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Changes to Withholding Tax Rules

01 May 2016

As per provisions of section 192 of the Indian Income Tax Act, 1961 (IT Act), every employer is required to  deduct tax from the salary of the employee based on the estimate of his annual tax liability. There has been a significant debate regarding responsibility of employer to collect and examine the supporting evidence in respect of certain deductions, allowances, set off of certain losses for estimation of income and computation of tax withholding from salary paid to employee. In order to bring clarity with respect to nature of evidence/documents to be obtained, the Finance Act 2015 mandated the employer to obtain evidence or proof or particulars of claim as may be specified. To this effect, the Central Board of Taxes (CBDT) has prescribed Rules1 having effect from June 1, 2016.