TDS on Salary Calculation Basis

Hello Sir

 

Could some one Please advise Is TDS calculation on Salaries based on Fixed Salary or based on Payable Salary (Excluding LOP days)

 

Thanks 

Rajesh CH

Replies (1)

TDS calculation on salaries is based on the taxable salary income, which is calculated after considering various exemptions and deductions.

The taxable salary income includes basic pay, dearness allowance, perquisites, and other allowances, but excludes exemptions like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and standard deduction of ₹50,000.¹

When it comes to Leave Without Pay (LOP) days, the employer doesn't consider the salary for those days while calculating TDS.

This is because LOP days are not considered part of the employee's taxable salary income.

 To give you a clearer picture, here's a step-by-step breakdown of how TDS on salary is calculated: - *Step 1*: Estimate the employee's salary for the financial year. -

*Step 2: Calculate exemptions under Section 10 of the Income Tax Act. -

Step 3*: Reduce exemptions from the gross monthly income to arrive at the taxable salary income. -

 *Step 4*: Add other incomes, like rental income or bank deposits, if applicable. So, to summarize, TDS calculation on salaries is based on the payable salary, excluding LOP days, after considering various exemptions and deductions.

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