The Central Board of Direct Taxes (CBDT) has introduced amendments to the income-tax rules, aimed at simplifying the process for salaried employees to claim credit for Tax Collected at Source (TCS) and Tax Deducted at Source (TDS). This amendment follows the guidelines set in the Union Budget 2024.
The amendments also enable parents to claim TCS credit for minors.
CBDT Notifies Amendments to Income-tax Rules
New Form 12BAA for Employees with Non-Salary Income
Starting from the next financial year, employees with income from sources other than salaries will need to submit a new Form 12BAA. This form was introduced by the CBDT on October 15, 2024, through the Income-tax (Eighth Amendment) Rules, 2024.
Section 192 Amended for TCS/TDS Credit
CBDT said that sub-section (2B) of Section 192 of the Income-tax Act, 1961 was amended vide the Finance (No. 2) Act, 2024 to include any tax deducted or collected at source under the provisions of Chapter XVII-B or Chapter XVII-BB, as applicable, for the purpose of making tax deductions in the case of salaried employees.
“Vide CBDT Notification No. 112/2024 dated 15.10.2024, the Income-tax Rules, 1962 (‘the Rules’) have been amended, introducing Form No. 12BAA as the prescribed statement of particulars required under sub-section (2B) of Section 192 of the Act,” CBDT said in a press statement.
Employers’ Role in Tax Deductions
The new form is a crucial tool for employees, allowing them to provide a more complete overview of their financial situation to their employers.
Employers are required to deduct TDS on salary after considering the particulars furnished by employees under sub-section (1) of Section 192. The employees must provide the necessary information via Form 12BAA to their employers for appropriate TDS deductions.
These sources may include income from fixed deposits, insurance commissions or dividends from equity investments.
If the employee has made a significant purchase or paid in foreign currency where TCS was deducted, this can also be reported using 12BAA.
Key features of Form 12BAA
Form 12BAA includes provisions for reporting both TDS and TCS details.
It requires employees to disclose:
Tax Deducted at Source (TDS) details, including:
- The section under which tax was deducted.
- The name and address of the deductor.
- The Tax Deduction and Collection Account Number (TAN) of the deductor.
- The amount of tax deducted.
- The amount of income received or credited.
Tax Collected at Source (TCS) details, which must include:
- The section under which tax was collected.
- The name and address of the collector.
- The TAN of the collector.
- The amount of tax collected.
TCS Credit for Minors in Parents’ Hands
In an amendment to sub-section (4) of Section 206C, the new rules now allow parents to claim TCS credit when a minor’s income is clubbed with theirs. This provision permits the transfer of TCS credit from the minor to the parent, simplifying tax credit claims for families.
