TDS on Salary | Choose Your Tax Regime - Clarified By CBDT

This was clarified by the Central Board of Direct Taxes (CBDT) in a circular. The circular addressed the issue of tax deduction at source from an employee's salary in case the employee opts for new tax regime in FY 2020-21.

• Employees, not having income from business or profession, will have to inform their employers about their intention to opt for the new tax regime for the purpose of deduction tax at source or TDS from salaries.

• If such an option is not exercised by an employee, he/she will continue to be taxed at the older slabs present in the IT Act.

• Once intimated to the employer about the intention to opt for the new concessional tax rates, for TDS purpose it will be applicable for the year and can't be modified.

• The income tax department said that the employee can change the option of tax structure at the time of filing income tax return and the amount of TDS payment will get adjusted accordingly.

• The deductor shall compute his total income and make TDS (tax deducted at source) thereon in accordance with the provision of Section 115 BAC of the (Income Tax) Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of Section 115 BAC of the Act, the income tax department said.

• Now, it's clear that the employee (only those not having income from business or profession) cannot change the option once exercised for the purpose of getting TDS deducted but can always change it at the time of filing the tax return.

Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.

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