A. Update

On October 15, 2024, the Central Board of Direct Taxes (CBDT) issued Notification G.S.R. 639(E), implementing amendments to Income Tax Rules, 1962 concerning tax deductions and collections at source under Chapter XVII-B and Chapter XVII-BB. These changes align with the amended sub- section (2B) of Section 192 of the Income Tax Act, 1961. Key changes include:

1. Amendment to Rule 26B

The existing Rule 26B has been replaced as - “Statement of particulars of income under heads of income other than "Salaries" or details of tax deducted at source or tax collected at source. The assessee may submit to the person responsible for making payment under sub- section (1) of section 192, the details of

1. any income chargeable under any head of income other than ‘Salaries’ received in the same financial year; or
2. any tax deducted at source or tax collected at source under the provisions of Part B or Part BB of Chapter XVII, for the same financial year; or
3. loss, if any, under the head “Income from house property” in the same financial year”.

2. Introduction of Form No. 12BAA:

A new Form No. 12BAA has been introduced statement showing particulars for the purposes of subsection (2B) of Section 192(2B). Employees must provide these particulars to their employers, who will then use the information to deduct tax at source (TDS) from salaries

3. Changes to Form No. 16 and Form 24Q:

Form No. 16 (Part B, Annexure-I): The table in Part B has been revised, specifically for the row numbered 19 and the entries relating thereto,the following shall be substituted

Form No. 24Q (Annexure II):

• In column (388), the term “or deductor(s)” has been removed.
• A new column (388A) has been added to report “Amount reported as per section 192 (2B), of other tax deducted at source or tax collected at source, other than (388)”.
• In column (389), the word “collected” has been added after "deducted." Additionally, after the figure "388", the figures and letter "+388A." have been inserted.

B. Statutory Compliance Release Date: October 15, 2024

C. Effective Date: October 01, 2024

A. Update

Parliament has received the assent of the President on the financial proposals of the Central Government for the financial year 2024-25. It has now been officially enacted as the Finance (No. 2) Act, 2024.

B. Statutory Compliance Release Date: August 16, 2024

C. Effective Date: April 01, 2024

A. Update

Vide Notification No. 1149/2024/LSGD dated June 27, 2024, the Government of Kerala, following the recommendation from the Finance Commission, published an order amending the Kerala Municipalities Act, 1994, the Kerala Municipalities (Labour Tax) Rules, 2005, the Kerala Panchayat Raj Act, 1994, and the Kerala Panchayat Raj (Labour Tax) Rules, 1996.

Accordingly, the employment tax slabs of Gram Panchayats and Municipal Corporations have been revised as follows:

B. Statutory Compliance Release Date: June 27, 2024

C. Effective Date: October 01, 2024

A. Update

The Honorable Finance Minister presented the Union Budget for the Financial Year 2024-25 today. The proposals have now been tabled before Parliament for approval and will be gazetted once approved. The key budget proposals impacting payroll are as follows:

1. Changes in Tax rates under New Tax Regime

To make the New Tax Regime more attractive, a new clause (ii) under sub-section (1A) of section 115BAC of the Act has been proposed to be added, providing the following tax rates for individuals opting for the New Tax regime with effect from the assessment year (AY) 2025-26 (Previous year 2024-25).

2. Increase in Standard Deduction for Taxpayers under New tax regime

It has been proposed to insert a new proviso after clause (ia) of section 16 to increase the standard deduction from ₹50,000 to ₹75,000 for salaried taxpayers who have opted for New Tax Regime under clause (ii) of sub-section (1A) of section 115BAC.

3. Increase in deduction for contribution by employer to Pension Scheme u/s 80CCD (2)

For employees who have opted for New Tax Regime under sub-section (1A) of section 115BAC of the Act, it is proposed to increase the deduction for other employer’s contributions also up to 14% of salary or actual contribution, whichever is lower. This will bring the deduction at par with contribution by Central or State Government employers.

4. Change in Section 80G- Deduction for Donations

“National Sports Fund” is proposed to be replaced as “National Sports Development Fund” for the purpose of deduction u/s 80G.

5. Expansion of scope in Sub-section (2B) of Section 192 – TDS from salary

To simplify claiming credit for TCS collected/TDS deducted, it is proposed to amend sub-section (2B) of section 192 to expand its scope, to include any tax deducted or collected at source (TCS) under the provisions of Chapter XVII-B or Chapter XVII-BB, as applicable. Accordingly, besides declaring other incomes and claiming “loss from house property”, it is proposed that an employee can declare details related to any tax deducted or collected by him as well to the employer for the purpose of calculating TDS from salary income. This proposal is effective from October 01, 2024 (PY 2024-25) and therefore, if this proposal is enacted, this change should be reflected in TDS from salary from October 2024 and onwards.

Also note, that the required declaration forms and verification manner shall be released if this proposal is enacted.

B. Announcement Date: July 23, 2024

C. Effective Date: Assessment Year 2025-26 (Previous Year 2024-25)

A. Update

The Government of Maharashtra issued a notification RNI No. MAHBIL /2009/40123 dated March 18, 2023, stating the below changes to the labour fund:

• Employees whose name appears in the register of an establishment on the last day of the contribution period of every six months (i.e. 30th June and 31st December) shall contribute to the fund at the rate of ₹25.
• Each employer in respect of each such employee shall contribute to the fund, thrice the amount contributed by such employee.

It is also provided that the State Government shall increase the rate of employees’ contribution once in every three years by a notification in the Official Gazette. However, such increase shall not exceed 30% of the rate of contribution.

B. Statutory Compliance Release Date: March 18, 2024

C. Effective Date: June 01, 2024

A. Update

NSDL has revised the e-TDS/TCS RPU utility to version 5.0 for preparing TDS/TCS returns. e-TDS/TCS Regular & Correction Statement(s) for FY 2007-08 and onwards (i.e. Forms 24Q, 26Q, 27Q and 27EQ) can be prepared using this utility.

