Are you Paying the Employees Subject to Payroll Taxation

Right Employee/Employer Taxes

The Income Tax Act has made the income of employees chargeable to tax. The employer is responsible for paying Tax Deducted at Source (TDS) on the salary paid to employees whose annual salaries exceed the maximum amount exempted from tax.

The Indian fiscal year runs from 1 April to 31 March. An employee/employer is liable to pay taxes in India based on his/her tax during a fiscal year. An employee/employer who is liable to pay taxes in India must apply for a tax registration number i.e. Permanent Account Number (PAN) with the Indian Income Tax Authorities in Form 49AA / Form 49A as applicable together with the prescribed documents.

Tax payment

Taxes on income earned will be payable through the following mechanisms.

  • Tax Deducted at Source (TDS) – Estimation of total income must be mentioned. Monthly deductions and remittance of taxes and other withholding taxes.
  • Advance tax – It will be triggered only if the tax exceeds 10,000. Determination of tax on an estimated personal income. Payment of tax in installments is due by the 15th of September/ December and March of every fiscal year.
  • Self-Assessment tax – Determination of tax on actual income. Payment of tax on or before filing a return of income.


Where the employer has failed to deduct tax, he/she is liable to pay interest. Where the employer has deducted the tax at source but failed to deposit wholly or partly, he/she is an assessee in default and liable to pay interest.

The court stated that the employer has the responsibility to deduct the applicable tax at source on their employee’s income at the applicable rates. Additionally, if the tax is deducted at source, the taxpayer will not be required to pay the deducted amount themselves.

But if the employee’s total income exceeds the maximum amount not chargeable to tax and the employer is deducting no TDS, then the employee is under an obligation to pay tax through the advance tax rate.

Paying the right taxes is a moral and legal obligation of every proud citizen of the country. The Indian Income Tax department is very flexible and designed to make sure there are no unnecessary taxes that may become a financial burden on the taxpayer.

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