.392(2)(a) and (b), the start-up deferral becomes s.392(3), and the five declarations of ss.192(2), (2A), (2B) are collapsed into a single list in s.392(4)(a)(i) to (v) with the no-reduction rule in s.392(4)(b). The perquisite statement, the evidence obligation and the in-year adjustment become s.392(5)(a), (b) and (c).
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved.
deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year
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Handle my notice → Ask a CA on WhatsAppSection 192 does not work like the rest of Chapter XVII-B: there is no threshold below which you need not deduct and no flat percentage to apply. You deduct, at the time of payment, "at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year" — that is, you build the employee's whole year's salary, work out the tax on it at the slab rates, divide that tax by that salary, and apply the resulting rate to each payment. Everything else in the section exists to make that estimate accurate: sub-section (2) lets the employee bring in salary from another employer in Form 12B, (2A) lets him bring in relief under section 89 in Form 10E, (2B) lets him bring in other income, other tax deducted or collected and a house property loss in Form 12BAA, (2D) obliges you to collect evidence of his claims in Form 12BB, and (2C) obliges you to give him back a statement of his perquisites in Form 12BA. Sub-sections (1A) and (1B) let you choose to pay the tax on a non-monetary perquisite yourself instead of deducting it, and section 115BAC(1A) is the default regime from assessment year 2024-25, so your estimate is made under it unless the employee tells you otherwise. This is the section as it stood after Act No. 15 of 2024 with effect from 1 October 2024; it governs salary paid up to 31 March 2026, after which section 392 of the Income-tax Act, 2025 takes over. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 192, section 192(1), section 192(2B), section 192(2), section 192(2A), section 192(2C), section 192(2D), section 192(1A), section 192(1B), section 192(3), section 192(1C), section 115BAC(1A), section 115BAC(6), section 115BAC, section Rule 26A, section Rule 26B, section Rule 26C, section Rule 21AA, section 10(10CC), section 40(a)(v), section 17(2), section 89, section 392 (Act of 2025) of the Income Tax Act 1961. It is reported as Section 192 of the Income-tax Act, 1961, as amended up to 2025. The average-rate mechanism is what makes section 192 unlike every other deduction provision, and it is why the two questions practitioners ask about other sections — has the threshold been crossed, and what percentage applies — have no answer here. The rate is an output of the employer's estimate, so the estimate is the whole of the obligation. That is why the litigation under this section is almost never about arithmetic and almost always about whether the estimate was honestly made. The library's separate entry on the bona fide estimate under s.192 collects the authorities on it. It is also why the declarations matter. Sub-sections (2), (2A) and (2B) are permissive for the employee — he "may" furnish or send them — but once he does, the employer "shall" take them into account. Sub-sections (2C) and (2D) are not permissive at all: the employer must collect the evidence and must issue the perquisite statement. Two limits in sub-section (2B) are missed often enough to be worth stating twice. The first is in the parenthesis: the other income an employee may report is "not being a loss under any such head other than the loss under the head 'Income from house property'". A business loss, a capital loss or a loss from other sources cannot be handed to the employer to set against salary, and an employer who allows one is deducting less than section 192 requires. The second is the proviso, which bars any reduction of the salary deduction except on account of the house property loss and tax deducted or collected under Parts B and BB. Reporting other income can only ever increase the deduction; the only things that can bring it down are the house property loss and credit for tax already deducted or collected. The 1 October 2024 substitution widened the second of those to take in tax COLLECTED at source — which is what makes Form 12BAA worth using for an employee who has borne TCS on a foreign remittance or a car purchase and would otherwise have to wait for the refund. If it applies to you, the first step is this: Build the estimate first, not the rate. Total the year's expected salary under the head, compute the tax on it at the rates in force for that financial year, divide the tax by the salary, and apply that rate to each payment. If the estimated tax is nil the average rate is nil and you deduct nothing; there is no threshold to look for.
