Major Income Tax Relief Announced for Salaried Employees: New Rules Under Section 192 and 206C Explained

In a landmark move that will benefit millions of salaried taxpayers, the Central Board of Direct Taxes (CBDT) has amended certain provisions of the Income Tax Act, 1961, under the Finance Act, 2024. These changes, effective as of October 15, 2024, introduce simpler processes for salaried employees to claim Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) credits, easing the tax deduction process significantly.

Overview of Changes in Income Tax Rules

The CBDT has notified amendments in the Income Tax Rules, 1962, specifically targeting salaried employees. With these changes:

• Employees can now claim TCS or TDS credits more easily.
• Parents can claim TCS credits for minor children.
• Form No. 12BAA has been introduced to streamline the reporting process.

These amendments, enacted under the Finance Act 2024, enhance tax compliance efficiency and aim to provide much-needed relief to salaried taxpayers.

Updates to Section 192 and Introduction of Form 12BAA

Section 192 of the Income Tax Act, 1961, governs TDS on salary income. As per the new notification, subsection 2B of Section 192 has been amended, allowing salaried employees to claim credits on TDS or TCS deductions through their employers.

The introduction of Form No. 12BAA is a significant addition. This form acts as a formal statement that employees need to submit to their employers, detailing the TCS or TDS information. Employers will then use this information to accurately deduct TDS on salaries. This adjustment is particularly beneficial for employees who may have TCS deducted on expenses incurred outside their salaries, such as travel or high-value purchases.

Key Points about Form No. 12BAA

• Employees must submit this form to their employers.
• It includes information on any TDS/TCS credits the employee wishes to claim.
• The employer will adjust the TDS deductions on salary based on this information.

This amendment is expected to streamline the tax deduction process, ensuring employees don’t miss out on potential tax credits due to lack of coordination between various TDS/TCS sources and their employers.

Claiming TCS Credit for Minors

In a significant relief for families, the updated rules allow parents to claim TCS credit on behalf of their minor children. This is especially beneficial for families where minors’ incomes are clubbed with those of their parents, making tax compliance smoother and more efficient.

• Example: Suppose a minor earns interest income on which TCS is deducted. If this income is clubbed with the parent’s, the parent can now claim the TCS credit on behalf of the minor.

This change eliminates the complexities parents previously faced when attempting to claim TCS credits for minors, thereby promoting better tax compliance and accuracy.

Modifications to Section 206C

Another major amendment under the Finance Act 2024 is in Section 206C of the Income Tax Act. Previously, TCS credit could only be claimed by the person responsible for the TCS payment. Now, with the update to subsection 4 of Section 206C, taxpayers other than the TCS collector can claim TCS credit.

How to Claim TCS Credit for Another Person

The collector making the TCS payment will need to:

1. Declare the PAN, name, and address of the person to whom TCS credit is being granted.
2. Provide detailed information about the payment and reason for credit transfer.

This flexibility is particularly useful in cases where TCS is incurred for minors or dependents, as it allows credits to be more accurately and efficiently attributed within families.

How These Changes Benefit Taxpayers

With these amendments, taxpayers stand to gain in multiple ways:

• Simplified Tax Compliance: Employees now have a more streamlined process for claiming TDS and TCS credits, reducing the burden of missed claims.
• Better Family Benefits: Parents can now claim TCS credits for minor dependents, ensuring families receive due credits without additional administrative complexities.
• Improved Accuracy: Employers, using Form No. 12BAA, can now deduct TDS accurately, leading to less risk of under- or over-taxation.
• Enhanced Flexibility: Section 206C amendments mean that TCS credits can be claimed by the person responsible for the income, rather than only the collector.

Frequently Asked Questions (FAQs)

1. What is Form No. 12BAA, and how do I use it?
Form No. 12BAA is a new form introduced by the CBDT that allows salaried employees to report any TCS or TDS they want to claim through their employer. Employees should submit this form to their employer, who will then factor in the TCS/TDS information when calculating TDS on salary.

2. Can I claim TCS credit for my child’s income?
Yes. With the recent changes, parents can now claim TCS credits on behalf of minors if their income is clubbed with the parent’s income. This is especially useful in cases where minors earn interest income or similar sources that may incur TCS.

3. What if I paid TCS, but my family member should claim the credit?
Under the amended Section 206C, you can now assign TCS credit to another person, such as a family member. The TCS collector must provide the PAN, name, and address of the person who will claim the credit and details of the payment.

4. How do these changes affect my salary TDS?
If you have additional TCS or TDS credits outside of salary, you can submit Form No. 12BAA to your employer. This ensures that TDS deductions on your salary account for all relevant credits, leading to more accurate deductions and potentially lower taxable income.

5. Are these changes applicable for FY 2024-25?
Yes, the Finance Act 2024 amendments are effective from October 15, 2024, and will be applicable for the Financial Year 2024-25.

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