B. Statutory Compliance Release Date: March 14, 2024

C. Effective Date: March 01, 2024

A. Update

Honourable Finance Minister presented the Interim Budget for the financial year 2024-25 today. The Budget has not proposed any modifications for salaried individuals and all existing tax rates will be retained.

B. Statutory Compliance Release Date: February 01, 2024

C. Effective Date: Assessment Year 2025-26 (Previous Year 2024-25)

A. Update

Vide notification No. 65/2023/F. No. 370142/21/2023 dated August 18, 2023, the Central Board of Direct Taxes amends Rule 3 Sub Rule (1) & (5) of the Income-tax Rules,1962 (‘the Rules’) for the purpose of sub-clauses (i) and (ii) of sub-section (2) of section 17 of the Income Tax Act, 1961 (‘the Act’) as follows:

Rule 3(1) determines the value of residential accommodation provided by the employer, during the previous year as per Table I, the amendment brought changes in the salary percentage and population criteria for specific clauses as follows:

1. (S.no 1) No new changes, where accommodation is provided by the Central Government or any State Government to the employees either holding office or post in connection with the affairs of the Union or of such State.
2. (S.no 2) Where the accommodation is owned by the employer or taken on lease or rent by the employer. The perquisite value shall be derived based on the revised salary percentage and revised population criteria:
   1. Where accommodation is unfurnished:
      1. 10% of salary in cities having a population exceeding 40 lakhs per the 2011 census.
      2. 7.5% of salary in cities having a population exceeding 15 lakhs but not exceeding 40 lakhs as per the 2011 census.
      3. 5% of salary in other areas, in respect of the period during which the said accommodation was occupied by the employee during the previous year as reduced by the rent, if any, actually paid by the employee.
      4. If accommodation is taken on lease or rent by the employer: Actual amount of lease rental paid or payable by the employer or 10% of salary, whichever is lower, as reduced by the rent, if any, actually paid by the employee.
   2. Where accommodation is furnished:
      1. The value of perquisite determined as above in point (a) and increased by 10% per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, by the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year.
3. (S.no 3) No new changes, where the accommodation is provided by the employer specified in (1) or (2) in a hotel (except where the employee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to another).

A new proviso has been inserted that where the accommodation is owned by the employer and the same accommodation is continued to be provided to the same employee for more than one previous year, the amount is calculated in accordance with SL. No.2(a) or 2(b) shall not exceed the amount so calculated for the first previous year, as multiplied by the amount which is a ratio of the Cost Inflation Index for the previous year for which the amount is calculated and the Cost Inflation Index for the previous year in which the accommodation was initially provided to the employee.

Explanation:

1. “Cost Inflation Index” means the index notified by the Central Government in Official Gazette under clause (v) of Explanation to section 48;
2. “first previous year” means the previous year 2023-2024, or the previous year in which the accommodation was provided to the employee, whichever is later;

For the purpose of the first proviso to Rule 3(1), any accommodation temporarily provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site, a dam site or a power generation site, or an off-shore site which, having plinth area not exceeding 1000 square feet(earlier 800 square feet), is located not less than eight kilometers away from the local limits of any municipality or a cantonment board; and

Clause (v) of the Explanation to the Rule has been substituted as follows;

(v) “remote area”, for purposes of the first proviso to sub-rule (1) means any area other than an area which is located-

(a) within the local limits of; or

(b) within a distance, measured aerially, of 30 kilometers from the local limits of, any municipality or a cantonment board having a population of 1,00,000 or more based on the 2011 census’

B. Statutory Compliance Release Date: August 18, 2023

C. Effective Date: September 01, 2023

A. Update

The Government of Haryana issued a notification HLWB/REV/2023/2733-2982 dated June 27, 2023, stating the below change in the monthly contribution limit to the labour fund, effective from January 01, 2023.

1. Employees shall contribute to the fund every month an amount equal to 0.2% of their salary or wages or any remuneration subject to a limit of rupees ₹31.
2. and each employer in respect of each such employee shall contribute to the fund every month, twice the amount contributed by such employee.

Provided that the limit specified shall be indexed annually to the consumer price index beginning from the first of January every year.

B. Statutory Compliance Release Date: June 27, 2023

C. Effective Date: January 01, 2023

A. Update

Further to our update – “Joint option for employees for Higher Pension” The employees provident fund authority has further extended the timeline on Exercise of joint option under para 11(3) and para (11)4.

The time to exercise this option by employees was four months from the judgment date, which was due on March 03, 2023, and has been extended by 2 months to May 03, 2023, and then extended till June 26 and now it has been further extended till July 11, 2023.

B. Statutory Release Date: : May 03, 2023

C. Due Date: July 11, 2023

SC Judgement:

A. Update

The Central Board of Direct Taxes has announced amendments to the Income-tax Rules,1962 (‘the Rules’) by vide Notification No. 28/2023/ [F.No. 370142/12/2023-TPL], dated May 22, 2023, and changes in Form 16, and Annexure II, III of Form 24Q, with effect from July 1, 2023, and shall be applicable for the assessment year 2024-25 and subsequent assessment years.

Form 16 Part B

• A row inserted Other special allowances under section 10(14) under allowances.
• Under Chapter VI-A a rows inserted for Deduction in respect of contribution by the employee and employer to Agnipath Scheme under section 80CCH.

From 24Q

• In serial number 4, in the table, in column No. 4, for the words “Education Cess”, the words “Health and Education Cess” shall be substituted.
• In Annexure I, in the table before “Verification”, in column No. 11, for the words “Education Cess”, the words, “Health and Education Cess” shall be substituted.
• In Annexure III, in the fifth column of the first table, for the words “Whether opting for taxation u/s 115BAC [Yes/No]”, the words “Whether opting out of taxation u/s 115BAC(1A) [Yes/No]” shall be substituted.