The operative text of section 192 of the Income-tax Act, 1961, in Chapter XVII — Collection and recovery of tax, B.—Deduction at source, marginal note "Salary". 192.(1) "Any person responsible for paying any income chargeable under the head 'Salaries' shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year." (1A) "Without prejudice to the provisions contained in sub-section (1), the person responsible for paying any income in the nature of a perquisite which is not provided for by way of monetary payment, referred to in clause (2) of section 17, may pay, at his option, tax on the whole or part of such income without making any deduction therefrom at the time when such tax was otherwise deductible under the provisions of sub-section (1)." (1B) "For the purpose of paying tax under sub-section (1A), tax shall be determined at the average of income-tax computed on the basis of the rates in force for the financial year, on the income chargeable under the head 'Salaries' including the income referred to in sub-section (1A), and the tax so payable shall be construed as if it were, a tax deductible at source, from the income under the head 'Salaries' as per the provisions of sub-section (1), and shall be subject to the provisions of this Chapter." (1C) is the eligible start-up ESOP deferral. It is set out in full, with s.191(2) and s.156(2), on the library's separate entry for those three sub-sections, and is not repeated here. (2) "Where, during the financial year, an assessee is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer, he may furnish to the person responsible for making the payment referred to in sub-section (1) (being one of the said employers as the assessee may, having regard to the circumstances of his case choose), such details of the income under the head 'Salaries' due or received by him from the other employer or employers, the tax deducted at source therefrom and such other particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible for making the payment referred to above shall take into account the details so furnished for the purposes of making the deduction under sub-section (1)." The printed text carries a footnote to this sub-section reading "See rule 26A and Form No. 12B." (2A) "Where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under [***] section 89, he may furnish to the person responsible for making the payment referred to in sub-section (1), such particulars, in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall compute the relief on the basis of such particulars and take it into account in making the deduction under sub-section (1)." There is an Explanation defining "University". The footnote to this sub-section reads "See rule 21AA and Form No. 10E." The omitted words at [***] are "sub-section (1) of". (2B) "Where an assessee who receives any income chargeable under the head 'Salaries' has, in addition, — (i) any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head 'Income from house property'); or (ii) any tax deducted or collected under the provisions of Part B or Part BB of this Chapter, as the case may be, for the same financial year, he may send to the person responsible for making the payment referred to in sub-section (1), the particulars of— (a) such other income; (b) any tax deducted or collected under any other provision of Part B or Part BB of this Chapter, as the case may be; and (c) the loss, if any, under the head 'Income from house property', in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall take into account the particulars referred to in clauses (a), (b) and (c) for the purposes of making the deduction under sub-section (1): Provided that this sub-section shall not in any case have the effect of reducing the tax deductible from income under the head 'Salaries', except where the loss under the head 'Income from house property' and the tax deducted in accordance with other provisions of Part B and tax collected in accordance with the provisions of Part BB, of this Chapter, has been taken into account." The footnote to this sub-section reads "See rule 26B." (2C) "A person responsible for paying any income chargeable under the head 'Salaries' shall furnish to the person to whom such payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary provided to him and the value thereof in such form and manner as may be prescribed." The footnote to this sub-section reads "See rule 26A and Form Nos. 12BA and 16." (2D) "The person responsible for making the payment referred to in sub-section (1) shall, for the purposes of estimating income of the assessee or computing tax deductible under sub-section (1), obtain from the assessee the evidence or proof or particulars of prescribed claims (including claim for set-off of loss) under the provisions of the Act in such form and manner as may be prescribed." (3) "The person responsible for making the payment referred to in sub-section (1) or sub-section (1A) or sub-section (2) or sub-section (2A) or sub-section (2B) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year." Sub-sections (4), (5) and (6) deal with accumulated balances of a recognised provident fund, payments out of an approved superannuation fund, and salary payable in foreign currency, and are not covered here. THE PRESCRIBED FORMS, from the Income-tax Rules, 1962. Rule 26A, "Furnishing of particulars of income under the head 'Salaries'": sub-rule (1) prescribes Form No. 