Are you a business owner? Why must you file IT returns for your employees?

Last Updated at: January 03, 2020
1110

Every business owner requires a tax filing that offers a comprehensive statement of their income after specific deductions and exemptions. Tax filing is also obligatory for salaried employees. Every person should pay a certain amount of tax when their income exceeds the non-taxable bracket. Thus, an employer should deduct the TDS from the salary given to every employee.

As always if you’d like to know more about professional help on startups, registrations or
compliance, browse our services and find our how we do it differently from others.

 

Tax filing is providing the comprehensive account of the income received by one in a financial year with the Income Tax Department. Non-performance of this process on the part of the income receiver will lead to the penalty if the total income received is above the maximum mentioned tax limit.

File ITR before due date

The employer is required to deposit the tax which is deducted in the Government account within the time prescribed and the format according to the Section 200 of the IT Act. The deducted tax has to be deposited to the recognition of the Central Government in any of the RBI, SBI or any authorized bank branches either in the form of cheque or cash or draft drawn on the local banks.

Employer deducting Income Tax from the employee’s salary

Income Tax Act, 1961 casts a responsibility on every person to pay the tax when his/her total taxable income is greater than the non taxable limit and that is why the employer deducts the TDS (Tax Deduction at Source) from the salary of the employee every month and remits the same to the Income Tax Department within the prescribed dates.

Sub-Section 2 of Section 192 provides that where an individual has more than one employer, he/she may provide the particulars of the salary payments and the TDS to the employer of his choice.

Employer’s responsibility to issue Form 16

Form 16 is a certificate issued by the employer to his/her employees every financial year, under the section 203 of the Income tax Act, 1961, by 31 May of the assessment year (AY). If an employer delays or does not issue the prescribed form on the time, he/she can be penalized. If the forms are not issued by then also, under section 272A(2)(g) of the Income Tax Act, the employer is liable to pay a penalty of Rs.100 per day of default till he/she issues the form.

If there is no TDS on the income, then the employer can refuse to issue the form to that employee. Employees can approach the accessing officer (AO), to whom one can file his/her ITR, and give a written complaint against the defaulting employer. On receiving the complaint, the AO may take necessary action or initiate penalty proceedings against the employer.

The significance of Form 16

Form 16 provides the information on the tax deducted at source (TDS) from income taxable under the head of salaries. It has two sections, part A and part B.

Part A mainly has TAN & PAN information of the employer & employee and particulars of the tax deducted and deposited which is authorized by the employer, TDS Certificate Number. Part B has other leftover details such as, information about salary paid, amounts that are deductible under chapter VIA, relief under section 89.

Part B is arranged by the employer by hand and issued along with Part A. If the individual is employed under more than one employer during the particular year, each of the employers will issue Part A of Form 16 for the individual such an individual was employed with each of the employers.

Total deductions are aggregated under the “Chapter IV-A” and reduced from the gross income to arrive at the chargeable income and the tax liability is calculated on this amount. Part B gives information related to tax payable by the employee or refundable to him/her.

The duty of employee when the employer fails to conduct TDS

It may show that TDS is the responsibility of the employer only but if an employee is alert about the TDS default, then the employee is under the responsibility to pay tax through the advance tax route or self-assessment tax as eventually, taxes are to be deposited on his/her income.

Evidence of proof of investments by the employees

According to section 192(2D) of the Income tax Act, 1961 (the Act) wherein the individual is liable for making the payment of salary (employer) is required to collect the essential evidence or proof in the prescribed form and manner to consent to any claim for any deduction or tax saving investments. But Central Board of Direct Taxes (CBDT) has prescribed the new form i.e. Form 12BB, in which the employees who are salaried would now be required to provide evidence of claims and tax saving investments to the employer.

Employers should make sure that they acquire the affirmation from the employees in the prescribed Form 12BB in order to be compliant. Form 12B is requisite to be furnished as per Rule 26A by a new employee joining any organisation in the middle of the year detailing the income he/she earned from the previous employer.

Being an employer, you need to make sure that you obtain confirmation from the employees before concluding anything from the TDS complaint form. If a new employee joins your company in the middle of a financial year, then you should inquire about the income that they earned from their former employer.

