Earning Income from Salary but Also Paid Other Taxes? Now Furnish Form 12BAA
Rounaq Neroy
Oct 18, 2024 / Reading Time: Approx. 4 mins
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The Central Board of Direct Taxes (CBDT) recently, vide notification No. 112/2024 dated October 15, 2024, amended the Income-tax Rules, 1962, to introduce Form 12BAA.
In the Union Budget 2024, announced in July this year, finance minister, Ms Nirmala Sitharaman, in a measure to simplify and rationalise proposed to allow credit of all tax deducted or collected while computing the amount of tax to be deducted on salary income under Section 192 of the Income-tax Act, 1961.
The new Form 12BAA incorporates the amendments brought by the Finance (No. 2) Act, 2024, permitting the credit of all taxes deducted or collected in the employee's name.
The new Form 12BAA (as per statement of particulars required under Section 192(2B) of the Income-tax Act, 1961) seeks information from you, the assessee or salaried individual, relating to Tax Deducted at Source (TDS), Tax Collected at Source (TCS) from other non-salary sources (viz. fixed deposits, insurance commissions, dividends, etc.), and loss under the head 'Income from House Property'.
In addition, if you as an employee have made a large purchase or paid in a foreign currency where TCS was deducted, this can also be reported through Form 12BAA.
The TDS and TCS portions of Form 12BAA include details such as:
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The relevant Sections under which the tax is deducted or collected at source
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Name, address and TAN (Tax Deduction and Collection Account Number, a 10-digit alphanumeric number issued by the Income Tax Department)
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Amount of tax deducted
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Amount of income received/credited
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Any other pertaining information
As a salaried individual, you are now required to furnish the aforesaid information details to your employer in Form 12BAA. This has come into effect from October 1, 2024.
The employer, in turn, shall deduct TDS on salary after taking into account the furnished particulars.
As a consequence of the aforementioned amendment to introduce Form 12BAA, changes are also made in 'Part B' of Form 16 (for tax deducted at source from income chargeable under the head 'Salaries') and Form 24Q (TDS Return on Salary Payment).
Form 12BAA will be additional information to employers besides Form 12BA -- which applies to employees whose salary income exceeds Rs 1.50 lakh in the financial year and is receipt of perquisites that include rent-free accommodation, contributions to superannuation funds, and travel expenses, among others.
The rationale behind this move was to help in avoiding cashflow issues for employees.
How Will This Help Employees?
Employers conventionally deduct the tax at source on 'Income from Salary' considering the tax-saving investment made by the employee (declared in Form 12BB), but do not account for the taxes paid or collected from other sources.
However, from now on, with the introduction of Form 12BAA, a more comprehensive view of the financial picture of the employee will be available to the employer.
The reporting of TDS and TCS on other sources -- from additional income sources or TCS collected when making significant expenditures -- would help reduce the overall tax deduction at source and thus leave a higher disposable income in the hands of employees.
In other words, Form 12BAA shall allow employees to counterbalance the TDS and TCS from non-salary, i.e. other sources, against the TDS on their salary income.
Final words...
As a responsible citizen of our country, make all disclosures truthfully, whether it is to your employer or the government.
This shall save you the hassle of a demand notice later and save you from embarrassment later, plus be in the interests of your reputation and financial well-being.
Keep in mind that non-disclosure of information and financial irregularities can cost you dear.
To save yourself from the axe of tax, choose between the New Tax Regime and Old Tax Regime thoughtfully and utilise the exemptions and deductions available under the respective regime.
Be thoughtful in your approach and engage in prudent tax planning.
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ROUNAQ NEROY heads the content activity at PersonalFN and is the Chief Editor of PersonalFN’s newsletter, The Daily Wealth Letter.
As the co-editor of premium services, viz. Investment Ideas Note, the Multi-Asset Corner Report, and the Retire Rich Report; Rounaq brings forth potentially the best investment ideas and opportunities to help investors plan for a happy and blissful financial future.
He has also authored and been the voice of PersonalFN’s e-learning course -- which aims at helping investors become their own financial planners. Besides, he actively contributes to a variety of issues of Money Simplified, PersonalFN’s e-guides in the endeavour and passion to educate investors.
He is a post-graduate in commerce (M. Com), with an MBA in Finance, and a gold medallist in Certificate Programme in Capital Market (from BSE Training Institute in association with JBIMS). Rounaq holds over 18+ years of experience in the financial services industry.
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