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TDS ON SALARY UNDER INCOME TAX ACT, 1961

TDS ON SALARY UNDER INCOME TAX ACT, 1961

TDS (tax deduction at source) is a type of income tax, that the payer deducts from the payment. Although tax is often paid by the individual earning the money, the TDS idea ensures that tax is taken out of the payment amount in advance. TDS is a powerful technique that minimizes tax evasion since it enables the government to levy tax at the source itself. The payer is required by this idea to subtract TDS and send it to the federal government.

What is TDS on Salary?

TDS on a salary denotes the employer's deduction of tax at the time the salary is deposited into the employee's account. The employer deposits the sum taken from the employee's account with the government. An employer must register for a TAN before deducting tax at source from an employee's salary. The Tax Deduction and Collection Account Number, or TAN number, is essentially a 10-digit alphanumeric code used by the Income Tax Department to track TDS deduction and remittance.

Section 192 of the Income Tax Act, 1961 deals with tax deducted at source (TDS) on salary.TDS on your anticipated income for the relevant financial year at the standard income tax rates that apply to you. Form 16 is given to the employee by the employer and includes the TDS that was deducted under Section 192.

When TDS is deducted under Section 192?

TDS is deducted when the salary is credited, under Section 192 of the Income Tax Act. While paying salary in advance as well, the employer is required to deduct TDS. If your annual salary does not exceed the basic exemption limit, TDS will not be deducted.

The regulations of TDS on salary apply to everybody, even if they do not have a PAN. Let's investigate the TDS for the maximum salary that is free from taxation based on various age groups. You can use it to decide whether TDS needs to be deducted from your pay.

AGE GROUP

MINIMUM INCOME FOR TDS

Indian residents below the age of 60 years

Rs. 2.5 lakh

Indian residents between the ages of 60 to 80 years

Rs. 3 lakh

Indian residents aged 80 and above

Rs. 5 lakh

 

How to calculate TDS on salary

While payments made as allowances and benefits are subject to some exclusions, the basic wage is completely taxable under the applicable tax bracket. The steps listed below can be used to calculate TDS on your income.

  • Step 1: To get your yearly income, write down your monthly salary and multiply it by 12. Typically, this will be equal to your CTC. Let this be ‘A’.

  • Step 2: Calculate your exemptions using the list below. These will often include HRA, travel costs, and medical allowances. Let this be ‘B’.

  • Step 3: Calculate your total annual income from that source after including any other income you may have. The same applies to any losses you suffered. For instance, home loan EMIs are included. The losses, however, will be deducted rather than added. Let this be ‘C’.

  • Step 4: Consider your investments next. Calculate your investment. EPF/PPF and other investment vehicles are exempt from taxes up to 1.5 lacs a year. Calculate the amount of money invested, it is also exempted from tax. Let this be ‘D’.

  • Step 5: Now calculate (A+C) – (B+D), the result will be the amount of money to be taxed.

  • Step 6: Now refer to the tax slab under which you fall. And know the TDS.

Conclusion

The Income Tax Act's Section 80C allows for a tax deduction of up to 1.5 lakh on life insurance premiums. Additionally, if the sum assured is 10 times the premium amount, Section 10(10D) exempts the maturity amount from tax. This is the reason life insurance is such a well-liked method of reducing taxes. An employee also receives a TDS Certificate from the employer upon TDS deduction.

eStartIndia will help you to file your TDS returns from the comfort of your home.

Author:

Dhvani Kamra
Noida
L.L.B. from Amity Law School, Noida


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