Are you a business owner? Why must you file IT returns for your employees?

1110

Every business owner requires a tax filing that offers a comprehensive statement of their income after specific deductions and exemptions. Tax filing is also obligatory for salaried employees. Every person should pay a certain amount of tax when their income exceeds the non-taxable bracket. Thus, an employer should deduct the TDS from the salary given to every employee.

As always if you’d like to know more about professional help on startups, registrations or
compliance, browse our services and find our how we do it differently from others.

 

Tax filing is providing the comprehensive account of the income received by one in a financial year with the Income Tax Department. Non-performance of this process on the part of the income receiver will lead to the penalty if the total income received is above the maximum mentioned tax limit.

File ITR before due date

The employer is required to deposit the tax which is deducted in the Government account within the time prescribed and the format according to the Section 200 of the IT Act. The deducted tax has to be deposited to the recognition of the Central Government in any of the RBI, SBI or any authorized bank branches either in the form of cheque or cash or draft drawn on the local banks.

Employer deducting Income Tax from the employee’s salary

Income Tax Act, 1961 casts a responsibility on every person to pay the tax when his/her total taxable income is greater than the non taxable limit and that is why the employer deducts the TDS (Tax Deduction at Source) from the salary of the employee every month and remits the same to the Income Tax Department within the prescribed dates.

Sub-Section 2 of Section 192 provides that where an individual has more than one employer, he/she may provide the particulars of the salary payments and the TDS to the employer of his choice.

Employer’s responsibility to issue Form 16

Form 16 is a certificate issued by the employer to his/her employees every financial year, under the section 203 of the Income tax Act, 1961, by 31 May of the assessment year (AY). If an employer delays or does not issue the prescribed form on the time, he/she can be penalized. If the forms are not issued by then also, under section 272A(2)(g) of the Income Tax Act, the employer is liable to pay a penalty of Rs.100 per day of default till he/she issues the form.

If there is no TDS on the income, then the employer can refuse to issue the form to that employee. Employees can approach the accessing officer (AO), to whom one can file his/her ITR, and give a written complaint against the defaulting employer. On receiving the complaint, the AO may take necessary action or initiate penalty proceedings against the employer.

The significance of Form 16

Form 16 provides the information on the tax deducted at source (TDS) from income taxable under the head of salaries. It has two sections, part A and part B.

Part A mainly has TAN & PAN information of the employer & employee and particulars of the tax deducted and deposited which is authorized by the employer, TDS Certificate Number. Part B has other leftover details such as, information about salary paid, amounts that are deductible under chapter VIA, relief under section 89.

Part B is arranged by the employer by hand and issued along with Part A. If the individual is employed under more than one employer during the particular year, each of the employers will issue Part A of Form 16 for the individual such an individual was employed with each of the employers.

Total deductions are aggregated under the “Chapter IV-A” and reduced from the gross income to arrive at the chargeable income and the tax liability is calculated on this amount. Part B gives information related to tax payable by the employee or refundable to him/her.

The duty of employee when the employer fails to conduct TDS

It may show that TDS is the responsibility of the employer only but if an employee is alert about the TDS default, then the employee is under the responsibility to pay tax through the advance tax route or self-assessment tax as eventually, taxes are to be deposited on his/her income.

Evidence of proof of investments by the employees

According to section 192(2D) of the Income tax Act, 1961 (the Act) wherein the individual is liable for making the payment of salary (employer) is required to collect the essential evidence or proof in the prescribed form and manner to consent to any claim for any deduction or tax saving investments. But Central Board of Direct Taxes (CBDT) has prescribed the new form i.e. Form 12BB, in which the employees who are salaried would now be required to provide evidence of claims and tax saving investments to the employer.

Employers should make sure that they acquire the affirmation from the employees in the prescribed Form 12BB in order to be compliant. Form 12B is requisite to be furnished as per Rule 26A by a new employee joining any organisation in the middle of the year detailing the income he/she earned from the previous employer.

Being an employer, you need to make sure that you obtain confirmation from the employees before concluding anything from the TDS complaint form. If a new employee joins your company in the middle of a financial year, then you should inquire about the income that they earned from their former employer.

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