Revision in Form 24Q: New Column 388A introduced & Column 375 renamed as Column 388
Key Changes in Form 24Q: In a significant move aimed at improving tax efficiency and reducing the burden on salaried individuals, the government has introduced crucial updates to the Tax Deducted at Source (TDS) Return Form 24Q. Starting from January 2025, these changes will streamline the TDS calculation process, particularly for employees with additional non-salary income. The modifications focus on eliminating double taxation and ensuring accurate tax deductions for employees across various income sources. This article delves into the key updates that salaried employees and employers must be aware of, along with how these changes will impact your tax filings.
TDS/TCS Adjustment for Non-Salary Income
One of the major changes introduced by the government is the requirement for employers to adjust TDS deductions for non-salary income when calculating salary-based TDS. This means that any TDS or TCS already deducted on freelance income, investments, or other non-salary earnings will now be considered in the TDS calculation for salaried income, helping to avoid double taxation.
Example:
If an employee earns ₹15,00,000 from their salary and ₹3,00,000 from freelance work, where ₹30,000 TDS has already been deducted on the freelance income, the employer will adjust the TDS calculation to account for the ₹30,000 already paid. This results in a lower overall TDS deduction on the salary, easing the financial burden on the employee.
Enhanced Reporting in Form 24Q
The revised Form 24Q includes several changes to improve reporting accuracy and transparency:
- Introduction of Column 388A
A new column, 388A, has been added to the form to report TDS/TCS deducted by other deductors or collectors under Section 192(2B). This will provide a more detailed breakdown of tax deductions on income from multiple sources.
- Renaming and Re-numbering of Column 388
The previous column 375 has now been renumbered and renamed to column 388. This column will be used to report TDS deducted by other employers and the total taxable salary. These improvements simplify tax filings and ensure greater clarity for tax authorities.
Increased Standard Deduction for the New Tax Regime
For employees opting for the new tax regime, the standard deduction has been increased from ₹50,000 to ₹75,000. Employers will need to update their payroll systems to reflect this change and ensure that the correct deductions are applied.
Also Read: Understanding CRS & FATCA: Enhancing Tax Transparency on Foreign Assets & Income
Submission of Form 12BAA for Lower TDS Deductions
Under the new tax regime, employees who wish to claim lower TDS deductions due to exemptions or deductions must submit Form 12BAA to their employers. This form ensures that the employers apply the appropriate TDS reductions in compliance with the government’s updated rules under Notification No. 112/2024-Income Tax.
Updated Tools for Accurate Tax Compliance
To support employers in complying with the updated TDS guidelines, Protean (formerly NSDL e-Governance) launched the Return Preparation Utility (RPU) version 5.4 and File Validation Utility (FVU) version 8.9 in December 2024. These updated tools will help employers file precise TDS returns, ensuring that all deductions are accurately reported in Form 24Q. Employers can download the new version of the RPU from the official Protean website https://www.protean-tinpan.com/services/etds-etcs/etds-rpu.html.
Revised TDS Certificates from Q4 of FY 2024-25
Starting from the fourth quarter of FY 2024-25, TDS certificates issued by employers will reflect the updated adjustments made in TDS calculations. This ensures that employees receive accurate records of their tax deductions, which are vital for filing their income tax returns (ITR) and ensuring compliance with tax regulations.
Impact on Employees and Employers
For Employees:
The revised TDS framework benefits employees by reducing the risk of over-deduction, which improves their take-home pay. By incorporating TDS deductions from non-salary income, employees will be taxed more accurately, resulting in enhanced financial flexibility and cash flow.
For Employers:
Employers are required to:
- Adjust TDS calculations for salary-based income by considering TDS/TCS already deducted on non-salary income.
- Update payroll systems to reflect changes in TDS computations, such as the increased standard deduction under the new tax regime.
- Ensure the submission of Form 12BAA by employees who wish to claim lower TDS deductions.
Employers will also need to adopt the new TDS tools, such as the updated RPU and FVU, for precise TDS filing and reporting.
Conclusion
The new TDS amendments, effective from January 2025, are a significant step toward simplifying the tax deduction process for salaried employees. By factoring in TDS on non-salary income, the changes aim to reduce over-deduction, ensuring employees’ tax liabilities are more accurately calculated. With these updates, employees can expect a more efficient and transparent tax filing experience, while employers will need to update their payroll systems and filing tools to stay compliant.
Both employees and employers must stay informed about these changes and take proactive steps to ensure proper tax deductions and compliance. This updated TDS framework will not only enhance tax efficiency but also improve the financial well-being of employees by increasing their take-home pay.
By understanding and adapting to these updates, employees and employers alike can navigate the new TDS framework smoothly, ensuring both compliance and optimized tax outcomes.
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