Rule 204 — Furnishing of particulars for deduction of tax at source from income under head “Salaries”. Made under s.392 of the Income-tax Act, 2025.
Rule 204 gives effect to Section 392 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
The rule covers two flows of particulars around salary deduction at source — what the employee may give the employer, and what the employer must give the employee.
Sub-rule (1) permits the assessee to furnish, in Form No. 122, to the person responsible for making the payment referred to in section 392(1), for the purpose of making deduction under that sub-section: any income under the head "Salaries" due or received from any other employer or employers during the tax year; any loss under the head "Income from house property" for the same tax year; any income chargeable under any head other than "Salaries", not being a loss under any such head other than the house property loss, for the same tax year; and any tax deducted or collected at source under Chapter XIX-B for the same tax year.
Sub-rule (2) requires the person responsible for paying income chargeable under the head "Salaries" to furnish to the person to whom the payment is made a statement giving correct and complete particulars of perquisites or profits in lieu of salary and the value of them — in the relevant columns provided in Form No. 130 if the salary paid or payable to the employee for the tax year is not more than Rs. 150000, and in Form No. 123 if it is more than Rs. 150000.
Sub-rule (3) provides that "salary" for the purposes of this rule has the same meaning as given in rule 15.
An employer deducting tax on salary knows only what it pays. Without the particulars in sub-rule (1) it cannot take account of a second employment, a house property loss or other income, and the employee is left to sort the difference out through advance tax or a refund. The rule opens that channel and makes it the employee's choice — "may furnish" — while sub-rule (2) runs the other way and obliges the employer to tell the employee what perquisites and profits in lieu of salary it has valued and on what footing.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Salary at or below which the perquisites particulars go in Form No. 130 | Not more than Rs. 150000 | Amount of salary paid or payable to the employee for the tax year; the particulars go in the relevant columns provided in that Form | Sub-rule (2)(a) |
| Salary above which the perquisites particulars go in Form No. 123 | More than Rs. 150000 | Amount of salary paid or payable to the employee for the tax year | Sub-rule (2)(b) |
The two sub-rules are not symmetrical. Sub-rule (1) is optional for the employee — the assessee "may furnish" Form No. 122 — while sub-rule (2) is an obligation on the payer, who "shall furnish" the statement to the employee. What may be given under sub-rule (1) is also restricted: any loss other than a loss under "Income from house property" is excluded by clause (c), so an employee cannot reduce the deduction by feeding in a business or capital loss. Which perquisites form applies turns on the salary paid or payable for the tax year, tested against Rs. 150000, and the boundary is exact: at exactly Rs. 150000 the salary is "not more than" that figure, so Form No. 130 applies. "Salary" here is not a term of art invented in this rule — sub-rule (3) takes it from rule 15, and that is the meaning to use when applying the threshold.
An employee whose salary for the tax year is Rs 9 lakh joined mid-year and had salary from a previous employer, along with a Rs 2 lakh loss under "Income from house property". He may furnish Form No. 122 to the present employer setting out the earlier salary, the house property loss and the tax already deducted, and the employer takes them into account in deducting under section 392(1). Whether or not he does, the employer must give him the perquisites statement in Form No. 123, his salary being more than Rs. 150000; an employee paid Rs 1,20,000 for the year would receive the particulars in the relevant columns of Form No. 130 instead.
You meet it at the start of employment and each year afterwards, in the Form No. 122 declaration given to the payroll department, and at the year end in the perquisites statement in Form No. 123 or Form No. 130 that the employer hands over.
The assessee may furnish the following particulars in Form No. 122 to the person responsible for making the payment referred to in sub-section (1) of section 392, for the purpose of making deduction under the said sub-section
Form No. 123, if the amount of salary paid or payable to the employee for the tax year is more than Rs. 150000