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CS Executive · Tax Laws and Practice · Income under the Head Salary

Under the Income-tax Act, 2025, at what rate must tax be deducted by the payer from salary under the general rule in section 392(1)?

Tax is deducted at the average rate, computed on the rates in force for the tax year in which payment is made, applied to the assessee's estimated income under the head Salaries for that year. It is not a flat rate or the maximum marginal rate.

  1. AAt the maximum marginal rate
  2. BAt a flat 10% on every payment
  3. CAt the average rate computed on the estimated income under the head Salaries for the tax year of paymentCorrect
  4. DAt the rate applicable to the previous year's salary

Explanation

Section 392(1) requires deduction at the average rate of income-tax based on the rates in force for the tax year of payment, applied to the estimated salary income for that year. The maximum marginal rate applies to oral trusts, not salary.

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