Salary TDS can include section 80G deductions, and adjusted monthly deductions need not attract interest automatically.

Employer TDS from salary may factor in employee donations eligible under section 80G where the prescribed return form expressly provides for such deductions, and the monthly tax deducted need not remain uniform when adjustments are made under section 192(3) to cure earlier excess or deficiency. The article states that such adjustment-based variation does not, by itself, attract interest under section 201(1A). The stated ratio is that statutory forms and salary-TDS provisions permit these deductions and recalculations during the financial year, so short deduction interest is not automatically leviable on that basis.

---

---

Issues: (i) Whether, while computing tax deductible at source from salaries, the employer could take into account deductions in respect of donations under section 80G. (ii) Whether interest was leviable under section 201(1A) where the tax deducted each month varied because of adjustment under section 192(3).

Issue (i): Whether, while computing tax deductible at source from salaries, the employer could take into account deductions in respect of donations under section 80G.

Analysis: Section 206 required the employer to furnish the annual return in the prescribed form, and Form No. 24 specifically contained a column for amounts deductible under section 80G in respect of donations to approved funds and charitable institutions. On that basis, the employer was authorised to consider such deductions while determining the salary income on which tax was to be deducted at source.

Conclusion: The deduction under section 80G was properly taken into account by the employer, and the computation of tax deducted at source was upheld in favour of the assessee.

Issue (ii): Whether interest was leviable under section 201(1A) where the tax deducted each month varied because of adjustment under section 192(3).

Analysis: Section 192 contemplated computation of tax on the estimated annual salary income by dividing the annual tax by the relevant number of months, but section 192(3) expressly permitted the employer to increase or reduce the amount to be deducted to adjust excess or deficiency arising from earlier deductions during the financial year. Therefore, monthly deductions were not required to remain uniform in all cases, and variance arising from such adjustment did not justify levy of interest.

Conclusion: No interest was leviable under section 201(1A), and this finding was in favour of the assessee.

Final Conclusion: The Revenue's challenge failed on both the computation of salary tax deduction and the levy of interest, and the relief granted by the appellate authority was sustained.

Ratio Decidendi: Where the prescribed TDS return form expressly contemplates specific deductions and the statute permits adjustment of deductions during the financial year, the employer may take such deductions into account and variation in monthly deduction does not, by itself, attract interest for short deduction.

---