ITR filing 2025: The Central Board of Direct Taxes (CBDT) has released a recent circular outlining the updated guidelines for tax deductions from salary as per section 192 of the Income Tax Act, 1961. The circular also incorporated the modifications introduced in the Finance Acts of 2024 and 2023. The CBDT circular, dated February 20, 2025, will apply to tax returns for the financial year 2024-25 (assessment year 2025-26).
The CBDT said: “The Form No. 16 has been amended vide the Income-tax (Fifth Amendment) Rules, 2023, w.e.f. 1-7-2023 and shall be applicable for the assessment year 2024-25 and subsequent assessment years. Form No. 16 (has been further modified vide the Income-Tax (Eighth Amendment) Rules, 2024, w.e.f. 15- 10-2024.”
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> Changes in Form 16
CBDT has made tweaks in Form 16 regarding tax deductions and benefits. These changes aim to provide clearer details on various taxes, deductions, and exemptions related to salary. The updated Form 16 is designed to simplify the tax filing process for individuals facing any challenges.
Form 16 serves as a TDS certificate displaying the salary earned and TDS deducted from it. The employer issues this certificate before June 15th of each assessment year, following the conclusion of the financial year in which the income was received.
Form 16 consists of two parts: Part A and Part B. Part A entails information on TDS deductions made and deposited quarterly, along with the employer's PAN and TAN details. Part A can be accessed and downloaded by the employer through the TRACES portal.
On the other hand, Part B of Form 16 is an attachment to Part A. It is to be compiled by the employer for their employees, illustrating the breakdown of salary and deductions endorsed under Chapter VI-A.
> New column in Form 24Q
A new column titled 388A has been introduced to Form 24Q, providing a convenient space for detailing other TDS/TCS deductions. This update aims to streamline the tax reporting process for both businesses and employees.
“In Budget 2024, the Government amended the Income Tax Act to allow employers to consider such TDS and TCS in the salary TDS calculations for financial year 2024-2025, benefiting many employees. To implement these changes, the formats of Form 16 and Form 24Q (Salary TDS return form) were updated in October 2024 to include sections for disclosing the TCS and TDS considered by employers,” Mousami Nagarsenkar, Partner, Deloitte India, told the Financial Express.
> Tax on salary and perquisites
The recent circular issued by CBDT includes important updates regarding taxation on salary and perks.
(i) Definition of salary
According to the amendments made in section 17(1) of the Income Tax Act under the Finance Act 2023, the definition of salary now includes the contribution made by the Central Government to the “Agniveer Corpus Fund”. This change applies to Agniveers enrolled in the Agneepath scheme and provides tax benefits under Section 80CCH.
(ii) Purview of perquisites
Certain benefits provided by companies, such as rent-free accommodation and residential facilities at concessional rates, will now be considered as perquisites and subject to taxation.
iii) New rates of surcharge in the Old Tax Regime
If you are taxed under the old tax regime, the surcharge on your income will be calculated based on the following brackets:
Between Rs 50 lakh and Rs 1 crore – 10% Between Rs 1 crore and Rs 2 crore – 15% Between Rs 2 crore and Rs 5 crore (excluding dividends and certain capital gains) – 25% Above Rs 5 crore (excluding dividends and certain capital gains) – 37% Above Rs 2 crore (including dividends and certain capital gains), not falling in the above categories – 15%