12B for the s.192(2) declaration of salary from another employer; sub-rule (2) prescribes, for the s.192(2C) statement, "(a) relevant columns provided in Form No. 16, if the amount of salary paid or payable to the employee is not more than one lakh and fifty thousand rupees; or (b) Form No. 12BA, if the amount of salary paid or payable to the employee is more than one lakh and fifty thousand rupees, which shall accompany the return of income of the employee", with an Explanation that "'Salary' for the purposes of this rule shall have the same meaning as given in rule 3". Rule 26B, now headed "Statement of particulars of income under heads of income other than 'Salaries' or details of tax deducted at source or tax collected at source", prescribes Form No. 12BAA for the s.192(2B) declaration; that rule was substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024. Form No. 12BAA is titled "Statement showing particulars for the purposes of sub-section (2B) of section 192". Rule 26C, "Furnishing of evidence of claims by employee for deduction of tax under section 192", sub-rule (1): "The assessee shall furnish to the person responsible for making payment under sub-section (1) of section 192, the evidence or the particulars of the claims referred to in sub-rule (2), in Form No. 12BB for the purpose of estimating his income or computing the tax deduction at source"; sub-rule (2) sets out a table of four claims and the evidence for each — house rent allowance (name, address and permanent account number of the landlord where the aggregate rent paid during the previous year exceeds rupees one lakh), leave travel concession (evidence of expenditure), deduction of interest under the head income from house property (name, address and permanent account number of the lender) and deduction under Chapter VI-A (evidence of investment or expenditure). Rule 21AA, "Furnishing of particulars for claiming relief under section 89", prescribes Form No. 10E. THE TWO PROVISIONS THAT COMPLETE (1A) AND (1B). Section 10(10CC) exempts "in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee, notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956)". Section 40(a)(v) disallows in computing business income "any tax actually paid by an employer referred to in clause (10CC) of section 10". THE DEFAULT REGIME. Section 115BAC(1A) opens "Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6)...". Sub-section (6) reads "Nothing contained in sub-section (1A) shall apply to a person where an option is exercised by such person, in the manner as may be prescribed, for any assessment year, and such option is exercised— (i) on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or (ii) along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in case of a person not having income referred to in clause (i)", followed by a proviso restricting withdrawal. The footnote against them records both sub-sections as inserted by Act No. 08 of 2023 with effect from 1 April 2024. The matter was decided on 2024-10-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. In the text that took effect on 1 October 2024 and governed salary paid up to 31 March 2026, section 192 does four things. FIRST, it fixes a method rather than a rate. Deduction is made at the time of payment, at the average rate of income-tax for the financial year, applied to the payer's own estimate of the employee's income under the head 'Salaries' for that year. The average rate is the tax on the estimated salary divided by that salary. Because the rate is derived from the estimate, section 192 carries no monetary threshold and no prescribed percentage: an employee whose estimated salary attracts no tax has an average rate of nil, and nothing is deducted. SECOND, sub-sections (1A) and (1B) give the employer an option, for a perquisite not provided by way of monetary payment within clause (2) of section 17, to pay the tax himself instead of deducting it. The tax he pays is computed at the same average rate, on the salary including that perquisite, and is then treated as if it were tax deducted at source under sub-section (1) and is subject to the rest of Chapter XVII. Two other provisions complete the arrangement: section 10(10CC) exempts that tax in the employee's hands, so it is not itself a further perquisite; and section 40(a)(v) denies the employer a business deduction for it. The employer therefore bears the tax out of taxed profits. THIRD, sub-sections (2), (2A), (2B), (2C) and (2D) are the machinery for making the estimate right. Under (2) the employee with more than one employer in the year, simultaneous or successive, may choose one of them and give him the particulars of the other salary and the tax deducted from it, in Form No. 12B under rule 26A(1); that employer must then take those details into account. Under (2A) an employee entitled to relief under section 89 may furnish the particulars in Form No. 10E under rule 21AA, and the employer must compute the relief and give it. Under (2B) the employee may report other income, other tax deducted or collected, and a loss under the head 'Income from house property', in Form No. 12BAA under rule 26B; the sub-section carries its own two limits, which are the point of it — other income may be reported only if it is not a loss under a head other than house property, and the proviso forbids any reduction of the salary deduction except on account of the house property loss and