TDS on Salary: Deductions, TDS Calculation with Example

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  • Last Updated on 28 February, 2022

1. Who has to deduct tax from Salary?

TDS has to be deducted by any person who is responsible for paying any income chargeable under head “Salaries “at the time of payment. TDS has to be deducted on the estimated income of employee at the average rate of Income-tax computed on the basis of rates in force for that financial year. There is no tax on salary if the annual salary of employee is below maximum amount not chargeable to tax.

2. How tax is to be calculated if the salary is received in foreign currency?

The tax to be deducted from the salary payable in foreign currency shall be calculated in INR. The salary paid in foreign currency shall be converted into Rupees (INR) as per the “Telegraphic Transfer Buying Rate” prevailing on the date on which tax is required to be deducted.

3. Is it mandatory for an employee to furnish his PAN to an employer? 

If employee does not furnish his PAN, the employer shall deduct tax at higher of the following rates:
a) at the rate specified in the Act 
b) at the rate or rates in force 
c) at the rate of 20%


4. What exemptions or deductions are allowed for TDS calculations? 

The employer shall take into consideration the following exemptions and deductions for the purpose of TDS calculation: a) Exemptions covered under Section 10 (HRA, Conveyance Allowance, other allowances or perquisites exempt from tax, etc.) b) Deductions allowed under Chapter VI-A (Section 80C to 80U) Employer shall obtain proof and evidences from employee before allowing exemptions and deductions.

5. Should an employer consider other income for the calculation of TDS? 

An employee may provide details of his other income and loss under the head ‘Income from House Property’ to the employer for the purpose of calculating tax to be deducted at source. It would be employer’s responsibility to consider the other income and check all documents for allowing deduction for losses.
Tax shall not be reduced in any case except due to the losses from house property. The tax to be deducted from employee’s salary shall not be less than the amount of tax calculated as if other income and tax deducted thereon have not been taken into account. 


6. How tax is to be calculated if a person is employed with multiple employers? 

In case an employee is employed by more than one employer during the financial year, he may furnish the details of salary due or received from one employer to another employer in Form 12B. In that case, the tax will be deducted on the aggregate salary by one of the employers to whom the information is furnished.

7. How the arrear of previous years received in the current year is taxed? 

Employee who has received arrears from earlier years in any financial year shall furnish the particulars of such receipt in Form 10E to his employer for computation of relief under section 89.

8. When is TDS to be deducted and deposited? 

Employer shall deduct TDS on monthly basis and deposit the same to the Government on or before 7th day of following month from the end of month in which tax is deducted. However, for the month of March, tax shall be deposited by 30th April following the end of the financial year. The TDS shall be deposited through Challan No. 281.

Month of deduction

Due Date for Payment of TDS

 

For Government Deductor

For Non-Government Deductor

April to Feb

7th of following month

7th of following month

March

7th of following month

30th of following month


9. When is TDS return to be filled? 

Employer will furnish quarterly TDS return within one month from the end of quarter in Form 24Q and furnish a certificate in Form 16 detailing the amount of TDS and other particulars.

Period of deduction

Due Dates for filing of TDS return

 

For Government Deductor

For Non-Government Deductor

April to June

31st July

31st July

July to Sept

31st October

31st October

Oct to Dec

31st December

31st December

Jan to March

31st May

31st May

10. How to calculate taxable income for deducting TDS? 

Gross salary                  xxx
 
Less: Exemption under Section 10 (xxx)
 
(i..e, HRA, Conveyance Allowance, Medical Allowance, etc.)
 
Income chargeable under head Salary xxx
 
Add: Income from House Property
 
Rental Income                  xxx
Less: deduction under Sec. 24(b)
– 30% of rental Income (xxx)
 
– Interest paid on housing loan (xxx) xxx
 
Add: Income from Other Sources xxx
 
Gross Total Income         xxx
 
Less: Chapter VI-A deduction       (xxx)
 
Taxable Income                xxx


11. How to file TDS return in a easy way: 

Step-1 – Create data structure and calculate tax liability
Step-2 – Create deduction entry, map with challan and generate return

Check-out TDS Software –  Compliance etds

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

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