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how to reduce TDS on salary

Deepa (Accounts) (38 Points)

23 April 2008

hi i m an accountant. can any1 tell me how can help our employees to reduce their TDS on salaries.like which allwances i can take in to account. and yes on which amt TDS is calculated? on basic salary or gross or net ? please reply me

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9 Replies

CA Akshat (article) (422 Points)
Replied 23 April 2008

hi deepa,

actually tds is to be calculated on total tax liability devided by no of months of the job in current year of the assessee as per section 192 of the income tax act.So there is no question of gross salary or net salary. U have to find tax liability of employee

Deepa (Accounts) (38 Points)
Replied 23 April 2008

arey but on which amount we have to calculate? 10 or 20 % of what ? for that we need total salary. so which salary shud we take in to account . incuding allownaces or excluding

C.rajesh (Articles) (1392 Points)
Replied 23 April 2008

Before calculating how much have to be deduted each month we have to consider the saving position and any other deductions avilable to the employee. if no information is available we would deduct straight away by dividing the net taxable salary by 12 months .

Deepa (Accounts) (38 Points)
Replied 24 April 2008

rajesh i know that . but what i m asking is which types of allowances we can show like HRA, DA, convyeance, etc....... and what are the limits of exemption.see right now i m deducting only PT & TDS. if i can reduce their basic salary, it will help to reduce their tds duduction. and we have less than 10 employees.so no PF or PPF

Deepa (Accounts) (38 Points)
Replied 05 May 2008

how to reduce TDS on salary

Gupta Mohit (CA) (824 Points)
Replied 07 May 2008

to reduce tds rate, filling up the form 15G and

signed by u and ur employer and deposit to ur employer

or file form13 and send to income tax department

after confirmation frm dept hand over to employer and get the benifit as per suggested by department

Jaideep (account) (137 Points)
Replied 08 May 2008

Hello, you can use the Tax Calculator from files section, it is in xls so you can easily use them and can see how to reduce the TDS on salary.

Jaideep

Tushar Papalkar (Manager-Accounts) (87 Points)
Replied 12 July 2008

Rajesh is right. You don't have to pay tax upto income of Rs,4,00,000/- by following tips

As a salaried taxpayer, you can structure your annual pay package of up to Rs 4,00,000 on a zero tax basis. You must endeavour to negotiate your pay package in a manner that the same can include maximum possible tax-free allowances and perquisites.

This would ensure that you are able to take maximum take-home pay per month with the minimum deduction of tax. Here is an illustrated pay package under which the allocation of your salary, allowances and perquisites could be structured as under:

Basic and DA of Rs 2,50,000

On the presumption that you are paying annual house rent of Rs 60,000, you can receive and claim House Rent Allowance of Rs 35,000 (being the amount in excess of 10% of your Basic and DA) as exempt under Section 10 (13A).

Transport Allowance of Rs 800 per month for meeting to and fro expenses from your home to office.
Annually Rs 9,600 can also be claimed by you as exempt under Section 10 (14). Conveyance Allowance of Rs 2,000 per month for discharging your official duties. Annually Rs 24,000 can be claimed by you as exempt under Section 10 (14).
Uniform Allowance of an annual amount of Rs 10,000 towards purchase and Rs 500 per month (annual Rs 6,000) to meet the expenses for washing and maintenance of uniform. Thus, annually Rs 16,000 can be claimed by you as exempt under Section 10 (14).

On the basis of your two children being educated at school or college, Children’s Education Allowance for each child at Rs 100 per month can be claimed exempt by you under Section 10 (14) at Rs 2,400 annually.

Reimbursement of medical expenses of up to Rs 15,000 annually can be claimed exempt by you under Section 17 (2).
Food coupons or paid vouchers provided by your employer being treated as exempt perks (not liable to FBT also), such coupons for a value of Rs 2,500 per month (annually Rs 30,000) can be planned under the package and claimed exempt.

Based on the assumption that Leave Travel Concession of Rs 18,000 is paid annually to you, the same can be claimed exempt under Section 10 (5), twice in a block of four years.

Actual exemption can be stretched even further!