the tax deducted or collected under Parts B and BB. Under (2D) the employer SHALL obtain the evidence or proof or particulars of prescribed claims, including a claim for set-off of loss, in Form No. 12BB under rule 26C. Under (2C) the employer SHALL give the employee a statement of the perquisites and profits in lieu of salary and their value — in the relevant columns of Form No. 16 where salary is not more than Rs 1,50,000, and in Form No. 12BA where it is more. FOURTH, sub-section (3) lets the employer correct himself within the year, increasing or reducing later deductions to absorb an earlier excess or shortfall. WHAT CHANGED AND WHEN. Sub-sections (1A) and (1B) were inserted by the Finance Act, 2002 with effect from 1 June 2002. Sub-section (2C) was inserted by the Finance Act, 2001 with effect from 1 June 2001. Sub-section (2B) was substituted by the Finance (No. 2) Act, 1998 with effect from 1 August 1998 and substituted again by Act No. 15 of 2024 with effect from 1 October 2024. Sub-section (2D) was inserted by the Finance Act, 2015 with effect from 1 June 2015. Sub-section (1C) was inserted by Act No. 12 of 2020 with effect from 1 April 2020, as the footnote attached to its opening words records; the library's separate entry on s.192(1C) identifies that Act as the Finance Act, 2020. The three changes made by Act No. 15 of 2024, all with effect from 1 October 2024, are: in (1C), "clause (vi) of sub-section (2)" was substituted by "sub-clause (vi) of clause (2)"; in (2A), the words "sub-section (1) of" were omitted before "section 89"; and the whole of (2B) was substituted. The substitution of (2B) is the one that matters. In the text before it the employee could report only "such other income and of any tax deducted thereon under any other provision of this Chapter" and the house property loss. In the substituted text he may report any tax deducted OR COLLECTED under Part B or Part BB of Chapter XVII, and the proviso now permits the salary deduction to be reduced on account of tax collected at source as well as tax deducted at source. Rule 26B was substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024 to prescribe Form No. 12BAA for that declaration. THE DEFAULT REGIME. Section 115BAC(1A) and section 115BAC(6) were both inserted by Act No. 08 of 2023 with effect from 1 April 2024, that is, for assessment year 2024-25 onwards. Sub-section (1A) applies of its own force to an individual or Hindu undivided family and the other persons it names, "other than a person who has exercised an option under sub-section (6)". It is therefore the default: an employer estimating salary income under section 192(1) computes tax under 115BAC(1A) unless the employee has opted out. For an employee with no business or professional income, sub-section (6)(ii) says the option out is exercised "along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year" — with the return, not with the employer. An intimation to the employer is therefore not the exercise of the option; it is an input into the employer's estimate. The Board addressed exactly that gap in Circular No. 4/2023 dated 5 April 2023, whose subject as printed on the departmental circular page is "Clarification regarding deduction of TDS under section 192 read with sub-section (1A) of section 115BAC of the Income-tax Act, 1961". Its body has not been read, and nothing from it is quoted here. WHEN IT STOPPED APPLYING. The Income-tax Act, 2025 (30 of 2025) provides by section 1(3) that "Save as otherwise provided in this Act, it shall come into force on the 1st April, 2026", and the Department's own release of 1 April 2026 is headed "Income-tax Act, 2025 comes into force from 1st April, 2026". Section 192 of the 1961 Act therefore governs salary paid up to 31 March 2026. Its successor is section 392 of the Income-tax Act, 2025, marginal note "Salary and accumulated balance due to an employee", which keeps the average-rate mechanism in sub-section (1) in materially the same words but restructures the rest: the (1A)/(1B) option becomes s.392(2)(a) and (b), the start-up deferral becomes s.392(3), and the five declarations of ss.192(2), (2A), (2B) are collapsed into a single list in s.392(4)(a)(i) to (v) with the no-reduction rule in s.392(4)(b). The perquisite statement, the evidence obligation and the in-year adjustment become s.392(5)(a), (b) and (c).
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the amendment history taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year"
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Section 192 of the Income-tax Act, 1961, as amended up to 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 192, section 192(1), section 192(2B), section 192(2), section 192(2A), section 192(2C), section 192(2D), section 192(1A), section 192(1B), section 192(3), section 192(1C), section 115BAC(1A), section 115BAC(6), section 115BAC, section Rule 26A, section Rule 26B, section Rule 26C, section Rule 21AA, section 10(10CC), section 40(a)(v), section 17(2), section 89, section 392 (Act of 2025), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not a judgment. In the text that took effect on 1 October 2024 and governed salary paid up to 31 March 2026, section 192 does four things. FIRST, it fixes a method rather than a rate. Deduction is made at the time of payment, at the average rate of income-tax for the financial year, applied to the payer's own estimate of the