India Releases Income Tax Deduction Rates for 2009-2010

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Jan. 21 – India’s Income Tax Department recently released a circular detailing the tax deduction rates on salaries for the financial year 2009-2010.

As per the Finance Act, 2009, income tax is required to be deducted under Section 192 of the Income Tax Act of 1961 from income chargeable for the financial year 2009-2010 (i.e. assessment year 2010-2011).

Released on January 11, Circular No.1/2010 contains the income tax rates for 2009-2010. The circular also explains certain related provisions to the Income-tax Act including how tax is calculated, who is responsible for deducting tax, what income is chargeable and how it will be calculated. We summarize some of these provisions below; click here to read the full version of the circular.

Tax rates


Method of tax calculation
Every person who is responsible for paying any income chargeable under the head “Salaries” shall deduct income-tax on the estimated income of the assessee under the head “Salaries” for the financial year 2009-2010. The income tax is required to be calculated on the basis of the rates given above and shall be deducted on average at the time of each payment. No tax will, however, be required to be deducted at source in any case unless the estimated salary income including the value of perquisites, for the financial year exceeds Rs.1,60,000, (or Rs.1,90,000, or Rs.2,40,000 as the case may be, depending upon the age and gender of the employee).

Persons responsible for deducting taxes
The “persons responsible for paying” for the purpose of Section 192 means the employer himself or if the employer is a company, the company itself including the principal officer thereof.

Chargeable income

  • Any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not
  • Any salary paid or allowed to them in the previous year by or on behalf of an employer or a former employer though not due or before it became due to them
  • Any arrears of salary paid or allowed to them in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year

For more information on income tax in India, please contact Dezan Shira & Associates at india@dezshira.com.