B. Statutory Compliance Release Date: May 22, 2023

C. Effective Date: July 01, 2023

A. Update

With respect to the Maharashtra state budget proposal of 2023, Bill No. XIII of 2023, has been introduced to amend the Maharashtra State Tax on Professions, Trades, Callings and Employments Act 1975 (‘the Act’), with effect from April 01, 2023, and received the Governor assent on April 06,2023.

Besides providing changes in benchmark disability, the Act also revises the threshold limit of tax on professions, trades, callings, and employments for female employees.

Accordingly, female employees whose salary or wages for a month is ₹ 25,001 and above, the professional tax will be paid at the rate of ₹200 per month from April 01, 2023. At present, the professional tax at the rate for female employee is ₹200 per month if monthly salary earned is higher than ₹15,001 and annual tax deducted should be ₹2,500.

The professional tax rates for Males remain the same and for females, the revised table is as below:

B. Statutory Compliance Release Date: March 20, 2023

C. Effective Date: April 01, 2023

A. Update

Vide Notification No. 113, dated March 14, 2023, Karnataka Act No. 14 of 2023 has been published amending the Karnataka Tax on Profession, Trades, Callings and Employees Act, 1976. Besides providing changes in penalties and interest in the events of different defaults, the Act also revises the Schedule of rates of tax on professions, trades, callings and employments.

Accordingly, employees whose salary or wages for a month is ₹ 25,000 or above, the professional tax will be paid at the rate of ₹200 per month from April 01, 2023.

At present, the professional tax at the rate of ₹200 per month is to be paid if monthly salary earned is ₹15,000 or more.

B. Statutory Compliance Release Date: March 14, 2023

C. Effective Date: April 01, 2023

A. Update

On November 04, 2022, the Hon’ble Supreme Court (SC) pronounced a judgement in the case of Special Leave Petition (C) Nos. 8658-8659 of 2019 concerning the Employees Provident Fund Organisation (EPFO/Fund) & anr. etc. and Sunil Kumar B. & ors. which deals with the legality of certain amendments and modifications made by the Central Government to the Employees’ Pension Scheme, 1995 (EPS 1995).

The judgement provides that:

• The ratio of the decision in the case of R. C. Gupta (supra) still holds good while dealing with pre-2014 position of the Scheme that the dates or time limit specified in clause 11(3) are not cut-off dates for employees to exercise their option under the proviso to the said para.
• The requirement in the Scheme for employee’s contribution to the extent of 1.16% for option members is ultra vires, in absence of a legislative provision to that effect. The administrators have been instructed to readjust the contribution pattern within the scope of the statute by bringing appropriate legislative amendments within a stipulated time of six months. Till such time, if no such legislative exercise is undertaken, the scheme as it stands shall continue and the duty to contribute 1.16% of the salary shall apply on option members as well.
• The employees of exempted establishments are integrated into the Pension Scheme and these employees should not be deprived of the benefit of getting option to remain in the pension scheme while drawing salary beyond the ceiling limit, in situations where similarly situated employees of unexempted establishments can exercise such option.
• The other area where the pension amount may get impacted is on determination of monthly pension on the basis of altered computation method. There is a reasonable basis for effecting change in the computation methodology for determining pensionable salary and this change of methodology comes within the power of the Central Government to modify a scheme.

The above matter was referred to the Central Government (CG) to issue relevant directions.

The Central Government (CG) released the directions to the EPFO via a letter dated December 22, 2022. To implement the orders of the SC and the directions of CG to give the benefit of higher pension to the eligible members, EPFO has issued several circulars as under:

1. Circular No. 54877/15149 on December 29, 2022: EPFO implemented the directions contained in para 44(ix) of the Judgement that SC agree with the view taken by the Division bench in the case of R.C. Gupta,
2. Circular No. 54877/15238 on January 05, 2023: EPFO clarified that para 11 of its earlier circular were issued with reference to communication of MoL&E,
3. Circular No. 55893/15785 on January 25, 2023: EPFO re-examined the cases of pension on higher wages in order to stop overpayment, if any, in respect of employees who had retired prior to September 01, 2014, without exercising any option under para 11(3) of pre-amended Scheme and have been granted pension on higher wages, and
4. Circular No. 56259/16541, being the latest, on February 20, 2023. This circular provides that the employees who did not exercise option as contemplated in the proviso to para 11(3) of the pre-amended 2014 Pension Scheme would be entitled to exercise joint option under erstwhile para 11(3) and existing para 11(4) within the extension period of 4 months. The Circular also provides in para 6 that the method of deposit and that of computation of pension will follow through subsequent circular.

Therefore, the following employees with their employers may submit joint option under para 11(3) and 11(4) to the concerned Regional Office:

1. The employees and employers who had contributed under para 26(6) of EPF Scheme on salary exceeding the prevalent wage ceiling of ₹5,000 or ₹6,500; and
2. The members of EPS 1995 who did not exercise joint option under the proviso to para 11(3) of the pre amendment scheme; and
3. Employees who were members prior to September 01, 2014, and continued to be a member on or after September 01, 2014.

The eligible employees, as mentioned above, can exercise the joint option along with their employers on the online facility provided by EPFO on February 27, 2023.

The time to exercise this option by employees was four months from the judgement date, which was due on March 03, 2023, but it has been further extended by 2 months to May 03, 2023.

B. Statutory Release Date: February 27, 2023

C. Effective Date: May 03, 2023

A. Update

In the Finance Bill 2023, the Government has proposed the following changes impacting payroll:

1. Changes in New Tax Regime

To make the New Tax Regime more attractive, various amendments have been proposed which not only aims to provide beneficial tax rates and other tax reliefs to the Individuals but also will help to simplify the compliances. Considering this, the following changes have been introduced under Section 115BAC of the Income Tax Act, 1961 (‘the Act’) the New Tax Regime:

a) Tax Slab Changes

New sub-section (1A) under section 115BAC of the Act has been proposed to be inserted, which provides revised tax rates, as below for the assessment years (AY) beginning on or after April 01, 2024, i.e., for the previous years (PY) beginning on or after April 01, 2023:

b) New Tax Regime to be default option.

