TDS relief for salaried: From January 1, 2025 TDS statement will reflect the net TDS/TCS benefit on

From October 1, 2024 the government has made it mandatory for employers to give benefits of TDS/TCS deducted on non-salary income while computing TDS to be deducted from salary. Adjustment of tax already paid through TDS/TCS on non salaried income while deducting TDS against salary can bring down TDS liability for a salaried employee. This amendment was introduced to reduce the incidence of extra TDS being deducted from salary income. While the law was already implemented, the necessary back end technical infra updation took time.

Protean (formerly NSDL e-Governance) has informed that the necessary changes have been made in the TDS software from December 27, 2024 and now the TDS certificate will start reflecting the updated changes for Q4 of 2024-25 TDS statement onwards.

Salaried to be eligible for lower TDS deduction from January 2025?

Mihir Tanna, associate director, S.K Patodia LLP says the correct wording to be used here is salaried employees become eligible for normal TDS deduction instead of extra deduction.

Tanna says before October 1, 2024 salaried employees had to pay TDS on non-salary income twice. He says: "Suppose if your salary is Rs 10 lakh and other income where TDS or TCS is deducted or collected is Rs 5 lakh. So earlier employers had to deduct TDS on Rs 15 lakh income in full irrespective of the fact that TDS or TCS was deducted or collected from that Rs 5 lakh income. Now after this amendment TDS will be deducted by the employer on Rs 15 lakh after giving benefit of TDS/TCS already deducted or collected on that Rs 5 lakh income. So the overall TDS amount to be deducted will go down."

Tanna says the government has given this benefit to salaried employees to enable them to claim credit of TDS/TCS incurred on non-salary income at the tax withholding stage itself if it's declared to the employer. "This will help reduce the incidence of extra TDS deduction and also reduce the cash flow problems of employees," says Tanna.

Chartered Accountant Himank Singla, partner, SBHS & Associates, says, "With the amendment, employers can now consider the TDS/TCS already deducted or collected on the additional income when calculating the TDS on the total income. This change simplifies the TDS process and ensures that employees are not subjected to double deduction of tax on their income. It reduces the burden of claiming refunds and provides relief from cash flow constraints, especially for those with significant non-salary income. This amendment reflects the government’s intent to streamline tax compliance and make the system more taxpayer-friendly."

As Per Chartered Accountant Ashish Niraj, Partner, A S N & Company, Chartered Accountants, says due to this amendement in Form 24Q and Form 16 will improve and TDS deduction will be become more accurate. "Employees will furnish their other income more accurately by which their TDS may change according to actual income. It will also include Loss under the head “Income from house property”. By this the TDS of employees will increase or decrease on case to case basis.”

While the extra TDS stopped getting deducted from October 1, 2024 itself, the TDS certificate will start showing this effect from Q4 of FY 2024-25 which starts from January 2025.

What did Protean say about updated TDS software?

Protean said in a circular dated December 26, 2024, "Attention of all TIN-Facilitation Centres (TIN-FCs) is hereby invited to the TDS/TCS Return Preparation Utility (RPU) & File Validation Utilities (FVU). The existing RPU and FVU utilities have been revised and the versions of the revised RPU and FVU are as follows:

Amendments introduced to TDS Form 24Q, 26Q and 27EQ

1) Addition of a New Column (388A): A new column (388A) has been added under Annexure II (Salary details) for Form 24Q. This amendment is applicable to statements pertaining to FY 2024-25 Q4 onwards."

As per the updated TDS Form 24Q the newly inserted column 388A will show amount reported as per section 192(2B), of other tax deducted at source or tax collected at source, other than (388).

Column 388 is meant to show reported amount of tax deducted at source by other employer(s) (income in respect of which included in computing total taxable income in column 339).

"2) Increase in Standard Deduction: Standard deduction has been increased from Rs 50,000 to Rs 75,000 under Annexure II 

3) Change in Column Name and Number: Changes have been made to the name and number of an existing column under Annexure II (Salary details) for Form 24Q, effective from FY 2024-25 Q4 onwards.

4) Omission of an Existing Section Code: Section code 194F has been omitted from Form 26Q, applicable to statements pertaining to FY 2024-25 Q3 onwards.

5) Changes in Applicability of Remark Values: Section under which Tax has been deducted/collected Applicable remark value:

6. Addition of New Remark Value (J): A new remark value 'J' has been introduced if no collection or lower collection is in view of notification issued under sub-section (12) of section 206C. This applies to Form 27EQ for statements pertaining to FY 2024-25 Q3 onwards. o This remark is applicable to collection codes A, B, C, D, E, I, J and L."

