TDS from Salaries (section 192).
The TDS is based on the tax at the applicable rate on the estimated income of employee for the year. Employer must not deduct TDS on all the non-taxable allowances like conveyance allowance, rent allowance, medical allowance and the deductible investments under sections like 80C, 80CC, 80D, 80DD, 80DDB, 80E, 80GG and 80U.
No tax is required to be deducted from source unless the estimated salary exceeds the amount not chargeable to tax.
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After calculating the total income from salary for the employee, you may request the employee to furnish a declaration stating the investments made by him/her from section 80C to 80U to factor in your calculation, and accordingly deduct TDS from the salary each month.
Hi,
Very good question indeed.
For deducting TDS on salaries, apply the basic logic/concept that "Income Tax is always chargeable on your 'Net' Income".
Net Income is calculated as(in brief): Gross Salary Add Any other income reported by the concerned employee less All exemptions less All deductions u/s 80C - 80U
Now apply the tax slab rates on above income.
Caluculate Education Cess (2% + 1%) of above.
Arrive at total tax adding the above two.
Now suppose you got total tax of Rs 12000 in above step, divide it by 12 months.
What you got in above step is the amount of TDS you have to deduct in each month.
Thanks Aryan and others for this detailed discussion and providing your useful inputs...
Is there any way to avoid or reduce the TDS on Salary ?
If investments u/s 80C - 80U brings down the taxable income below 200,000/-, then no TDS is to be deducted. If there is some tax liability left, and don't want to deduct TDS, one can opt to pay self-assessment tax before filing IT returns. Interest will be charged for late self-assessment tax payment if it is more than 5,000/-
Dear
At the time of TDS calculation , we should consider all saving and income for the Succeding year. If the income is not cross Tax slab rates. we should fillied the ITR before due date.
If we forget to add any income wcich are related to such F.Y and income is come under the taxability. that time we should deposit TDS Amount before filling IT Return along with Interest @ 1.5%
Shiv
Thanks again for your valuable inputs...
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