After introduction of concessional tax regime in Finance Act, 2020, there were several concerns arise and representations received from various stakeholders that, the option for concessional regime to be exercised at the time of filing of return, accordingly, the employer would not know if the employee would opt for taxation under Section 115BAC of the Act or not and thus how to deduct TDS on the salaries paid? Whether to consider Section 115BAC while deducting TDS?
After above consideration and representation received from various stakeholders, CBDT comes up with a clarification vide circular no. C1 of 2020 dated 13.04.2020, addressing the issues for TDS deduction by employers. A synopsis of the clarification is given below:
| S. No. | Class of Persons | Clarification |
| 1 | Individuals NOT having income from “Business and Profession” (Option to be exercised every year afresh) | · Employer shall deduct TDS on basis of declaration obtained from employee for his intention to opt for new regime at start of each year. · Declaration once given to employer cannot be changed during the year. · Declaration given to the employer can deviate from option exercised at the time of actual filing of Income Tax Return by the employee. · If no declaration is received, employer has to deduct TDS at normal rates under old tax regime. · Onus of employer is relieved when TDS is deducted on the basis of declaration received. |
| 2 | Individuals having income from “Business and Profession” along with Income from Salaries (Option once exercised cannot be withdrawn in subsequent years) | · All the above-mentioned clarifications (see S.No.1) shall apply in First year of exercising option. · For subsequent years, declaration to be given to employer shall not deviate from the option once exercised in previous year. |
Source: CBDT Circular no. C1/2020 dated 13.04.2020
