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Section 192 - TDS on Projected Income

03 August 2023

I have worked for FY 23-24 with a company Till June 2023. Now the Full and Final Settlement is due from the employer and the Finance department is asking to pay the TDS accumulating for the "Projected / Estimated Income" of FY 23-24. Now I have joined another employer from July 23 and here also I am subjected to pay TDS. Is it mandatory under section 192 that when any employee leaves any employer, he / she is supposed to pay the TDS on estimated income for that FY?

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14 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 03 August 2023

But full and final settlement is the amount which is paid to the employee after all the deduction which is due to the employee then afterwards employer pay the amount

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Abhishek Sen (9 Points)
Replied 03 August 2023

In my case, payable FnF is about 56K as - Last Salary + Leave Encashment + Medical + LTA minus the shortfall of notice. Now, projected TDS for July 23 to March 24 is 77K, which they are showing in the statement. So now I have to pay 21k to the employer to get the final settlement clear.

Now, my question is - Why the previous employer deduct TDS on Projected / Estimated income? Why should I have to pay advance Tax on something which I will never earn from that employer? Is there any such rule in Income Tax that I have to pay full Tax on Projected Income as estimated by my previous employer.

CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 03 August 2023

Actually in every jobs or every employer estimate the employee salary for a full year and calculate income tax on that for the full year in estimate then after calculating the tax for full year the employer be able to calculate the monthly income tax which is deducted from the monthly salary and then the in-hand salary be given to employees. In this case whether you have Form 16 from the previous employer??

Abhishek Sen (9 Points)
Replied 03 August 2023

Form 16 was issued in June for FY 22-23. The scenario now is - April 2023 - Salary credited post TDS, then May 2023 Salary Credited post TDS, June 2023 - Not credited as this was last working month.

Now, projected TDS was subsequently deducted from the Salary when they paid. No issue on that. On my final salary and other full and final settlement (like leave balance encashment + medical + LTA etc) they are imposing TDS which is being calculated as "Estimated Salary for June 2023 to March 2024". Is this relevant?

Why should I get TDS imposed on the part "Estimated Salary" when they already know my full n final income under the head "salaries" w.r.t. last working day? They should impose TDS (at the same rate or whatsoever) on the accumulated income and not the estimated income. I want to know is there any such binding in the Income Tax Act under 192 ...

CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 03 August 2023

Under the Income Tax Act, salary income is taxable on a due basis or receipt basis, whichever is earlier. So, even if you haven’t received the salary for unserved notice period, you will have to pay income tax on it.

To put it in perspective, if you're liable to serve a notice of 1 month, but instead, you serve only 15 days notice, the employer will deduct 15 days salary from your full and final settlement. However, the TDS levied on the settlement will be on the full month's salary and not 15 days.

15 days taken as an example

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Abhishek Sen (9 Points)
Replied 03 August 2023

Got it. Agreed. Then what about the period balance. Do the employer also reserves the Tax or TDS for the period beyond employment?

for example, my Last day was over on June 30th. Now from July 2023 to March 2023 period, employer is imposing TDS on estimated income. Is this valid?

CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 03 August 2023

Have you joined the previous company as an FTH or an FTE? if you're an FTE then before completion of notice period if u resign then TDS will be deducted

Abhishek Sen (9 Points)
Replied 04 August 2023

I think you did not understand my case.

I worked for 11 years with this company. So I was a full time employee. I never questioned that they can not deduct TDS. They can deduct TDS on the final dues.

But my question is something else. Post 30-06-2023 I am no more an employee to that organization. My dues are : Last month salary and full and final that includes period LTA & Medical as per rules. These dues + FnF amounts to 56,000 only.

Now they have provided me a Tax Calculation, which has column 1 with April May June 2023 details, Column 2 with TDS project for FY 23-24, Column 3 as Full and Final settlement. This is calculated to 91,000, in which 14,000 have been deducted as TDS. Now ideally, post 30.06.2023 I am no more an employee of that organization, Does then further Tax Projection further for FY 23-24 carried any value or it should be NIL?

Why the employer will further deduct tax on which they cant guarantee my future income, as my employment tenure with the org has ended?

sabyasachi mukherjee (27579 Points)
Replied 04 August 2023

It violates income recognition concept as per accounting standard.

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CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 04 August 2023

You should have a contact with your previous employer regarding the issue

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SANTOSH KUMAR SETHUMADHVAN (4 Points)
Replied 06 August 2023

Dear Sir
I believe, the tax to be deducted on receipt basis as on 30.06.2023 and Form 16 need to be issued by the previous employer. From July 2023 onwards, the new employer shall deduct tax from the earnings and in the subsequent Form 16 issued by the new employer, the income drawn from the previous employer may be reflected there at. Please correct me if I am wrongly understood.

Santosh Kumar S

sabyasachi mukherjee (27579 Points)
Replied 08 August 2023

Due or receipt whichever is earlier. But Unless an employee receive it he will not show it in itr. It violates the basic income recognition concept.

Manish (CA) (1174 Points)
Replied 08 August 2023

Originally posted by : Abhishek Sen
	I think you did not understand my case. I worked for 11 years with this company. So I was a full time employee. I never questioned that they can not deduct TDS. They can deduct TDS on the final dues. But my question is something else. Post 30-06-2023 I am no more an employee to that organization. My dues are : Last month salary and full and final that includes period LTA & Medical as per rules. These dues + FnF amounts to 56,000 only. Now they have provided me a Tax Calculation, which has column 1 with April May June 2023 details, Column 2 with TDS project for FY 23-24, Column 3 as Full and Final settlement. This is calculated to 91,000, in which 14,000 have been deducted as TDS. Now ideally, post 30.06.2023 I am no more an employee of that organization, Does then further Tax Projection further for FY 23-24 carried any value or it should be NIL? Why the employer will further deduct tax on which they cant guarantee my future income, as my employment tenure with the org has ended?