It has also been proposed that rates given in sub-section (1A) of section 115BAC of the Act (as explained above) are proposed to be the default rates. Accordingly, the above-mentioned rates shall apply to all individuals unless an option is exercised by them along with the return of income on or before the due date specified under sub-section (1) of section 139 of the Act. This option can be exercised every year.

c) Change in the surcharge for the highest tax slab:

The highest surcharge rate has been proposed to be reduced from 37% to 25%. Accordingly, the revised surcharge under new regime would be as follows:

d) Extension of standard deduction

It has been proposed to extend the standard deduction of ₹ 50,000 under Sub section (ia) of section 16 under the new regime.

2. Change in tax rebate under section 87A of the Act

It has been proposed to provide a rebate of 100% of the income tax payable on total income not exceeding ₹ 7 Lakhs to the resident salaried individuals opting for new tax regime.

All the above changes have been proposed only for the New Tax Regime, and no changes have been introduced for the old tax regime.

3. Increase in exemption limit of Leave Encashment

It has been proposed to increase the existing exemption limit of ₹ 3 Lakhs for leave encashment on the retirement of non-government salaried employees to ₹ 25 Lakhs. This is allowed under both old and new tax regimes.

4. Change in valuation of residential accommodation provided to employees

As per clause (2) of section 17 of the Act, “perquisite” inter alia includes value of rent-free accommodation or value of any concession in rent provided to employees by the employer. The employer may be either Central/State Government or other than that, with different methodologies of valuation of perquisites for the two categories of employers.

In order to prescribe a uniform methodology in the Rules for computing the value of taxable perquisite, it is proposed to amend sub-clauses (i) and (ii) of clause (2) and remove explanations 2, 3 and 4 of clause (2)(ii) of section 17 of the Act. Explanation 2 provides for increase in value of furniture and fixture by 10% p.a. of the cost of furniture or actual hire charges payable as reduced by any charges paid or payable if such furniture is hired from a third party. Explanation 3 provides the meaning of "salary" and Explanation 4 provides the definition of "specified rate" as 15%, 10% and 7.5% of salary depending on the population of cities as per 2001 census.

The uniform method for computation of the value of rent-free accommodation or accommodation provided at a concessional rate will be prescribed under Rules.

Further, it is proposed to amend the Explanation 1 to sub-clause (ii) of clause (2) of section 17 of the Act so as to provide that accommodation shall be deemed to have been provided at a concessional rate if the value of the accommodation computed in the prescribed manner exceeds the rent recoverable from, or payable by, the assessee/employee.

5. TDS on payment of accumulated balance due to an employee

Section 192A with its first proviso provide for withholding of TDS by the trustees of the Employees' Provident Fund Scheme, 1952 or any person authorised at the time of payment of the taxable accumulated balance due to the employee at the rate of 10% where the amount or aggregate amount of such payment to the payee is more than ₹50,000.

It has been proposed in the Bill to delete the second proviso of section 192A which requires an employee entitled to receive such taxable amount to furnish his Permanent Account Number (PAN) to the person responsible for deducting TDS, failing which TDS is deducted at the maximum marginal rate.

With this proposed deletion of second proviso, in case of failure to furnish PAN, TDS will be deducted at the rate of 20% as in other non-PAN cases in accordance with section 206AA of the Act, instead of at the maximum marginal rate.

B. Announcement Date: February 01, 2023

C. Effective Date: Assessment Year 2024-25 (Previous Year 2023-24)

A. Update

Vide notification G.O. (Ms) No. 161 dated December 02, 2022, the Governor of Tamil Nadu has made the following amendments to the Labour welfare fund Rules, 1973:

• Annual employee contribution towards the Labour Welfare Fund has been revised from ₹10 to ₹20, and
• Annual employer contribution towards the Labour Welfare Fund has been revised from ₹20 to ₹40.

These amendments were gazetted by Extraordinary Gazette no. 538 published on December 02, 2022 and come into force from this date.

B. Statutory Compliance Release Date: December 02, 2022

C. Effective Date: December 02, 2022

A. Update

Vide notification GO(P) No.41/22/LBR dated May 19, 2022, the Labour and Employment welfare secretary of Kerala has revised the rate of employer and employee contributions to Kerala Shop and Commercial Establishment Labour Welfare Fund from ₹20 to ₹50 per month per employee.

B. Statutory Compliance Release Date: May 19, 2022

C. Effective Date: September 01, 2022

A. Update

Gujarat Government has recently updated the Professional Tax rates through notification number GHN-35-PFT-2022-S.3(2)(10)-Th. The updated rates are as under:

• For employees earning monthly salaries or wages up to ₹12,000, no Professional Tax is payable
• For employees earning monthly salaries or wages more than ₹12,000, Professional Tax is payable as ₹200 p.m.

In the notification, it is also mentioned that:

• where salary or wage is payable with a frequency other than monthly, monthly salary or wage for this purpose will be the actual total salary or wage paid/payable in a month.
• Where an employee is separated before the end of a month, his Professional Tax liability for that month shall be proportionately reduced.

B. Statutory Compliance Release Date: April 08, 2022

C. Effective Date: April 01, 2022

A. Update

Budget for the financial year 2022-23 (assessment year 2023-24) was announced by the Finance Minister on February 01, 2022. The key highlights of the proposed amendments impacting payroll are as under:

• It is proposed to amend clause (2) of section 17 and to insert a new sub-clause in the proviso to state that any sum paid by the employer in respect of any expenditure actually incurred by  the employee on his medical treatment or treatment of any member of his family in respect of any illness relating to COVID-19 subject to such conditions, as may be notified by the Central Government, shall not be forming part of “perquisite”.
• There is no change proposed in the tax rates used for the purposes of computation of deduction of tax at source from salaries, either in the First Schedule of the Bill or section 115BAC, and surcharge for the Assessment Year 2023-24 (Financial Year/PY 2022-23).
• To bring at par with the Central Government employees, it is proposed to increase the limit of deduction under section 80CCD of the Income Tax Act from the existing 10% to 14% in respect of contribution made by the State Government to the account of its employees. This amendment will take effect retrospectively from the assessment year 2020-21 (PY 2019-20) and subsequent assessment years.
• Currently, Deduction under section 80DD is allowed, inter alia, if the payment of annuity or lump sum amount is made to the benefit of the dependant, in the event of the death of the individual in whose name subscription to the scheme has been made. It is proposed to amend this condition to allow the deduction also during the lifetime of the individual, where he/she has attained the age of 60 years or more, in whose name subscription to the scheme has been made, and where payment or deposit has been discontinued. This amendment will take effect from assessment year 2023-24 (PY 2022-23) and subsequent assessment years.