employee's income under the head 'Salaries' for that year. The average rate is the tax on the estimated salary divided by that salary. Because the rate is derived from the estimate, section 192 carries no monetary threshold and no prescribed percentage: an employee whose estimated salary attracts no tax has an average rate of nil, and nothing is deducted. SECOND, sub-sections (1A) and (1B) give the employer an option, for a perquisite not provided by way of monetary payment within clause (2) of section 17, to pay the tax himself instead of deducting it. The tax he pays is computed at the same average rate, on the salary including that perquisite, and is then treated as if it were tax deducted at source under sub-section (1) and is subject to the rest of Chapter XVII. Two other provisions complete the arrangement: section 10(10CC) exempts that tax in the employee's hands, so it is not itself a further perquisite; and section 40(a)(v) denies the employer a business deduction for it. The employer therefore bears the tax out of taxed profits. THIRD, sub-sections (2), (2A), (2B), (2C) and (2D) are the machinery for making the estimate right. Under (2) the employee with more than one employer in the year, simultaneous or successive, may choose one of them and give him the particulars of the other salary and the tax deducted from it, in Form No. 12B under rule 26A(1); that employer must then take those details into account. Under (2A) an employee entitled to relief under section 89 may furnish the particulars in Form No. 10E under rule 21AA, and the employer must compute the relief and give it. Under (2B) the employee may report other income, other tax deducted or collected, and a loss under the head 'Income from house property', in Form No. 12BAA under rule 26B; the sub-section carries its own two limits, which are the point of it — other income may be reported only if it is not a loss under a head other than house property, and the proviso forbids any reduction of the salary deduction except on account of the house property loss and the tax deducted or collected under Parts B and BB. Under (2D) the employer SHALL obtain the evidence or proof or particulars of prescribed claims, including a claim for set-off of loss, in Form No. 12BB under rule 26C. Under (2C) the employer SHALL give the employee a statement of the perquisites and profits in lieu of salary and their value — in the relevant columns of Form No. 16 where salary is not more than Rs 1,50,000, and in Form No. 12BA where it is more. FOURTH, sub-section (3) lets the employer correct himself within the year, increasing or reducing later deductions to absorb an earlier excess or shortfall. WHAT CHANGED AND WHEN. Sub-sections (1A) and (1B) were inserted by the Finance Act, 2002 with effect from 1 June 2002. Sub-section (2C) was inserted by the Finance Act, 2001 with effect from 1 June 2001. Sub-section (2B) was substituted by the Finance (No. 2) Act, 1998 with effect from 1 August 1998 and substituted again by Act No. 15 of 2024 with effect from 1 October 2024. Sub-section (2D) was inserted by the Finance Act, 2015 with effect from 1 June 2015. Sub-section (1C) was inserted by Act No. 12 of 2020 with effect from 1 April 2020, as the footnote attached to its opening words records; the library's separate entry on s.192(1C) identifies that Act as the Finance Act, 2020. The three changes made by Act No. 15 of 2024, all with effect from 1 October 2024, are: in (1C), "clause (vi) of sub-section (2)" was substituted by "sub-clause (vi) of clause (2)"; in (2A), the words "sub-section (1) of" were omitted before "section 89"; and the whole of (2B) was substituted. The substitution of (2B) is the one that matters. In the text before it the employee could report only "such other income and of any tax deducted thereon under any other provision of this Chapter" and the house property loss. In the substituted text he may report any tax deducted OR COLLECTED under Part B or Part BB of Chapter XVII, and the proviso now permits the salary deduction to be reduced on account of tax collected at source as well as tax deducted at source. Rule 26B was substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024 to prescribe Form No. 12BAA for that declaration. THE DEFAULT REGIME. Section 115BAC(1A) and section 115BAC(6) were both inserted by Act No. 08 of 2023 with effect from 1 April 2024, that is, for assessment year 2024-25 onwards. Sub-section (1A) applies of its own force to an individual or Hindu undivided family and the other persons it names, "other than a person who has exercised an option under sub-section (6)". It is therefore the default: an employer estimating salary income under section 192(1) computes tax under 115BAC(1A) unless the employee has opted out. For an employee with no business or professional income, sub-section (6)(ii) says the option out is exercised "along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year" — with the return, not with the employer. An intimation to the employer is therefore not the exercise of the option; it is an input into the employer's estimate. The Board addressed exactly that gap in Circular No. 4/2023 dated 5 April 2023, whose subject as printed on the departmental circular page is "Clarification regarding deduction of TDS under section 192 read with sub-section (1A) of section 115BAC of the Income-tax Act, 1961". Its body has not been read, and nothing from it