Employers will now have to seek employees’ preferred choice of tax regime before deducting tax at source from salary, according to a Central Board of Direct Taxes circular issued late Wednesday.
Finance minister Nirmala Sitharaman had in the budget, presented in February, announced that the new tax regime would be the default regime.
As per the latest circular, in case an employee does not opt for any regime tax deduction would be as per the new tax regime.
“A deductor, being an employer, shall seek information from each of its employees having income under section 192 of the Act regarding their intended tax regime and each such employee shall intimate the same to the deductor, being his employer, regarding his intended tax regime for each year,” the circular said.
It added that the deductor shall compute his total income and deduct tax at source thereon according to the option exercised.