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.
