Maximise Your Tax Savings: Power of Form 12BB

With the end of the financial year approaching, it’s important for employers and managers to remember their role in following tax withholding rules (TDS). This involves collecting and verifying a form called Form 12BB from employees. This form is crucial because it helps employers take out the right amount of taxes from employees’ pay checks. The form lets employees claim any deductions or exemptions they qualify for, like health insurance or investments. To check the correct amount of withholding tax is deducted employers can get information from Form 12BB. So the article will provide the Section 192 of Income Tax Act TDS compliance so that employers can follow these rules and will not face any future issues. 

Compliances to follow for TDS deduction under Section 192 of Income Tax Act 1961

Salary TDS section 192 B compliance are:

• Collect and Verify Employee Forms: You’ll need to gather a form called Form 12BB from each eligible employee. Don’t forget to check the information they provide on deductions and exemptions against any supporting documents they submit. Ideally, this should be done early in the financial year.
• Prepare Year-End Tax Forms: The last quarter form 12 BB will be use to complete other forms like Annexure II of 24Q and also the TDS statement. The forms contain the detailed information regarding employees earning, withholding tax and other tax related information.
• Issue Employee Tax Certificates: Once these forms are submitted, you’ll need to provide each employee with a Form 16. This document, downloadable from the TRACES portal, summarizes their annual income and tax withheld. They’ll need this form when filing their own personal tax returns.

There is a TDS on salary section 192 B limit and the employer should follow the limit while deducting TDS. How much TDS is deducted on salary per month depend on the person income in which tax slab a person is coming. Also, in section 192 TDS rate also differ as per tax slabs.

Checklist for managers (HODs/DDOs) handling tax deductions from salaries:

• PAN, Aadhaar, and Investment Details: The investment details of employees along with their PAN, Aadhaar Card are required.
• New vs. Old Tax System: As two schemes are available first know the scheme employees are using.
• Form 12BB: Early in the year (and again at year-end if needed), collect Form 12BB from employees. This lets them claim deductions or exemptions for things like health insurance or investments. Don’t forget to get any documents that support their claims.
• Tax Form Completion and Distribution: Verify Form 12BB Information: Double-check the details on the Form 12BBs against the provided proof and the chosen tax filing system.
• Prepare Year-End Tax Forms: During the last quarter, use the information gathered to fill out specific tax forms (Annexure-II of Form 24Q and TDS statements). These forms show employee income, tax withheld, and other tax-related details.
• Issue Employee Tax Certificates: Once the tax forms are submitted, provide each employee with a Form 16. This form, downloadable from the TRACES portal, summarizes their annual income and tax withheld. They’ll need it for their personal tax returns.
• Employee Education: Encourage employees to claim deductions and exemptions accurately when filing their tax returns. Remind them to avoid making any false claims that could lead to refund issues.

Fines for not following TDS Compliance guidelines.

If employers (HODs/DDOs) don’t follow these procedures, they could face consequences under the Income Tax Act. This means the company could be held responsible for the employee’s taxes instead.  Here’s what could happen:

• Fines: The company might be charged a penalty for not following the rules under section 271C of Income Tax Act 1961
• Legal Action: In serious cases, the company could even face legal proceedings under Section 276B of Income Tax Act 1961

By following the checklist above, employers can ensure they’re withholding taxes correctly and avoid any potential issues with the tax authorities.

Takeaway

New tax rules (TDS) are important for both companies and employees. Form 12BB lets employees claim deductions (like health insurance) and help companies withhold the right amount of tax. Companies should collect this form early, verify the information, and issue tax certificates (Form 16) at year-end. Following these steps ensures everyone plays fair, avoids tax trouble, and contributes to a healthy economy.