Aakash Uppal, Partner & Leader, Corporate Tax (North & East), Tax & Regulatory services, BDO India, says, "Section 206C(12) of the Income Tax Act, 1961 (the Act) empowers the Central Government (CG), with effect from 01 October 24, to issue a notification outlining specific transactions on which there would be no collection of tax at source or collection of tax at source at lower rate, from such assesses/class of persons as specified by CG in the notification. In order to give effect to the above in the TCS return Form, CBDT issued Notification No. 114/2024 whereby CBDT inter-alia provided that in Form No. 27EQ (i.e. TCS return form), the following note shall be inserted: '8A. Write “J” if no collection or lower collection is in view of notification issued under sub-section (12) of section 206C.'.

Thus, new remark value ‘J’ is added in Form 27EQ in case where there is “No collection, or Lower collection of tax on account of specific notification issued u/s 206C(12)”

In this regard, CBDT has issued Notification No. 115/2024 wherein it has specified that no collection of tax shall be made under section 206C(1F) of the Act (i.e. Sale of Motor vehicle/ specified goods) on any payment received from the Reserve Bank of India. Thus, concerned person shall select ‘J’ under remarks in Form 27EQ to represent no collection of tax on transaction under 206C(1F) of the Act with Reserve Bank of India.

The above insertion/ remark will help the taxpayers in correct representation and seamless communication with the tax department to highlight cases of transaction where collection has not been made on account of specific exemption provided by CBDT and thereby reduce cases of scrutiny for non-collection / lower collection of tax."

"Return Preparation Utility (RPU) version 5.4 and File Validation Utility (FVU) versions as stated above are applicable with effect from December 27, 2024 onwards and same are hosted on Protean website. The said RPU & FVU can be downloaded from the following URL https://www.protean-tinpan.com/downloads/e-tds/eTDS-download-regular.html. All TIN-FCs are advised to note that e-TDS/TCS statements validated with FVU versions lower than 8.9 or 2.185 will not be accepted at Online SAM from December 27, 2024," TIN said in the circular dated December 26, 2024.

Uppal from BDO India says: "As per Section 192 of Act, an employee can declare to the employer, his non salary income, apart from his ‘salary income’. The non salary income earned by an employee may also be subject to TDS/TCS. Prior to amendment vide Finance Act 2024, the Act did not specifically permit consideration of TDS / TCS related to other income i.e. non-salary income

From 1st October 2024, the employee can claim TDS/TCS on such non salary income by declaring it to the employer. Employer will give credit for such TDS/TCS on such non-salary income declared by the employee to the employer. Through a notification 112/2024, CG has notified new form 12BAA in which employer can give details on other income of the employee and TDS/TCS on such income."

Chartered Accountant Ashish Karundia, says, "The latest update of the File Validation Utilities (FVUs) and Return Preparation Utility (RPU) for e-TDS/TCS Statements includes changes introduced by the Finance (No.2) Act, 2024. This Act, among other things, includes provisions for NIL or reduced tax collection/deduction for specified transactions involving notified persons. Specifically, the Central Government has stated that no tax collection shall be made under Section 206C(1F) on payments received from the RBI. The current release reflects this relaxation, as well as any similar future changes. Therefore, it is crucial for stakeholders to file their e-TDS/TCS Statements using the updated FVUs/RPU to prevent rejection by the TRACES/Incometax portal."

Niraj says: “New Column 388A has been inserted under Annexure II in Form 24Q to give effect to the Income-tax (Eighth Amendment) Rules, 2024 vide Notification No. 112/2024-Income Tax Dated 15th October, 2024. Now After 12BA ,a new form 12BAA will be inserted which will contain the statement showing particulars for the purpose of Section 192(2B) to furnish particulars of income under any head other than "Salaries" and deduction of tax at source thereof to his employer so that it can be included in taxable income."

Singla says: "The new column 388A added under Annexure II (Salary details) in Form 24Q relates to changes introduced by the Income Tax Department for reporting salary details more comprehensively.

Form 24Q is a quarterly TDS return for salaries, and Annexure II captures detailed information about employees’ salaries, deductions, exemptions, and taxable income. The introduction of column 388A is a part of the department’s initiative to enhance transparency and ensure more accurate reporting. While specific details about what exactly column 388A will require have not been officially clarified yet, it is expected to align with changes in tax laws or introduce additional reporting requirements for employers, such as new deductions, exemptions, or allowances applicable from FY 2024-25 Q4 onwards."