Income Tax under the Income Tax Act is usually a deduction from salary done by the employer before payment to employees.
It is a concept known as Tax Deduction from Source or TDS.
Employers in India pay different kinds of income tax.
- Tax on their Income
- Tax-related to employees income
Employers being companies often pay a corporate tax, which is a tax based on their Income.
This tax depends on several factors:
- Nationality- Whether foreign or domestic
- Motive- Whether profit-making or charitable
- Period of operation- Whether a New manufacturing company or established company
- Income- Domestic Tax rate is determined by Income. Ex. Below or above 250 crore
Under the TDS scheme, the Income-tax deducted is a direct tax.
With respect to corporate tax, the Income Tax Act is the main legislation using which deductions made between different heads of Income.
Under the Act, there are several positions designated to be tax payees, among which companies and other bodies are also employers.
Thus an employer is a broader term under which many organizations can be categorized.
Rights of Employers in Providing Tax Exemption
- As per the Income Tax Act, 1961, Employers are required to deduct tax at source.
- The employer must then remit the tax to the Authority.
- Employer is also required to submit returns at regular intervals to the government.
- Taxes should also be as per prescribed rules and by a Tax rate as specified by the Authority.
- Employers have a right to demand proof from employees when they claim for exemptions.
Employers pay tax not only for their own earning but also for that of their salaried employees when it exceeds the limit into the bracket of taxable income.
In India, the Income Tax Act and the Central Board of Direct Taxes strengthened the TDS system, which provide rules at regular intervals.
Tax brackets are also subject to annual change. Thus in India, the laws relating to Income-tax are split into Legislation, Rules, and Regulation.
There is a permanent Income Tax Tribunal which deliberates on disputes between employer-employee as well as employer- tax authority.
However, the streamlined approach of the Indian Tax system is dedicated to the ease of business.
It helps employers set up business at a minimum cost.
The officials within the employer company can act as Tax officers during the internal audit to minimize cost.