Income-Tax Deductions from Salaries for FY 2024-25 Under Section 192 (Circular-no-03-2025)
The Central Board of Direct Taxes (CBDT) has issued circular-no-03-2025, providing detailed guidelines for income tax deductions from salaries under Section 192 of the Income Tax Act, 1961, for the financial year 2024-25. This circular incorporates amendments from the Finance (No. 2) Act, 2024, Finance (No. 1) Act, 2024, and Finance Act, 2023, which affect Tax Deduction at Source (TDS) for salaried employees. Understanding these provisions is crucial for both employers and employees to ensure accurate tax deductions and compliance.
Also Read-ENR-03: How To Generate e-Way Bills By Unregistered Dealers
For the Financial Year 2024-25, several key changes have been introduced that impact how income tax is calculated and deducted from salaries. These changes encompass the taxation of salary and perquisites, revised surcharge rates under the old tax regime, income tax slabs under the new tax regime, and modifications in reporting requirements through Form 16 and Form 24Q. Furthermore, the circular addresses tighter rules on TDS non-compliance and provides a higher exemption for leave encashment. These updates aim to streamline the tax deduction process and provide clarity on the latest regulatory changes.
| Information | Details |
|---|---|
| Relevant Section | Section 192 of the Income Tax Act, 1961 |
| Financial Year | 2024-25 |
| Key Changes | Taxation of salary and perquisites, revised surcharge rates (old tax regime), income tax slabs (new tax regime), changes in Form 16 and Form 24Q, stricter rules on TDS non-compliance, increased leave encashment exemption |
| Standard Deduction (New Tax Regime) | Increased to Rs 75,000 for individual taxpayers with income from salary or pension |
| Basic Exemption Limit (New Tax Regime) | Rs 3,00,000 for all individuals |
Key Highlights of Circular No. 3/2025.
Taxation of Salary and Perquisites.
Under Section 17(1), salary now includes contributions made by the Central Government to the Agniveer Corpus Fund under the Agnipath Scheme. Additionally, amendments to Section 17(2) specify that rent-free or concessional accommodation provided by employers is taxable as per prescribed rules.
Surcharge Rate Revisions for FY 2024-25 (Old Tax Regime).
The Finance (No. 2) Act, 2024, has revised surcharge rates for high-income earners under the Old Tax Regime:
- 10%: For income between Rs 50 lakh – Rs 1 crore
- 15%: For income between Rs 1 crore – Rs 2 crore
- 25%: For income between Rs 2 crore – Rs 5 crore (excluding certain capital gains)
- 37%: For income above Rs 5 crore (excluding certain capital gains)
- 15%: For income above Rs 2 crore, if it includes capital gains under Sections 111A, 112, or 112A
Income Tax Slabs Under the New Tax Regime.
For those opting for the New Tax Regime (Section 115BAC), the tax rates for Assessment Year 2025-26 are as follows:
- Up to Rs 3,00,000: Nil
- Rs 3,00,001 – Rs 7,00,000: 5%
- Rs 7,00,001 – Rs 10,00,000: 10%
- Rs 10,00,001 – Rs 12,00,000: 15%
- Rs 12,00,001 – Rs 15,00,000: 20%
- Above Rs 15,00,000: 30%
Individuals earning up to Rs 7 lakh under the new tax regime can claim a full tax rebate under Section 87A.
Updates to Form 16 and Form 24Q.
Form 16 has been modified to include changes in reporting other tax deductions and perquisites. Form 24Q now features a new column (388A) to report other TDS/TCS deductions.
Tighter Regulations on TDS Non-Compliance.
Failure to deduct TDS under specific provisions will result in penalties under Section 271C. Non-payment of deducted tax may lead to rigorous imprisonment ranging from 3 months to 7 years, along with a fine, as per Section 276B.
Increased Exemption for Leave Encashment.
Non-government employees can now claim an exemption of up to Rs 25 lakh on leave encashment at retirement, according to CBDT Notification No. 31/2023.
