TDS on Salary in India
TDS on Salary in India
What is TDS on Salary?
TDS, or Tax Deducted at Source, applies to your salary income as per Section 192 of the Income Tax Act. It means your employer deducts a portion of your income tax before paying your salary. This deducted amount is then deposited with the government on your behalf.
Who Needs to Deduct TDS?
If you earn a salary above the minimum limit, your employer must deduct TDS from your salary as a salaried employee. This applies to all employers, including:
- Individuals
- Hindu Undivided Families (HUFs)
- Partnership firms
- Public and private companies
- Trusts
- Co-operative societies
When is TDS Deducted?
TDS is taken out of your salary every month when you get paid. It's based on your current salary, not what you've earned in the past. Whether you get paid early or late, TDS will still be deducted.
How Much TDS is Deducted?
The amount of TDS deducted depends on your income tax slab.
The amount of TDS deducted depends on your income tax slab. Here's a breakdown:
|
Income Threshold |
Tax Slab |
TDS Rate |
|
Upto Rs. 2.5 lakhs |
Nil |
0% |
|
Rs. 2,50,000 - Rs. 5,00,000 |
5% |
|
|
Rs. 5,00,000 - Rs. 7,50,000 |
10% |
|
|
Rs. 7,50,000 - Rs. 10,00,000 |
15% |
|
|
Rs. 10,00,001 - Rs. 12,50,000 |
20% |
|
|
Rs. 12,50,001 - Rs. 15,00,000 |
25% |
|
|
More than Rs. 15,00,000 |
30% |
What is TDS Calculated On?
TDS is calculated on your Cost to Company (CTC), which includes your base salary and various allowances like:
- House Rent Allowance (HRA)
- Travel Allowance (TA)
- Medical Allowance (MA)
- Dearness Allowance (DA)
- Special Allowance
How to Minimize TDS
While your employer deducts TDS, you can potentially claim exemptions to reduce your taxable income and minimize TDS. Here are some common exemptions:
- House Rent Allowance (HRA): If you live in rented accommodation, you can claim an exemption for a portion of your HRA.
- Travel Allowance (TA): You can claim an exemption for travel expenses incurred for commuting to work.
- Medical Allowance (MA): You can claim an exemption by submitting medical bills.
- Investments under Section 80C: You can claim deductions for investments made in various schemes like PPF, ELSS, ULIPs, etc., up to a limit of Rs. 1.5 lakh.
- Medical Insurance Premiums (Section 80D): Premiums paid for health insurance for yourself and your dependents are also deductible.
How to Calculate TDS on Salary
Calculating TDS can be complex, but online TDS calculators can simplify the process. However, you can generally follow these steps:
1. Calculate Total Earnings: This includes your base salary, commissions, bonuses, and perks for the year.
2. Collect Investment Proofs: Gather proof of investments you plan to claim exemptions for.
3. Calculate Exemptions: Add up all the exemptions you're eligible for.
4. Taxable Income: Subtract the total exemptions from your gross salary to determine your taxable income.
5. TDS Deduction: Based on the applicable tax slab on your taxable income, your employer will deduct TDS.
Where to Find TDS Information
For a detailed breakdown of your TDS deductions, refer to Form 16 provided by your employer. This form contains details about the deducted and deposited TDS amount.