The Central Board of Direct Taxes (CBDT) has notified amendments in income tax rules for ease in claiming credit for TCS collected/TDS deducted for salaried employees.

It will also enable claiming TCS credit of minors in the hands of parents.

The amendments are introduced under the sub-section (2B) of Section 192 of the Income-tax Act, 1961. It was amended vide the Finance (No. 2) Act, 2024 (FA (No. 2)) 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.

Further, through a notification, 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.

Employees must provide these particulars to their employers, who are responsible for making payments under sub-section (1) of Section 192. The employer, in turn, shall deduct TDS on salary after taking into account the furnished particulars.

Further, sub-section (4) of Section 206C of the Act was amended vide FA (No. 2) to allow the credit of TCS to a person other than the collectee—such as a parent in the case of a minor collectee—when the minor’s income is clubbed with that of the parent.

Accordingly Vide CBDT Notification No. 114/2024 dated 16.10.2024 Rule 37-I of the Rules has been amended to allow credit of tax collected at Source to a person other than the collectee, in whose hands the income of the collectee is assessable.

Notably, employers typically deduct TDS from salary as per the declaration given by the employee, taking into account investments and expenses eligible for tax deductions.

They did not adjust the taxes paid by the employee against other sources.

Now, by informing their employer about TCS collected and TDS deducted via this new form, the employee can lower their tax deduction from their salary. The move will help the employees deal with cash flow issues and increase their income to spend or save. CBDT notified the new form via a notification issued on October 15, 2024.