is quoted here. WHEN IT STOPPED APPLYING. The Income-tax Act, 2025 (30 of 2025) provides by section 1(3) that "Save as otherwise provided in this Act, it shall come into force on the 1st April, 2026", and the Department's own release of 1 April 2026 is headed "Income-tax Act, 2025 comes into force from 1st April, 2026". Section 192 of the 1961 Act therefore governs salary paid up to 31 March 2026. Its successor is section 392 of the Income-tax Act, 2025, marginal note "Salary and accumulated balance due to an employee", which keeps the average-rate mechanism in sub-section (1) in materially the same words but restructures the rest: the (1A)/(1B) option becomes s.392(2)(a) and (b), the start-up deferral becomes s.392(3), and the five declarations of ss.192(2), (2A), (2B) are collapsed into a single list in s.392(4)(a)(i) to (v) with the no-reduction rule in s.392(4)(b). The perquisite statement, the evidence obligation and the in-year adjustment become s.392(5)(a), (b) and (c). It arises in TDS Defaults and Salary & Perquisites matters, on section 192, section 192(1), section 192(2B), section 192(2), section 192(2A), section 192(2C), section 192(2D), section 192(1A), section 192(1B), section 192(3), section 192(1C), section 115BAC(1A), section 115BAC(6), section 115BAC, section Rule 26A, section Rule 26B, section Rule 26C, section Rule 21AA, section 10(10CC), section 40(a)(v), section 17(2), section 89, section 392 (Act of 2025) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Estimate under section 115BAC(1A) unless the employee has told you he is opting out. It has been the default since assessment year 2024-25. Take his intimation in writing at the start of the year, and record that you told him the intimation is not the option itself — for an employee with no business income the option under s.115BAC(6)(ii) is exercised along with the return under s.139(1). Collect Form 12BB under rule 26C before you allow any claim. Sub-section (2D) makes this an obligation on you, not a courtesy to the employee: house rent allowance with the landlord's PAN where the year's rent exceeds one lakh, evidence of leave travel concession expenditure, the lender's PAN for house property interest, and proof of investment or expenditure for Chapter VI-A. Take a Form 12B under rule 26A(1) from anyone who joined mid-year or holds a second job, and put the previous employer's salary and tax into your estimate. Once he furnishes it you are obliged to use it. Accept a Form 12BAA under rule 26B for other income, other TDS and TCS, and a house property loss — and refuse any other loss. A business, capital or other-sources loss cannot reduce the salary deduction, and the proviso to sub-section (2B) forbids the reduction in any event. Take Form 10E under rule 21AA before you give relief under section 89, and compute the relief yourself: sub-section (2A) says the employer shall compute it, not that he shall accept the employee's figure. The library has a separate entry on section 89 with rules 21A and 21AA. Issue Form 12BA with Form 16 wherever salary paid or payable exceeds Rs 1,50,000, and use the perquisite columns of Form 16 alone only below that figure. Rule 26A(2) draws the line there, and 'salary' for that purpose takes its meaning from rule 3. If you decide to bear the tax on a non-monetary perquisite yourself under sub-section (1A), compute it under (1B) at the average rate on the salary INCLUDING that perquisite, pay and report it as if it were tax deducted at source, and add it back in the tax computation — section 40(a)(v) disallows it. Do not gross it up again in the employee's hands; section 10(10CC) exempts it there. Use sub-section (3) rather than a correction statement when you find a shortfall inside the same financial year: increase the later deductions until the year closes correctly. For salary paid on or after 1 April 2026 stop reading this section and read section 392 of the Income-tax Act, 2025, which is its successor.
Still good law. The text relied on is the current published text of section 192. Ten editions, running from 1962 to the current one, were compared. Every one named the Income-tax Act, 1961 and printed the marginal note "Salary", and the text stops changing at the edition immediately before the current one, which is identical to it word for word across sub-sections (1) to (6). Sub-section (1), which carries the average-rate words quoted on this page, was transcribed from three of those editions and is identical in all three. Every amendment date given here comes from the footnotes carried by those same editions: (1A), (1B) and (2C) from the 2004 edition, (2D) from the 2015 edition, (1C) from two later ones, and the three changes of 1 October 2024 from the current text. The text of (2B) as it stood before the 2024 substitution was read in the 2004 edition, which confirms that what 2024 added was tax COLLECTED at source under Part BB. Rules 26A, 26B, 26C and 21AA were each read in their own text and each agrees with the "See rule" footnote printed against the matching sub-section. Four things are not closed. The body of CBDT Circular No. 4/2023 has not been read, so only its number, its date of 5 April 2023 and its subject line are used, and nothing from its body is quoted or relied on anywhere on this page. The footnotes name the amending Acts only by number, as Act No. 12 of 2020 and Act No. 15 of 2024, and the enacted Finance Acts were not read to confirm their short titles. No notification number was found for the insertion of rule 26C and Form 12BB, so none is given. The repeal and savings provision of the Income-tax Act, 2025 was not read; the statement that section 192 governs salary paid up to 31 March 2026 rests on section 1(3) of that Act and on the Department's release of 1 April 2026. No judgment has been read for this entry. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Sub-sections (1) to (6) were transcribed from the current published text of the section, which names the Income-tax Act, 1961 and prints the heading "Salary" under Chapter XVII, B.—Deduction at source. The same text was transcribed independently from the preceding edition and the two agree word for word. That current text carries three footnotes, printed as: "57a. Sub. for 'clause (vi) of sub-section (2)' by Act No. 15 of 2024, w.e.f. 1-10-2024."; "58. Words 'sub-section (1) of' omtt. by Act No. 15 of 2024, w.e.f. 1-10-2024."; "59. Sub. by Act No. 15 of 2024, w.e.f. 1-10-2024." Marker 57a sits in sub-section (1C) on the words "sub-clause (vi) of clause (2)"; marker 58 sits in sub-section (2A) immediately before "section 89"; marker 59 opens sub-section (2B) and its closing bracket falls after the proviso. Footnote 59 does not reproduce the prior text of (2B), so the pre-2024 text was read separately in an earlier edition. The older amendment dates come from footnotes carried by earlier editions and not by the current text. Two of those editions attach to the opening of sub-section (1C) a footnote printed as "Ins. by the Act No. 12 of 2020, w.e.f. 1-4-2020". An edition of 2004 records the insertion of (1A) and (1B) by the Finance Act, 2002 with effect from 1 June 2002, the insertion of (2C) by the Finance Act, 2001 with effect from 1 June 2001, and the substitution of (2B) by the Finance (No. 2) Act, 1998 with effect from 1 August 1998. An edition of 2015 records the insertion of (2D) by the Finance Act, 2015 with effect from 1 June 2015. Footnote numbering restarts in every edition, so a footnote number means nothing without the edition it was read in. The rule and form cross-references are the "See rule" footnotes printed against each sub-section — rule 26A and Form No. 12B against (2), rule 21AA and Form No. 10E against (2A), rule 26B against (2B), rule 26A and Form Nos. 12BA and 16 against (2C) — and each rule was then read in its own text. Rule 26B now prescribes Form No. 12BAA, having been substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024, fourteen days after the amendment to sub-section (2B) took effect. Sub-sections (4), (5) and (6) — accumulated balances of a recognised provident fund, payments out of an approved superannuation fund, and salary payable in foreign currency — are deliberately left out of this record. They belong with section 192A. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not a judgment. In the text that took effect on 1 October 2024 and governed salary paid up to 31 March 2026, section 192 does four things. FIRST, it fixes a method rather than a rate. Deduction is made at the time of payment, at the average rate of income-tax for the financial year, applied to the payer's own estimate of the employee's income under the head 'Salaries' for that year. The average rate is the tax on the estimated salary divided by that salary. Because the rate is derived from the estimate, section 192 carries no monetary threshold and no prescribed percentage: an employee whose estimated salary attracts no tax has an average rate of nil, and nothing is deducted. SECOND, sub-sections (1A) and (1B) give the employer an option, for a perquisite not provided by way of monetary payment within clause (2) of section 17, to pay the tax himself instead of deducting it. The tax he pays is computed at the same average rate, on the salary including that perquisite, and is then treated as if it were tax deducted at source under sub-section (1) and is subject to the rest of Chapter XVII. Two other provisions complete the arrangement: section 10(10CC) exempts that tax in the employee's hands, so it is not itself a further perquisite; and section 40(a)(v) denies the employer a business deduction for it. The employer therefore bears the tax out of taxed profits. THIRD, sub-sections (2), (2A), (2B), (2C) and (2D) are the machinery for making the estimate right. Under (2) the employee with more than one employer in the year, simultaneous or successive, may choose one of them and give him the particulars of the other salary and the tax deducted from it, in Form No. 12B under rule 26A(1); that employer must then take those details into account. Under (2A) an employee entitled to relief under section 89 may furnish the particulars in Form No. 10E under rule 21AA, and the employer must compute the relief and give it. Under (2B) the employee may report other income, other tax deducted or collected, and a loss under the head 'Income from house property', in Form No. 12BAA under rule 26B; the sub-section carries its own two limits, which are the point of it — other income may be reported only if it is not a loss under a head other than house property, and the proviso forbids any reduction of the salary deduction except on account of the house property loss and the tax deducted or collected under Parts B and BB. Under (2D) the employer SHALL obtain the evidence or proof or particulars of prescribed