B. Statutory Compliance Release Date: February 02, 2022

C. Effective Date: Assessment Year 2023-24 (PY 2022-23), unless stated otherwise in specific points

A. Update

Vide Extraordinary Notification no. 455, Tamil Nadu Government has updated the employee and employer contribution to Labour Welfare Fund (LWF). Each employee shall contribute to LWF ₹50 and each employer, in respect of each such employee, shall contribute ₹100 annually. Erstwhile, these rates were ₹10 and ₹20, respectively.

B. Statutory Compliance Release Date: October 01, 2021

C. Effective Date: October 01, 2021

A. Update

Central Board of Direct Taxation has introduced Rule 9D to Income Tax Rules, 1962, vide Notification No. 95/2021/ F. No. 370142/36/2021-TPL, dated August 31, 2021. Rule 9D provides clarity on the computation and the fund management mechanism required for the interest income earned on PF contributions, exceeding the specified limits, by the employee.

Specifications, as announced by the Board:

Two separate accounts shall be maintained in the provident fund account of the employee: Taxable and Non-Taxable contribution.Taxable income will arise as interest accrued during the previous year in Taxable Contribution Account. Various amounts to be categorized as follows:

Non-Taxable Contribution shall comprise of the following:

1. Closing balance in the account as on 31st day of March 2021
2. Any contribution made by the person in the account during the previous year 2021-2022 and subsequent previous years, which is not included in the taxable contribution account
3. interest accrued on (i) and (ii), stated above
4. Sum of (i), (ii) and (iii) should be reduced by any withdrawal from the account

Taxable Contribution shall comprise of the following:

1. Contribution made by the person in a previous year in the account during the previous year 2021-2022 and subsequent previous years, which is more than the threshold limit
2. Interest accrued on (i), stated above
3. Sum of (i) and (ii) should be reduced by any withdrawal from the account.

Threshold Limits to be applicable:

1. INR 5,00,000, if only the employee is contributing.
2. INR 2,50,000, if employee and employer, both are contributing.

B. Statutory Compliance Release Date: August 31, 2021

C. Effective Date: A.Y. 2022-23 (P.Y. 2021-22)

A. Update

Due to the ongoing impact of COVID-19, Ministry of Finance has announced tax exemptions on expenditure on COVID-19 treatment and ex-gratia received by dependents on death of the employee vide press release dated June 25, 2021 and Circular No. 12/ 2021.

The exemptions proposed are as below:

1. Amount received for treatment of COVID-19 for self and dependents.

Tax exemption has been proposed under the Act on any amount received by a taxpayer for medical treatment from employers or from any person for the treatment of COVID-19, during FY 2019-20 and subsequent years.

2. Ex-gratia payment received by family members of the deceased employee.

Ex-gratia payments made to family members of employees who have lost their lives due to COVID-19 is proposed to be fully exempt if the employer of the deceased makes such payment. When any other person makes the payment, the same shall be exempt up to INR 10 lacs (in aggregate).

The necessary legislative amendments for the above is expected to follow in due course.

Further, timelines have been extended for various filing. The relevant extension related to withholding taxes on salary income are summarised below:

3. The Statement of Deduction of Tax for the last quarter of the Financial Year 2020-21

Required to be furnished on or before May 31, 2021 under Rule 31A of the Income-tax Rules,1962, previously extended to June 30, 2021 vide Circular NO.9 of 2021, may be furnished on or before July 15,2021.

4. The Certificate of Tax Deducted at Source in Form No.16

Required to be furnished to the employee by June 15, 2021 under Rule 31 of the Income-tax Rules,1962, previously extended to July 15, 2021 vide Circular NO.9 of 2021, may be furnished on or before July 31, 2021.

B. Statutory Compliance Release Date: June 25, 2021

C. Effective Date: April 1, 2019

A. Update

Ministry of Finance has announced amendments to the Income-tax Rules,1962 (‘the Rules’) vide Notification No. 15/2021/F.No. 370142/04/2019-TPL, dated March 11, 2021, for changes in Forms 12BA, part B of Form 16 and Annexure II of Form 24Q, with effect from April 1, 2021.

1. Form No. 12BA

• A. The following changes have been introduced basis the amendments made in Finance Act 2020 in the list of perquisites-
  Disclosure of Stock options have been segregated in 2 parts:

  • a) Stock options allotted or transferred by employer being an eligible start-up referred to in section 80-IAC.
  • b) Stock options (non-qualified options) other than ESOP in pt. 1(a) above

• B. For Taxability of perquisite on retirement funds as defined under Section 17(2) (vii) & (viia) of Income Tax Act, 1961 (‘the Act’) read with Rule 3B of the Rules, the following line items have been added:

  • a) Contribution by the employer to fund and scheme taxable under section 17(2)(vii) of the Act.
  • b) Annual accretion by way of interest, dividend etc. to the balance at the credit of fund and scheme referred to in section 17(2)(vii) of the Act and taxable under section 17(2)(viia) of the Act.