In the above case, the various allowances and perquisites to the extent of Rs 1,50,000 as shown herein above would be exempt, leaving your taxable salary at Rs 2,50,000 out of the total pay package of Rs 4,00,000. You can plan appropriate investments or allocations by way of contribution to PF or PPF, payment of Life Insurance Premium, etc, up to Rs 1,00,000, which are eligible for deduction under Section 80 C and thus ensure that your Total Income stands reduced to Rs 1,50,000.

This being within the basic exemption limit, the income-tax payable thereon would work out to ‘nil.’ You can thus effectively enjoy a ‘Zero Tax Status’ in respect of your total pay package of Rs 4,00,000.Depending on the facts of your case, the nature and extent of exemption of some allowances such as HRA, LTC, etc, could vary and would call for appropriate review.

In case you are not paying any house rent, you could have possibly invested in a house of your own and be entitled to claim interest on housing loan up to Rs 1,50,000 as a special deduction under Section 24, which would enable you to stretch your actual tax exemption much beyond Rs 4 lakh

1 Like

Azmathullah Khan (Accounts Manager) (1386 Points)
Replied 14 July 2008

Originally posted by :Tushar Papalkar
"	Rajesh is right. You don't have to pay tax upto income of Rs,4,00,000/- by following tips As a salaried taxpayer, you can structure your annual pay package of up to Rs 4,00,000 on a zero tax basis. You must endeavour to negotiate your pay package in a manner that the same can include maximum possible tax-free allowances and perquisites. This would ensure that you are able to take maximum take-home pay per month with the minimum deduction of tax. Here is an illustrated pay package under which the allocation of your salary, allowances and perquisites could be structured as under: Basic and DA of Rs 2,50,000 On the presumption that you are paying annual house rent of Rs 60,000, you can receive and claim House Rent Allowance of Rs 35,000 (being the amount in excess of 10% of your Basic and DA) as exempt under Section 10 (13A). Transport Allowance of Rs 800 per month for meeting to and fro expenses from your home to office. Annually Rs 9,600 can also be claimed by you as exempt under Section 10 (14). Conveyance Allowance of Rs 2,000 per month for discharging your official duties. Annually Rs 24,000 can be claimed by you as exempt under Section 10 (14). Uniform Allowance of an annual amount of Rs 10,000 towards purchase and Rs 500 per month (annual Rs 6,000) to meet the expenses for washing and maintenance of uniform. Thus, annually Rs 16,000 can be claimed by you as exempt under Section 10 (14). On the basis of your two children being educated at school or college, Children’s Education Allowance for each child at Rs 100 per month can be claimed exempt by you under Section 10 (14) at Rs 2,400 annually. Reimbursement of medical expenses of up to Rs 15,000 annually can be claimed exempt by you under Section 17 (2). Food coupons or paid vouchers provided by your employer being treated as exempt perks (not liable to FBT also), such coupons for a value of Rs 2,500 per month (annually Rs 30,000) can be planned under the package and claimed exempt. Based on the assumption that Leave Travel Concession of Rs 18,000 is paid annually to you, the same can be claimed exempt under Section 10 (5), twice in a block of four years. Actual exemption can be stretched even further! In the above case, the various allowances and perquisites to the extent of Rs 1,50,000 as shown herein above would be exempt, leaving your taxable salary at Rs 2,50,000 out of the total pay package of Rs 4,00,000. You can plan appropriate investments or allocations by way of contribution to PF or PPF, payment of Life Insurance Premium, etc, up to Rs 1,00,000, which are eligible for deduction under Section 80 C and thus ensure that your Total Income stands reduced to Rs 1,50,000. This being within the basic exemption limit, the income-tax payable thereon would work out to ‘nil.’ You can thus effectively enjoy a ‘Zero Tax Status’ in respect of your total pay package of Rs 4,00,000.Depending on the facts of your case, the nature and extent of exemption of some allowances such as HRA, LTC, etc, could vary and would call for appropriate review. In case you are not paying any house rent, you could have possibly invested in a house of your own and be entitled to claim interest on housing loan up to Rs 1,50,000 as a special deduction under Section 24, which would enable you to stretch your actual tax exemption much beyond Rs 4 lakh	"