The Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT) has issued Circular No. 03/2025, detailing the Income Tax Deduction from Salaries during the Financial Year 2024-25 under Section 192 of the Income Tax Act, 1961. This circular provides guidelines for employers regarding tax deduction at source (TDS) on salaries and incorporates amendments from the latest Finance Act.

Key Highlights of the Circular

1. TDS Deduction Rates for Salaried Employees
   The circular specifies applicable income tax slabs for salaried employees and the corresponding TDS deduction rates under both the old and new tax regimes. Employees can opt for the preferred tax regime, and TDS will be calculated accordingly.
2. New Tax Regime as Default Option
   As per the amendments, the new tax regime will be treated as the default regime unless the employee specifically opts for the old regime by submitting a declaration to the employer.
3. Deductions and Exemptions
   • Under the old tax regime, deductions under Section 80C, 80D, and others continue to apply.
   • The new tax regime allows a standard deduction but eliminates most exemptions and deductions.
4. Employer’s Responsibility
   Employers are responsible for:
   • Collecting employee declarations regarding their choice of tax regime.
   • Accurately computing TDS on salaries in compliance with the prescribed tax rates.
   • Ensuring timely deposit of deducted tax and filing of TDS returns as per IT Act provisions.
5. Amendments in Income Tax Provisions
   The circular outlines key amendments made to tax provisions through the latest Finance Act, 2024, impacting salary taxation.
6. Computation of Taxable Income
   The circular provides guidelines for computing taxable income, considering salary components, exemptions, and applicable deductions.

Implications for Employees and Employers

• For Employees: They must submit declarations to their employer regarding their chosen tax regime to ensure proper TDS calculation.
• For Employers: They need to update payroll systems, comply with new tax rates, and educate employees about their tax regime choices.

Income Tax Deduction for Salaried People

CBDT’s Circular No. 03/2025 serves as a crucial guide for employers and employees in managing salary taxation for FY 2024-25. Compliance with these updated TDS provisions is essential to avoid penalties and ensure smooth tax deductions in line with the Income Tax Act, 1961.