If you’re a salaried employee and find yourself facing cash shortages due to Tax Collected at Source (TCS) deductions—especially when traveling abroad or making large purchases—there’s good news. The Income Tax Department has introduced a provision allowing your employer to help you adjust these deductions, giving you more immediate relief instead of waiting for tax refunds through income tax filings.
On October 17, the Income Tax Department issued a notification that allows employees to inform their employers about any TCS or TDS (Tax Deducted at Source) deductions they face during the financial year. This can be done by submitting Form 12BAA, a simple declaration that lets your employer adjust these tax payments from your monthly salary deductions.
TCS and TDS Deductions Explained
TCS and TDS are two types of taxes deducted at different stages of financial transactions. For instance, when you make a payment above ₹7 lakh using a debit or credit card while traveling abroad, 20% TCS is applicable. In other cases, TDS is deducted on various forms of income or payments, such as rent, contract work, or professional fees.
Until now, taxpayers had to wait until filing their annual income tax returns (ITR) to claim refunds for any excess TDS or TCS deducted throughout the year. This caused many salaried employees to have their funds tied up, often leading to a temporary shortage of liquid funds. But now, thanks to a change announced in the Union Budget, employees can get this amount adjusted sooner.
Employers Can Now Adjust TCS Payments
Under the new system, employers can adjust the TCS or TDS already deducted from an employee’s payments. Here’s how it works:
- Employees will need to submit Form 12BAA to their employer, detailing the TCS or TDS already deducted.
- The employer, who already deducts tax from the employee’s salary, will then factor in the TCS or TDS and adjust the monthly tax deduction accordingly.
- This means less tax (or none at all, depending on the amount) will be deducted from your salary in upcoming months, easing the financial burden.
Chartered accountant and tax expert Karan Batra points out that this adjustment will simplify things for salaried employees. “Before, many clients only realized TCS had been deducted—such as when buying a car—at the time of filing their returns, which delayed the process and increased refund claims. Now, with the employer making adjustments, employees won’t need to wait for ITR filing to get their money back,” he said.
This process offers real-time relief for employees by ensuring that their salaries reflect these adjustments throughout the financial year, preventing unnecessary tax deductions.
Parents Can Claim TCS for Minor Children
There’s also a new benefit for parents. If your minor child’s income has been clubbed with yours for tax purposes, you can now claim credit for any TCS deducted on payments related to your child. This is possible due to an amendment in sub-section (4) of section 206C of the Income Tax Act. The change ensures that parents can transfer TCS credit from the minor child to themselves, making it easier to manage overall tax liabilities for the family.
With these changes, salaried employees now have a more convenient way to manage their tax deductions without waiting for refunds after filing income tax returns. By submitting Form 12BAA to their employer, they can ensure their taxes are adjusted promptly and accurately, reducing the strain on their monthly finances.