TDS on Salary: Key Considerations Under Section 192.
Section 192 of the Income Tax Act mandates that every employer deduct TDS on salary payments if the employee’s salary exceeds the basic exemption limit. This deduction occurs at the time of salary payment, whether the salary is paid in advance, on time, or in arrears. The basic exemption limit varies based on the tax regime and the age of the individual.
Calculating TDS on Salary.
To accurately calculate TDS on salary, employers should consider:
- Income other than salary, such as rental income, if reported by the employee
- Interest on home loans, with evidence provided in Form 12BB
- Tax-saving investments declared by the employee using Form 12BB
Example: If an employee’s salary is Rs 10 lakh and they have other income of Rs 5 lakh subject to TDS/TCS, the employer will deduct TDS on Rs 15 lakh after accounting for the TDS/TCS already deducted from the Rs 5 lakh income. This ensures that employees can claim credit for TDS/TCS on non-salary income at the withholding stage, reducing extra TDS deductions and cash flow issues.
Budget 2024-25: Key Amendments to Income Tax.
The Union Budget 2024-25 introduced several amendments to the income tax structure, particularly under the new tax regime. These include:
- Increased Standard Deduction: The standard deduction for salaried individuals has increased from Rs 50,000 to Rs 75,000.
- Increased Deduction on Family Pension: The deduction on family pension has increased from Rs 15,000 to Rs 25,000 under Section 57(iia).
- Increased NPS Contribution: The deduction limit for employer contributions to the National Pension System (NPS) has increased from 10% to 14% under Section 80CCD.
Understanding Income Tax Slabs for FY 2024-25 (AY 2025-26).
The income tax slabs for FY 2024-25 vary based on whether you opt for the new or old tax regime.
New Tax Regime:
- Up to Rs 3 lakhs: Nil
- Rs 3 lakhs to Rs 7 lakhs: 5% (Tax rebate under Section 87A up to Rs 7 lakhs)
- Rs 7 lakhs to Rs 10 lakhs: 10%
- Rs 10 lakhs to Rs 12 lakhs: 15%
- Rs 12 lakhs to Rs 15 lakhs: 20%
- More than Rs 15 lakhs: 30%
FAQs: Income Tax Deductions for FY 2024-25.
Q: What is Section 192 of the Income Tax Act?
A: Section 192 deals with TDS on salary, mandating employers to deduct TDS on salary payments if the employee’s income exceeds the basic exemption limit.
Q: What is the basic exemption limit for FY 2024-25?
A: Under the new tax regime, the basic exemption limit is Rs 3,00,000 for all individuals, irrespective of age.
Q: How does the increased standard deduction impact tax liability?
A: The increased standard deduction of Rs 75,000 under the new tax regime can provide tax savings of up to Rs 7,500 (excluding cess) for those in the highest 30% tax bracket.
Q: What changes were made to surcharge rates under the old tax regime?
A: The Finance (No. 2) Act, 2024, revised surcharge rates, including 10% for income between Rs 50 lakh and Rs 1 crore, and up to 37% for income above Rs 5 crore (excluding certain capital gains).
Q: What penalties apply for non-compliance with TDS regulations?
A: Failure to deduct TDS under specific provisions attracts penalties under Section 271C, while non-payment of deducted tax can result in imprisonment and fines under Section 276B.
Disclaimer:
The information provided in this article is for general informational purposes only and does not constitute professional financial or legal advice. Tax laws and regulations are subject to change, and it is advisable to consult with a qualified tax advisor or professional for specific advice related to your individual circumstances. The author and publisher of this article disclaim any liability for any actions taken or not taken based on the information provided herein. Always verify the latest provisions and updates from official sources such as the Income Tax Department and the CBDT before making any financial decisions.
Discover more from TaxGst.in
Subscribe to get the latest posts sent to your email.
C.K. Gupta
Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.
