Form 24Q Explained – New Tax Regime Impact on Salary TDS

Form 24Q is a quarterly TDS (Tax Deducted at Source) return filed by employers to report the salary payments made to employees and the tax deducted under Section 192 of the Income Tax Act. It’s mandatory for any employer who deducts TDS from salaries to submit this form to the Income Tax Department.

Structure of Form 24Q

Form 24Q is split into two components:

1. Annexure I (Quarterly Filing)

This annexure must be submitted at the end of each quarter and includes:

●     Details of the deductor (employer)

●     Employee PANs

●     Payment of salaries

●     Amount of TDS deducted

●     Details of tax payment (challans used)

This helps the Income Tax Department match the TDS deposited with the PAN of each employee.

2. Annexure II (Filed in Q4 Only)

This annexure is required only with the fourth quarter filing and contains:

●     Complete salary breakup for the financial year

●     Deductions claimed by the employee (like HRA, 80C, etc.)

●     Other income declared by the employee

●     Total tax liability, based on salary and deductions

●     Whether the old or new tax regime was opted

This annexure serves as a complete summary for the year and ensures correct computation of tax liability.

Impact of the New Tax Regime on Salary TDS

With the introduction of the New Tax Regime (Section 115BAC), Form 24Q needed an update to reflect employee tax regime preferences. Here's how it impacts TDS on salary:

●     Mandatory Disclosure: Employees must intimate their employer at the beginning of the year whether they are opting for the old or new tax regime.

●     Regime Indicator in Annexure II: Employers need to indicate which regime was chosen by each employee in the Q4 return via Annexure II.

●     No Deductions in New Regime: If the employee opts for the new regime, deductions under Section 80C, 80D and most exemptions like that of HRA, etc., are not applicable. This significantly alters the TDS calculation.

●     Tax Calculation Differences:

-       Under the old regime, tax is calculated after considering all applicable exemptions and deductions.

-       Under the new regime, lower slab rates apply, but most exemptions & deductions are disallowed.

-       Form 24Q reflects this difference and helps in proper tax credit reconciliation.

●     Quarterly Relevance: In Annexure I, the tax deducted will be visible every quarter, but only in Q4 will it be clear how the deductions or lack thereof impacted final tax liability.

Due Dates for Filing Form 24Q

Form 24Q must be filed every quarter by the following deadlines:

Penalties for Late Filing or Errors

Employers must be cautious about late filings or incorrect TDS deductions. The following consequences apply:

1. Interest Penalty (Section 201)

●     1% per month: If TDS is not deducted on time.

●     1.5% per month: If TDS is deducted but not deposited on time.

2. Late Filing Fee (Section 234E)

●     Rs 200 per day of delay

●     Capped to the total amount of TDS

3. Penalty (Section 271H)

●     Between Rs 10,000 to Rs 1,00,000

●     Imposed for filing incorrect returns or failure to file within a year

These penalties are in addition to interest and late fees, making compliance critical.

Steps to File Form 24Q

Use of Web-e-Tax software over NSDL Utility is preferred due to inherent advantages like creation of one time masters, in built checks and validations, utilities like PAN validation, ADP (Advance Default Predictor), suggesting better tax regime for employees and so on..

Form 24Q is filed online through the TIN-NSDL (now TRACES) portal. Here's a simplified process:

1. Use Web-e-Tax software.
2. Enter details of salary paid in the beginning of the year.
3. Deposit TDS month wise as per automatic calculations. Changes can be made in the deposit challan if TDS amount is to be increased /decreased due to any monthly variation like payment of incentives for specific employees.
4. Generate and check the physical Form 24Q or check online in the software.
5. Generate the quarterly TDS statement in electronic format.
6. Software automatically validates the file using the File Validation Utility (FVU).
7.  Correct errors, if any.
8. Generate the .fvu file again and upload it through the TRACES portal or submit physically at a TIN-FC.

Key Points to Remember

●     Always take employee declarations early in the year if he wants to opt for old regime. In case of no intimation, New regime is the default regime.

●     Ensure accurate PAN, TAN, and challan data for proper tax credit to employees.

●     Annexure II is crucial for correct income and tax reporting under either regime.

●     Form 24Q serves not just compliance, but also ensures the employee’s TDS is correctly reflected in their Form 26AS/AIS.

Conclusion

Form 24Q is more than just a quarterly form, it's a vital compliance document that ensures proper TDS deduction and accurate tax credit to employees. With the emergence of the new tax regime, employers have greater responsibility in understanding how exemptions, deductions, and income declarations impact TDS computation. Careful attention to Annexure II and quarterly filings will ensure smooth processing and avoid potential penalties. Whether you're an HR professional, accountant, or business owner, being well-versed with Form 24Q and its interplay with tax regimes is essential in the current landscape.