Tds on salary

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shamkant (Querist)
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05 March 2012 In F.y 2011-12 one of employee retire on 29th Feb 2012. We have paid salary to him up to Jan 2012. And the salary for Feb 2012 + Leave encahment + gratuity will be paid in next F.y 2012-13 may be in May 2012 or June 12. While considering his tax liability whether we consider his income whole amount payable to him for F.Y 2011-12 though salary for Feb-2012 + Leave encahment + gratuiry not paid and accordingly tax calculateed on whole amount. Or consider income up to Jan 2012 & accordingly tax calculated and Feb-2012 salary & leave encashment + gratuity in next F.y i.e 2012-13 as on paid basis & tax calculated accordingly.

we will booked the expenses at the time of payment.In that case what is the solution. Pls guide. Because we have financial problem so we release the payment may be after 2 or 4 months.

We have to follow practice to make any entry in books at the time of payment. In that case pls explain if we will mak epayment in next f.y then we will make the TDS payment in next F.y. If we make the payment after issuing Form 16, then what will be the solution.

CA Ghanshyam Joshi

CA Ghanshyam Joshi (Expert)
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05 March 2012 4.3 BASIS OF CHARGE
1. Section 15 deals with the basis of charge. Salary is chargeable to tax either on ‘due’
basis or on ‘receipt’ basis whichever is earlier.
2. However, where any salary, paid in advance, is assessed in the year of payment, it
cannot be subsequently brought to tax in the year in which it becomes due.
3. If the salary paid in arrears has already been assessed on due basis, the same cannot
be taxed again when it is paid.
Examples:
i. If A draws his salary in advance for the month of April 2011 in the month of March 2011
itself, the same becomes chargeable on receipt basis and is to be assessed as income of
the P.Y.2010-11 i.e., A.Y.2011-12. However, the salary for the A.Y.2012-13 will not
include that of April 2011.
ii. If the salary due for March 2011 is received by A later in the month of April 2011 only, it is
still chargeable as income of the P.Y.2010-11 i.e. A.Y.2011-12 on due basis. Obviously,
salary for the A.Y.2012-13 will not include that of March 2011.

4.8 SALARY ARREARS
Normally speaking, salary arrears must be charged on due basis. However, there are
circumstances when it may not be possible to bring the same to charge on due basis. For
example if the Pay Commission is appointed by the Central Government and it recommends
revision of salaries of employees, the arrears received in that connection will be charged on
receipt basis. Here, also relief under section 89(1) is available.

shamkant

shamkant (Querist)
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06 March 2012 Sir My question is that we paid salary for month of March 2012 - after june 12 in next f.y i.e 2012-2013 after issuing of Form 16. If suppose that employee state tht I am not recd salary in F.y 2011-12. How would you deduct my TDS.

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CA Ghanshyam Joshi

CA Ghanshyam Joshi (Expert)
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06 March 2012 Basis of Charge is "Due" or "Receipt" which ever is earlier. If the employee is in service for the month of March then salary is "Due" in FY ending on March. By your convience you are not allowed to play with the words of provision.
If the service was discontinued due to some reason and the employeer didn't pay the salary of the last month in that financial year but in the next financial year then it should be taxed in the financial year in which it has been paid.
But this should not be applicable if the service is continued without any break.