TDS is a withholding tax for the receipt of any income, be it wages, commissions, or any contractual payments under the system. tax rate system. The most common TDS deduction is Tds On Salary. This deduction will always be made by the employer when paying the employee’s salary and payroll.

TDS / salary ratios range from 10 to 30%. The employer for the TDS deduction must have a valid TAN number issued by the Indian government. This is an alphanumeric number of 10 which is required under the TDS Deductions Summary under Section 192 of the Income Tax Act of India.

How to calculate the TDS on the salary

Check the Gross Monthly Income: This is the total of the basic income + allowances and indirect benefits

Exemption under section 10 of the Income Tax Act. These are mainly HRA (Rental Allowance), medical expenses and travel allowance. Deduct all these exemptions from the gross salary.

The ATD is calculated on the annual salary by multiplying by the corresponding number after deduction of deductions from gross salary. This figure is based on annual taxable income.

If you have another source of income, such as rental income, or any type of loss incurred due to the payment of interest on the mortgage. The same should be added or subtracted when calculating the TDS.

Then calculate the investments made during a year under Chapter VIA of the ITA (Income Tax Act). The same amount will be deducted from the gross salary online. Tax exemption under section 80C is allowed up to 1.5 lakh. The main avenues of investment that can be included in the calculation of Tds on salary are SSC, NSC, Sukanya Samridhi, etc.

Senior citizens’ tax exemptions are different from those under 60.

Factors to consider when deducting TDS from salary

The TDS deduction will occur after subtracting the exempt income from the employee’s total earnings. India’s ATI sets a limit for exemptions. When employers deduct TDS from employees, they must provide requested details such as proof of income and employee returns.

The list of allowances eligible for tax exemption is as follows:

  1. Rent allowance

To avoid TDS payroll, an employee can apply for shelter allowance and provide the required details. like a rent receipt.

  1. Standard deduction

To minimize the deduction of TDS from the salary, one can also apply for transport and medical benefits. The standard deduction offered by the government is Rs 50,000.

  1. Child education allowance

The government provides an education allowance of Rs 100 per month for up to two children.

  1. Travel Leave Allowance (LTA)

This is a type of allowance that employers offer to employees. It is awarded when an employee leaves the city for professional reasons. An employee can apply for an LTA under Section 10 (5) of the Income Tax Act 1961. It should be understood that travel allowance can only be claimed if the LTA component is part of vacation pay. An employee can apply for a tax exemption in the LTA up to a maximum of 4 years of travel.

Example

Ramesh earns a salary of Rs 70,000 per month. His annual income is Rs 840,000 per year. Depending on the salary, he can claim a tax exemption of up to Rs 100,000. After deduction, his taxable income is Rs 8,40,000. The annual tax will be Rs. 78,000+ 3% Cess Tax, or Rs 2,340.

The TDS / average salary ratio of Rs 8.40,000 is 9.56%

big tax calculation

Who is required to deduct TDS from wages?

Employees can deduct Tds from salary when making monthly payments to employees. This is part of the reason why employees take paid time off. If someone earns a salary of up to Rs 250,000 per year, no deduction will be made.

Under Article 192 of the LIR, the following persons are required to withhold TDS at source:

People

Companies (public or private)

HUF (indivisible Hindu family)

Partnership

Private enterprise

Trusts

Partnerships

All of the companies mentioned above must make a TDS deduction at a specific time and submit it to the public treasury according to government regulations. government of India. Under section 192 of the ITA, an employer must present proof of an employer-employee relationship. Therefore, not all employees who retain TDS such as HUFs, corporations or corporations, are required to retain TDS under section 192 of the ITA.

Tax tile for the TDS deduction

Details of the age of residence in India

before 60 years old Rs 2.5 Lakhs

Person aged 60 to under 80 Rs 3 Lakhs

Super Citizen over 80 Rs 5 Lakhs

Tax rate under the new tax system

Up to Rs 2.5. total income greater than Rs. 5 lakh + 4 ss

Rs 750 001 to Rs 10 Lakh

15% of total income above Rs.7. 5 lakh + 4’s

Rs 100,0001 to 12.50,000 Rs

20% of total income on Rs 10 lakh + 4’ss

Rs 12.50,001 to Rs 15

25% of total income above Rs 12.5.

Main items under which TDS deductions are made:

pay

  1. Article 80C

Here, one can request a tax exemption of up to Rs 150,000 per year. Here is a list of the plans that are exempt:

Invest in mutual funds like linked savings plans, ULIPs, etc. It is also known as the Fixed Tax Savings Deposit.

FPE

Children’s courses

National Savings Certificate

Repayment of the capital of the mortgage

Sukanya Samriddhi’s plan

Deferred annuity payments

Premium savings plan

Annual mortgage plan ‘life insurance

UTI pension plan

Mutual fund investment

Home loan program of the National Housing Bank

Investment in stocks and bonds

  1. Article 80CCG

An employee can apply for an annual exemption of up to Rs 25,000 under section 80CG of the ITA. The minimum investment period must not be less than three years.

  1. Article 80D

Under section 80D, individuals are permitted to exempt all annual payments in the form of health insurance premiums.

When is the deadline for making TDS payroll deductions?

All TDS deductions from wages must be made under Section 192 of the Income Tax Act and must be made no later than April 30.

Final result

The income earned by the employee belongs to “wage income”. But make sure the employer has a valid TAN and gives you Form 16, and all deductions are reflected on Form 26AS.

edited and proofread by Nikita Sharma


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