Income Tax Circular No.04/2023 || Clarification Regarding Deduction of TDS u/s 192 read with Section 115BAC(1A) of the Income Tax Act, 1961

vide Finance Act, 2023, Sub-section (1A) has been Inserted in Section 115BAC of the Income Tax Act, 1961 to provide for a New Tax Regime with effect from the Assessment Year beginning on or after April 1st 2024. This regime applies to an Individual or Hindu Undivided Family or Association of Persons [other than a Cooperative Society] or Body of Individuals, whether Incorporated or not, or an Artificial Juridical Person. Under this New Regime, the Income Tax in respect of the Total Income of the person shall be computed at the Rates provided in Sub-section (1A) of section 115BAC of the Act, subject to certain conditions, including the condition that the person does not avail of Specified Exemptions and Deductions.

The above-mentioned New Tax Regime is the default Tax Regime applicable to all persons mentioned above. However, under Sub-section (6) of Section 115BAC of the Income Tax Act, 1961 a person may exercise an option to opt out of this Tax regime. A person not having income from a Business or profession can exercise this option every year.

Representations have been received expressing concerns regarding TDS on Salary Income of a person u/s 192 of the Act, as the Deductor, being an Employer, would not know if the person, being an employee, would opt out from Taxation under Sub-section (1A) of Section 115BAC of the Act or not.

In order to avoid genuine hardship in such cases, the Board, in exercise of powers conferred u/s 119 of the Act, hereby directs that a Deductor, being an Employer, shall seek information from each of its employees having income u/s 192 of the Act regarding their Intended Tax Regime and each such employee shall intimate the same to the Deductor, being his Employer, regarding his intended Tax Regime for each year and upon intimation, the Deductor shall compute his Total Income, and deduct tax at source thereon according to the option exercised.

If intimation is not made by the Employee, it shall be presumed that the employee continues to be in the default tax regime and has not exercised the option to opt out of the new tax regime. Accordingly, in such a case, the employer shall deduct tax at source, on income u/s 192 of the Act, in accordance with the rates provided under Sub-section (1A) of section 115BAC of the Act.

It is also clarified that the intimation would not amount to exercising the option in terms of Sub-section (6) of section 115BAC of the Act and the person shall be required to do so separately in accordance with the provisions of the sub-section.

This Circular is in Supersession of Circular No.C1/2020 dated April 13th 2020 and shall be applicable for TDS during the Financial Year 2023-24 and Subsequent Years.

The Circular can be accessed at Click Here

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