Form 12BAA: New Form Allows Employees To Lower TDS With Additional Tax Disclosures

Form 12BAA: This will enable employees to inform their employers of deductions or collections from other income sources

Employers, who deduct TDS on salary under Section 192(1), will now adjust these additional tax deductions when calculating TDS on salaries.

Source : ABPLIVE AI

Form 12BAA: The Central Board of Direct Taxes (CBDT) has introduced a new form — Form 12BAA, a move aligned with the Budget 2024 announcements. This form will allow employees to report tax deductions from sources other than their salary, such as fixed deposits, insurance commissions, dividends, or taxes collected at the time of making major purchases like vehicles or foreign currency.

According to a press release issued by the Press Information Bureau (PIB) on October 17, 2024, the CBDT, through Notification No. 112/2024 dated October 15, 2024, has amended the Income-tax Rules, 1962. The introduction of Form 12BAA comes under sub-section (2B) of Section 192 of the Income-tax Act.

The form will enable employees to inform their employers of deductions or collections from other income sources. Employers, who deduct TDS on salary under Section 192(1), will now adjust these additional tax deductions when calculating TDS on salaries.

Traditionally, employers deducted TDS from salary based on declarations related to investments and eligible expenses provided by employees. However, taxes paid on income from other sources were not taken into account. This will now change with the introduction of Form 12BAA, allowing employees to report such taxes and reduce their TDS on salary accordingly.

The new system, which took effect on October 1, 2024, is aimed at improving employees' cash flow by reducing the tax deducted from their salary when other taxes have already been paid. This will provide individuals with more disposable income to either save or spend.

Employers are required to deduct tax from salaries as per Section 192 of the Income-tax Act, and employees can choose between the old or new tax regime.

The choice of tax regime determines the applicable tax deductions, with employees needing to submit investment declarations to optimize their tax liabilities. Form 12BAA adds an additional layer of flexibility for employees to ensure all tax payments are accurately reflected in their salary TDS.