claims, including a claim for set-off of loss, in Form No. 12BB under rule 26C. Under (2C) the employer SHALL give the employee a statement of the perquisites and profits in lieu of salary and their value — in the relevant columns of Form No. 16 where salary is not more than Rs 1,50,000, and in Form No. 12BA where it is more. FOURTH, sub-section (3) lets the employer correct himself within the year, increasing or reducing later deductions to absorb an earlier excess or shortfall. WHAT CHANGED AND WHEN. Sub-sections (1A) and (1B) were inserted by the Finance Act, 2002 with effect from 1 June 2002. Sub-section (2C) was inserted by the Finance Act, 2001 with effect from 1 June 2001. Sub-section (2B) was substituted by the Finance (No. 2) Act, 1998 with effect from 1 August 1998 and substituted again by Act No. 15 of 2024 with effect from 1 October 2024. Sub-section (2D) was inserted by the Finance Act, 2015 with effect from 1 June 2015. Sub-section (1C) was inserted by Act No. 12 of 2020 with effect from 1 April 2020, as the footnote attached to its opening words records; the library's separate entry on s.192(1C) identifies that Act as the Finance Act, 2020. The three changes made by Act No. 15 of 2024, all with effect from 1 October 2024, are: in (1C), "clause (vi) of sub-section (2)" was substituted by "sub-clause (vi) of clause (2)"; in (2A), the words "sub-section (1) of" were omitted before "section 89"; and the whole of (2B) was substituted. The substitution of (2B) is the one that matters. In the text before it the employee could report only "such other income and of any tax deducted thereon under any other provision of this Chapter" and the house property loss. In the substituted text he may report any tax deducted OR COLLECTED under Part B or Part BB of Chapter XVII, and the proviso now permits the salary deduction to be reduced on account of tax collected at source as well as tax deducted at source. Rule 26B was substituted by the Income-tax (Eighth Amendment) Rules, 2024 with effect from 15 October 2024 to prescribe Form No. 12BAA for that declaration. THE DEFAULT REGIME. Section 115BAC(1A) and section 115BAC(6) were both inserted by Act No. 08 of 2023 with effect from 1 April 2024, that is, for assessment year 2024-25 onwards. Sub-section (1A) applies of its own force to an individual or Hindu undivided family and the other persons it names, "other than a person who has exercised an option under sub-section (6)". It is therefore the default: an employer estimating salary income under section 192(1) computes tax under 115BAC(1A) unless the employee has opted out. For an employee with no business or professional income, sub-section (6)(ii) says the option out is exercised "along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year" — with the return, not with the employer. An intimation to the employer is therefore not the exercise of the option; it is an input into the employer's estimate. The Board addressed exactly that gap in Circular No. 4/2023 dated 5 April 2023, whose subject as printed on the departmental circular page is "Clarification regarding deduction of TDS under section 192 read with sub-section (1A) of section 115BAC of the Income-tax Act, 1961". Its body has not been read, and nothing from it is quoted here. WHEN IT STOPPED APPLYING. The Income-tax Act, 2025 (30 of 2025) provides by section 1(3) that "Save as otherwise provided in this Act, it shall come into force on the 1st April, 2026", and the Department's own release of 1 April 2026 is headed "Income-tax Act, 2025 comes into force from 1st April, 2026". Section 192 of the 1961 Act therefore governs salary paid up to 31 March 2026. Its successor is section 392 of the Income-tax Act, 2025, marginal note "Salary and accumulated balance due to an employee", which keeps the average-rate mechanism in sub-section (1) in materially the same words but restructures the rest: the (1A)/(1B) option becomes s.392(2)(a) and (b), the start-up deferral becomes s.392(3), and the five declarations of ss.192(2), (2A), (2B) are collapsed into a single list in s.392(4)(a)(i) to (v) with the no-reduction rule in s.392(4)(b). The perquisite statement, the evidence obligation and the in-year adjustment become s.392(5)(a), (b) and (c).
TaxSphere, “Statutory position — s.192: the employer deducts at the average rate on his own estimate of the year's salary, and the declarations exist to correct the estimate”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-192-average-rate-on-the-estimated-salary-and-the-declarations-that-correct-it/ (validity last checked 2026-09-23)
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My client received salary arrears and family pension arrears in one year and has been pushed into a higher slab. What relief is available, how is it computed, and is Form 10E a precondition?
My employer pays my Indian tax under a net of tax contract. Must the tax on that tax be grossed up again, or is it exempt under section 10(10CC)?
My clients settled a wage dispute and took VRS and compensation for loss of future salary in two instalments. The company deducted TDS on the whole amount without giving s.89 relief. Can we make the employer refund it?
Our restaurant and banquet bills carry a tip that the customer adds on the card. The money lands in our bank account and we hand it to the staff with their wages. The department says that is salary we should have deducted on. Is it?