2. A line item ‘Whether opting for taxation u/s 115BAC? has been added to the below Forms:

• a. Form 16 – Part B
• b. Form 24 Q – Annexure II

B. Statutory Compliance Release Date: March 11, 2021

C. Effective Date: April 1, 2021

A. Update

In Finance Act, 2020, Ministry Of Finance had announced that the amount of the aggregate of amounts of any contributions made to the account of the assessee by the employer for specified fund or scheme, which exceeds Rs. 7.5 lakh shall be treated as taxable perquisite in the hands of the employee. Sub clauses (vii) and (viia) have substituted the existing sub-clause (vii) of clause (2) of Section 17 in order to incorporate the changes.

The following contributions will be considered as specified fund or scheme:

• Contributions made to a recognized provident fund
• Contribution made in the scheme referred to in sub-section (1) of Section 80CCD, namely pension scheme notified by the Central Government
• Contribution made to an approved superannuation fund

In order to calculate the taxable perquisite, the authorities vide Notification No. 11 /2021/F. No. 370142/52/2020-TPL, dated March 5, 2021, have introduced Rule 3B which explains the calculation formula for the taxable perquisite value under Section 17 (2)(viia) of the Act, the same has been detailed below:

TP= (PC/2)*R + (PC1+ TP1)*R

Where,

* Where the amount or aggregate of amounts of TP1 and PC1 exceeds the amount or aggregate of amounts of balance to the credit of the specified fund or scheme on the first day of the current previous year, then the amount in excess of the amount or aggregate of amounts of the said balance shall be ignored for the purpose of computing the amount or aggregate of amounts of TP1 and PC1.

B. Statutory Compliance Release Date: March 05, 2021

C. Effective Date: April 1, 2021

Following are the relevant amendments proposed in Finance Bill 2021 for the Assessment Year 2022-23 (Financial Year 2021-22):

1. Tax Rates

No change has been announced on the personal income tax rates.

2. Exemption for Leave Travel Concession (LTC) cash scheme

According to the LTC cash voucher scheme, tax exemption is available for cash allowance in lieu of LTC up to a maximum of INR 36,000 per person, under section 10(5) of the Income Tax Act 1961 (‘Act’) for the AY 2021-22 only, subject to the conditions laid down for eligibility.

The details are available as a separate update on the portal, as announced in circular earlier.

Effective For: F.Y. 2020-21 (A.Y. 2021-22)

3. Section 80EEA deduction for Affordable Housing Loans

Section 80EEA of the Act provides for a deduction in respect of interest paid on loan taken from any financial institution for acquisition of an affordable residential house property. The deduction was subjected to the condition that loan has been sanctioned on or before 31 March 2021. In Finance Bill 2021, the period of loan sanctioned by the financial institution is proposed to be extended till 31 March 2022.

Effective From: F.Y. 2020-21 (A.Y. 2021-22) and onwards

4. Removal of exemption on specified Unit Linked Insurance Plan (ULIP)

Exemption under section 10(10D) of the Act will not be available in case of ULIP issued on or after 1 February 2021 where annual premium exceeds Rs.2,50,000 for any year over the term of ULIP. The same will now be taxed as capital gains from sale of equity-oriented fund, subject to conditions specified.

Effective From: F.Y. 2021-22 (A.Y. 2022-23) and onwards.

5. Taxability of Interest from Provident Funds

Exemption under Section 10 sub clause (11) and sub clause (12) of the Act for the interest accrued on employee’s contribution to Provident Funds made on or after April 1, 2021 shall no longer apply to the extent it relates to the amount or aggregate of amounts of contribution made by the employee exceeding Rs.2,50,000 in a previous year in that fund, computed in such manner as may be prescribed.

Effective From: F.Y. 2021-22 (A.Y. 2022-23) and onwards

6. Taxation of income of resident from notified overseas retirement fund

Government is to notify rules to provide relief on income accruing from overseas retirement benefit accounts for residents, which is taxed in overseas on withdrawal or retirement and on accrual basis in India. Insertion of new section 89A to the Act has been proposed in the Income Tax Act, to provide that the income of a specified person from specified account shall be taxed in the manner and in the year as prescribed by the Central Government.

Effective From: F.Y. 2021-22 (A.Y. 2022-23) and onwards

A. Update

The Union Cabinet has given its approval for ABRY to boost employment in formal sector and incentivize creation of new employment opportunities during Covid recovery phase under Atmanirbhar Bharat Package 3.0.

The following features of the scheme will impact Employee Provident Fund (EPF) contributions from 2020 to 2023:

• Government of India (GOI) will provide subsidy for two years specifically in respect of new employees engaged on or after October 01, 2020 and up to June 30, 2021
• GOI will pay both 12% employees' and 12% employers' contributions, i.e.24% of wages, towards EPF in respect of new employees in establishments employing up to 1000 employees for two years
• GOI will pay only employees' share of EPF contribution i.e. 12% of wages in respect of new employees in establishments employing more than 1000 employee for two years
• An employee drawing monthly wage of less than ₹ 15,000, who was not working in any establishment registered with the EPFO before October 01, 2020 and who did not have a UAN or EPF Member account number prior to October 01, 2020, will be eligible for the benefit
• Any EPF member possessing UAN drawing monthly wage of less than ₹ 15,000, who made exit from employment during Covid pandemic from March 01, 2020 to September 30, 2020 and did not join employment in any EPF covered establishment up to September 30,2020, will also be eligible to avail benefit
• EPFO will credit/deposit the contribution in Aadhaar seeded account of members in electronic manner
• The software development and the procedure for the scheme are under process. EPFO will also ensure that the benefits provided under ABRY do not overlap with any other scheme implemented by EPFO.

B. Statutory Compliance Release Date: December 09, 2020

C. Effective Date: October 01, 2020

A. Update

Employee State Insurance Corporation (ESIC) has, through notification no. G.S.R. 675(E), omitted Rule 51B of The Employees' State Insurance (Central) Rules, 1950, which states that in areas where the act is implemented for the first time, the contribution for the initial twenty-four months from such date of implementation for an employer is 3 percent and employee is 1 percent. Now, the contribution rates will be continue at the general contribution rate at 3.25 percent as employer contribution and 0.75 percent as employee contribution for all newly implemented areas as well.

