The Central Board of Direct Taxes (CBDT) has issued Circular No. 03/2025, dated February 20, 2025 notifying the income-tax deduction from salaries during the financial year 2024-25 under section 192 of the income-tax act, 1961.
This circular impacts TDS calculations, Form 16, Form 24Q, and tax compliance for salaried employees and employers.
As Per Circular No. 24/2022 dated 07.12.2022, the rates of deduction of income-tax from the payment of income under the head “Salaries” under section 192 of the Income-tax Act, 1961, during the financial year 2022-23, were intimated. Circular also explained certain related provisions of the Act and Income-tax Rules, 1962.
The Circular No. 03/2025 Dated 20/02/2025 contains the amendments made vide the Finance (No.2) Act of 2024, Finance (No. 1) Act of 2024 and Finance Act of 2023 in respect of rates of deduction of income-tax from the payment of income under the head “Salaries” under section 192 of the Income Tax Act.
The Board has notified that where no amendments have been made by the the Finance (No.2) Act of 2024, Finance (No. 1) Act of 2024 and Finance Act of 2023, in such cases, the Circular No. 24 of 2022 shall continue to be applicable for F.Y. 2024-25.
Key Highlights of CBDT Circular No. 3/2025
Amendment in Form 16 and 24Q
Form 24Q: New Column 388A introduced for reporting other TDS/TCS deductions.
Form 16: Updated to include additional tax deductions and perquisites.
Taxation of Salary and Perquisites
Perquisite Valuation: Rent-free or concessional accommodation provided by employers is taxable under Section 17(2).
Salary Definition: Contributions by the Central Government to the Agniveer Corpus Fund now form part of salary under Section 17(1).
Revised Income Tax Slabs (New Tax Regime – NTR) for FY 2024-25
₹0 – ₹3,00,000: Nil
₹3,00,001 – ₹7,00,000: 5%
₹7,00,001 – ₹10,00,000: 10%
₹10,00,001 – ₹12,00,000: 15%
₹12,00,001 – ₹15,00,000: 20%
Above ₹15,00,000: 30%
Section 87A Rebate: Full tax rebate for income up to ₹7 lakh under the new tax regime.
Higher Leave Encashment Exemption
Non-government employees can now claim leave encashment exemption up to ₹25 lakh at retirement, as per CBDT Notification No. 31/2023.
Updated Surcharge Rates (Old Tax Regime)
10% for income between ₹50 lakh – ₹1 crore
15% for income between ₹1 crore – ₹2 crore
25% for income between ₹2 crore – ₹5 crore (excluding specific capital gains)
37% for income above ₹5 crore (excluding specific capital gains)
15% for income above ₹2 crore, if it includes capital gains under Sections 111A, 112, or 112A
Stringent Penalties for TDS Non-Compliance
Section 271C: Failure to deduct TDS will attract monetary penalties.
Section 276B: Non-payment of deducted tax may lead to 3 months to 7 years of imprisonment with fines.
Impact on Salaried Employees and Employers
Employers must implement revised TDS rates and updated Form 16 and Form 24Q.
Employees should choose between the old and new tax regimes for maximum tax savings.
TDS compliance is crucial, as failure to deduct and deposit TDS on time can result in hefty penalties and prosecution.
Taxpayers and employers are advised to refer to the full circular on the Income Tax Department’s website for detailed guidelines.
Stay tuned for more updates on income tax rules, deductions, and compliance for FY 2024-25.
Notification Details
Circular No. 3/2025
Date: 20/02/2025
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