Section 192(1)

Section 192(1) — the law in short

What the courts have decided on section 192(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• State Bank of India v Assistant Commissioner of Income Tax Supreme CourtHelps department
  My client is an employer facing a s.201 order for not deducting on LTC where the employees' itineraries included a foreign leg but the reimbursement was limited to the domestic shortest-route fare. Is the bona fide estimate defence available?
  No. The Supreme Court held that the moment an employee undertakes travel with a foreign leg it is not travel within India and the payment is outside s.10(5), so the employer was bound to deduct under s.192(1) and was rightly held an assessee in default. It rejected the argument that the reimbursement having been confined to the shortest domestic route saved the exemption, and it rejected the bona fide mistake defence because the employer had the complete travel details before it when settling the bills.
• CIT v Eli Lilly & Co (India) P Ltd Supreme CourtCuts both waysSuperseded by amendment
  The TDS officer says I under-deducted under s.192. If my estimate was made honestly, does that answer the demand, the interest and the penalty?
  It answers the penalty, not the tax and not the interest. The Supreme Court treated s.192(1) as requiring the employer to estimate the salary — an exercise akin to computation — and held that where there was a shortfall the officer proceeds under s.201(1) to recover it and interest under s.201(1A) runs from the date the tax was deductible to the date the tax was actually paid. On penalty it held that s.271C should not be invoked where the issue was a nascent one and the employers had acted bona fide.
• State Bank of India v ACIT (TDS) High CourtHelps departmentNo later treatment found
  Staff booked a consolidated package tour with a foreign leg. Can we exempt the Indian part as LTC?
  No. Where the tour operator charges a consolidated amount for the whole journey including the domestic portion, there is no severable Indian leg on which s.10(5) can operate, and the employer was rightly treated as an assessee in default under s.201(1) and s.201(1A).
• 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 CBDT Circulars & InstructionsCuts both ways
  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.
• Statutory position — s.89 with Rule 21A and Rule 21AA: the five categories of relief on arrears, the proviso that forfeits relief where the s.10(10C) exemption has been claimed, and what Rule 21AA actually says about Form 10E CBDT Circulars & InstructionsCuts both waysNo later treatment found
  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?
  Section 89 gives relief where an assessee receives a sum in the nature of salary paid in arrears or in advance, or salary for more than twelve months in one financial year, or a payment which under s.17(3) is a profit in lieu of salary, or a sum in the nature of family pension as defined in the Explanation to s.57(iia) paid in arrears, and his total income is on that account assessed at a higher rate; the Assessing Officer must, on an application, grant such relief as may be prescribed. Rule 21A prescribes five different computations depending on which of five categories the payment falls into. On Form 10E, be precise: Rule 21AA says that an assessee entitled to relief under section 89 "may furnish to the person responsible for making the payment referred to in sub-section (1) of section 192" the particulars specified in Form No. 10E — it is expressed as a permission, and it is directed at the employer for the purposes of tax deduction, not in terms as a condition precedent to the relief.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.