B. Statutory Compliance Release Date: October 27, 2020

C. Effective Date: October 27, 2020

A. Update

In continuation to the announcement by the Ministry of Finance on October 12, 2020, the Government has decided to extend the benefit to other employees (i.e. non-Central Government employees) as well.

Accordingly, the payment of cash allowance, subject to maximum of Rs 36,000 per person as Deemed LTC fare per person (Round Trip) to non-Central Government employees, shall be allowed income tax exemption subject to fulfillment of the following conditions:

• The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21
• The employee spends a sum equals to three times of the value of the deemed LTC fare on purchase of goods / services which carry a GST rate of not less than 12% from GST registered vendors / service providers through digital mode during the period from the 12th of October, 2020 to 31st of March, 2021 (‘specified period’) and obtains a voucher indicating the GST number and the amount of GST paid.
• An employee who spends less than three times of the deemed LTC fare on specified expenditure during the specified period shall not be entitled to receive full amount of deemed LTC fare and the related income-tax exemption and the amount of both shall be reduced proportionately

B. Statutory Compliance Release Date: October 29, 2020

C. Effective Date: October 12, 2020

A. Update

According to the announcement by the Ministry of Finance, dated October 12, 2020, employees can avail LTC Cash Voucher Scheme for the four-year block 2018-21. Since employees cannot avail LTC in the current block due to COVID-19, the Government has decided to give cash payment in lieu of one LTC during 2018-21. This scheme can be availed by the employees of Central Government employees.

Employees will be availing the following:

• Full payment on Leave encashment,
• Payment of fare in 3 flat-rate slabs depending on class of entitlement, and
• Fare payment will be tax free.

Subjected to the following conditions:

• An employee, opting for this scheme, will be required to buy goods / services worth 3 times the fare and 1 time the leave encashment before March 31, 2021.
• The scheme also requires that money must be spent on goods attracting GST of 12% or more from a GST registered vendor through digital mode. The employee is required to produce GST invoice to avail the benefit.

B. Statutory Compliance Release Date: October 12, 2020

C. Effective Date: FY 2020-21

A. Update

Parliament has received the assent of the President on the Code on Social Security, 2020. The objective of the Code is to amend and consolidate the laws relating to social security with the goal to extend social security to all employees and workers, in the organized or unorganized or any other sectors.

The Code on Social Security amalgamates the existing nine statues viz., The Employees’ Compensation Act, 1923, The Employees’ State Insurance Act, 1948, The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, The Maternity Benefit Act, 1961, The Payment of Gratuity Act, 1972, The Unorganized Workers’ Social Security Act, 2008, The Cine Workers Welfare Fund Act, 1981, The Building and Other Construction Workers Cess Act, 1996, and The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959.

The following are the major impacts of the Code on the payroll processes:

• Definition of ‘wages’ contains certain inclusions and exclusions and is different for different social security types.
• Definition of ‘employees’ also includes workers employed through contractors.
• Employee Provident Fund (EPF) scheme will apply on all establishments employing 20 or more employees and to certain notified establishments.
• Under the Provident Fund Scheme of EPF, employers will have to make a contribution of 10% or 12%, as the case may be, and the employees will have to make a contribution similar to the employer or more if they wish to do so.
• Under the Pension scheme of EPF, out of employers’ contribution to Provident Fund above, 8.33% of the wages for every employee shall be contributed.
• Under the Insurance Scheme of EPF, maximum of 1% of wages towards Employee’s Deposit-Linked Insurance Fund (EDLI) and administration charges up to 0.25% of EDLI shall be deposited by the employer.
• Employee State Insurance (ESI) scheme will apply to certain establishments with 10 or more employees and to all the establishments which carry out hazardous work, as may be notified by the central government.
• ESI contributions shall be paid at such rates as may be prescribed by the Central Government.
• Besides EPF and ESI, this Code also covers gratuity, maternity benefit, and social security for construction workers and workers in unorganized sector.
• The Code also provides for filing of single return electronically, or otherwise, by an employer.
• Aadhaar linked identification of employees is also covered.

B. Statutory Compliance Release Date: September 28, 2020

C. Effective Date: Multiple dates for different provisions to be notified by Central Government

A. Update

Finance Act 2020 introduced concessional rate of tax for individuals opting a new tax regime under section 115BAC of the Income Tax Act, 1961. Also, the memorandum to Budget 2020 provided that specific allowances under section 10(14) of the Income Tax Act, 1961 read with Rule 2BB of the Income Tax Rules, 1962 would still be allowed as exemption for the employees opting for new tax regime. These specific allowances under Rule 2BB are:

• Any Allowance granted to meet the cost of travel on tour or on transfer;
• Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;
• Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office; and
• Transport Allowance granted to an employee with disability to meet expenditure for the purpose of commuting between place of residence and place of duty.

It was also specifically provided in the Memorandum that exemption in respect of free food and non- alcoholic beverage provided by an employer through paid voucher [Clause iii of sub-rule 7 of Rule 3] shall not apply to the employees exercising option of new tax regime.

Now, the Central Board of Direct Taxes through Notification No. 38/2020 has accordingly amended the Rule 2BB and Rule 3 to give effect to the above provisions of Memorandum. These rules may be called as the Income-tax (13th Amendment) Rules, 2020

B. Statutory Compliance Release Date: June 26, 2020

C. Effective Date: April 01, 2020

A. Update

Finance Minister announced additional relief measures to support Indian Economy’s fight against COVID-19. In order to provide more take home salary to employees and also to give relief to employers in payment of Provident Fund dues, statutory PF (EPF) contribution of both employer and employee will be reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months, i.e. June to August 2020.

Further to the above Press Release, a Notification has been released on May 18, 2020. As per this, the reduced rate of 10% of monthly pay (instead of 12% of monthly pay) applies for employer’s and employee’s EPF contribution in respect of wages payable for the months of May, June and July 2020.

