New Delhi: The Central Board of Direct Taxes, the apex body to administer the direct taxes in the country, has issued a new form for the salaried persons to declare the details of tax deducted at source (TDS) and tax collected at source (TCS) from their other incomes to their employers. This form known as Form 12BAA will be filed by salaried employees and the employers will take this information into account while deducting taxes at source – TDS – of the concerned employee.
The information furnished by a salaried employee to his or her employer through Form 12BAA will be considered as his or her statement showing particulars for the purposes of sub-section (2B) of section 192 of Income Tax Act of 1961.
What is this Form 12BAA?
The form 12BAA has been specifically introduced as per the announcement made in the Union Budget for FY 2024-25. It has specifically devised for the disclosure of non-salary income and inclusion of details on Tax Collected at Source (TCS). These forms, as per the guidelines issued in the current financial year’s Union Budget will allow the offsetting of Tax Deducted at Source (TDS) and TCS collected from sources other than salary against the TDS on salary of salaried employees.
With the issue of notification of October 15, 2024, now the salaried employees are required to use this newly introduced Form 12BAA to inform their employers about the deductions made from income derived from sources other than their salaries. These sources other than salary may include income from fixed deposits, commissions from insurance policies, dividends from investments in equity shares, or taxes collected during the purchase of goods or services, such as a car or foreign currency.
Earlier this information was not available with the employers of the salaried employees. This information is not present in the older version of the form. The new form is simple and would require employees to report their Tax Deducted at Source (TDS) and TCS collected from sources. This will be an additional intimation to the employer. Employees will have to file Form 12BA along with the new Form 12BAA.
Employers to get detailed info about their employees’ other incomes
Employers traditionally deduct TDS from salaries based on the employee's declaration, considering investments and eligible expenses for tax deductions. However, they have not previously accounted for taxes paid by the employee from other sources. This is set to change with the introduction of a new form by the CBDT.
Employees can reduce TDS deducted by employers
By using this form 12BAA to report TCS collections and TDS deductions to their employers, now the salaried employees can reduce their tax deduction liabilities at the source, thereby having more cash in hands as employers will now also take into account TDS collected from them from their incomes other than income from salary.
This new requirement for employees to disclose other TDS and TCS information to their employers came into effect from October 1, 2024. Employees can now inform their employers about TDS deducted from additional income sources or TCS collected when making significant expenditures.
Budget proposal implemented by the CBDT
Finance Minister Nirmala Sitharaman had announced a slew of measures in this year’s Union Budget so that the process for claiming credits under the Income Tax Act can be streamlined for taxpayers, particularly by the salaried individuals.
In her budget speech, she had said that the government had received representations that credit of TCS paid should be allowed while computing the amount of tax to be deducted on salaried income of the employees as this will help in avoiding cash flow issues for employees.
Similarly, all TDS may be taken into account for the purpose of deduction of tax from the salary income of employees, she had said, adding that when the TCS etc is not taken into account, the same is required to be claimed as a refund by the employee which adds to the compliance process.
"In order to ease compliance, it is proposed that sub-section (2B) of section 192 may be amended to expand the scope of the said subsection to include any tax deducted or collected under the provisions of Chapter XVII-B or Chapter XVII-BB, as the case may be, to be taken into account for the purposes of making the deduction under sub-section (1) of section 192," the finance minister had said then.
Information to be furnished in Form 12BAA
The new Form 12BAA requires these details:
Section under which tax was deducted
Name of the deductor
Address of the deductor
TAN of the deductor
Amount of tax deducted
Amount received/credited
Other details
Required TCS details
Section under which tax was deducted
Name of the collector
Address of the collector
TAN of the collector
Amount of tax collected
Other details.