The reduced rate for provident fund contributions will be applicable for International Workers also.

This notification is not applicable to:

• Central Public Sector Enterprises, State Public Sector Enterprises and other establishments owned by or under the control of the Central Government or the State Government;
• Establishments eligible for relief under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) i.e. establishments with up to 100 employees with 90% or more of such employees earning monthly wages less than INR 15,000 – where both employer’s and employee’s share of Provident Fund contribution is payable by the Central Government.

B. Statutory Compliance Release Date: May 18, 2020

C. Effective Date: May 01, 2020

A. Update

Till now, ESI Scheme was notified in 566 Districts in 34 States and Union Territories, which include some fully notified while some partially notified districts. After Aatmanirbhar Bharat Abhiyaan Press Release-Part 2 , it has been provided that ESIC shall cover all districts and all establishments employing 10 or more employees in India. Extension of ESIC coverage to employees working in establishments with less than 10 employees shall be on voluntary basis.

B. Statutory Compliance Release Date: May 14, 2020

C. Effective Date: May 14, 2020

A. Update

Central Board of Direct Tax has released a Circular clarifying the option under section 115BAC to be considered for TDS from Salary u/s 192.

• For a salaried individual, with no business income, employees will give intimation to the employer and basis that TDS will be deducted. However, this option will be given only once in a year.
• For a salaried individual, with business income, employees will give intimation to the employer and basis that TDS will be deducted. However, this option will be given only once in a lifetime. Employer/admin needs to ensure that such option is not altered in the subsequent tax years.

Things to be noted here:

• Where no intimation has been made by an employee, old regime shall be applicable by default.
• No format for such intimation has been provided and hence, will be subject to a particular organization.
• No timeline has been provided by when an employee can give such intimation.
• An employee will continue to have the right to exercise such option at the time of filing return and it may be different from the one made in the Intimation to the employer.

B. Statutory Compliance Release Date: April 13, 2020

C. Effective Date: April 01, 2020

A. Update

To provide relief to the Covid-19 affected, a public charitable trust in the name of ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund) has been set up. Donations to this fund will be exempted from the income tax under section 80G.

B. Statutory Compliance Release Date: March 28, 2020

C. Effective Date: April 01, 2019

A. Update

Following are the relevant amendment (from product’s perspective) brought by Union Budget, 2020:

1. Change in Perquisites

Presently, u/s 17(2)(vii), any contribution by the employer to an approved superannuation fund is considered as a perquisite to the extent it exceeds ₹ 1.50 Lakhs. Finance Bill, 2020 proposes to extend the coverage to the amount(s) of any contribution made by an employer:

• in a recognized provident fund;
• in the scheme referred to in sub-section (1) of section 80CCD; and
• in an approved superannuation fund,

to the extent it exceeds ₹ 7.50 Lakhs in a tax year.

The above limit shall also include, any annual accretion, like interest or dividend, on the above amount.

2. Deduction u/s 80EEA extended to another year

It is proposed to amend section 80EEA so as to provide that the deduction in respect of interest paid on loan sanctioned by a financial institution for acquisition of a residential house property, shall be available if the loan has been sanctioned during the period 1 April 2019 to 31 March 2021, subject to the other conditions specified in the said section.

3. Simplified and New Income Tax Regime as an option to the old regime

There is no change proposed for tax rates applicable to a salaried individual.

However, a new simplified optional personal tax regime would be introduced, under which reduced income tax rates would apply to individuals who opt to forego certain deductions and exemptions.

The simplified optional personal tax regime is proposed to be inserted via section 115BAC for Individuals to pay tax as per the below rates, subject to certain conditions:

Conditions to opt for above rates are that the following exemptions and deductions shall not be available:

• Leave travel concession as contained in clause (5) of section 10;
• House rent allowance as contained in clause (13A) of section 10;
• Exemptions under clause (14) of Section 10 provided for special allowances granted to meet business related expenses and other prescribed allowances (other than those, as may be prescribed for this purpose, as provided below);
• Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
• Interest under section 24 in respect of self-occupied or vacant property (Loss under the head “Income from house property” for rented house shall not be allowed to be set off under any “Salary” head and would be allowed to be carried forward as per extant law);
• Any deduction under chapter VI-A (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, etc.). However, deduction under section 80CCD(2) (employer contribution on account of employee in notified pension scheme) can be claimed.
• without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.

It is also proposed to carry out amendment of the Income-tax Rules, 1962 (the Rules) and subsequently, to allow only following allowances notified under section 10(14) of the Act to the Individual exercising option under the proposed section:

• Transport Allowance granted to an employee with disability to meet expenditure for the purpose of commuting between place of residence and place of duty;
• Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
• Any Allowance granted to meet the cost of travel on tour or on transfer;
• Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

It is also proposed to amend Rule 3 of the Income Tax Rules subsequently, to remove exemption in respect of free food and beverage through vouchers provided to the employee, being the person exercising option under the proposed section, by the employer.

This option can be exercised every year in the prescribed manner (to be prescribed by Rules) by a salaried individual, with no business income, along with the return of income for a previous year relevant to the assessment year and shall be valid for that previous year and all subsequent years.

Individuals with business income can exercise this option before the due date of filing the return. Once this option is exercised, they will have to continue with the new regime for that year and all subsequent years.

The Tax rates for TDS from Salaries are specified in Part III of the First Schedule to the Bill and the same Part also covers the newly proposed Section 115BAC. This implies that such option of an individual will also be considered for the purpose of tax deduction from the salaries. The amount of income-tax computed in accordance with the above provisions, including the income tax computed under section 115BAC, shall be increased by a surcharge.

Income Tax Department has introduced a Tax Calculator for Resident Individuals for the financial year 2020- 21 to enable a taxpayer identify which regime is more beneficial to him/her and accordingly, decide which one to opt for.

However, the above proposals are yet to obtain Presidential assent.

B. Statutory Compliance Release Date: February 01, 2020

C. Effective Date: April 01, 2020