Salary is a fixed payment that is received by providing services. Salary comes under the purview of taxation, where the liability is calculated according to applicable slab rates, because of the income tax. It comes under the purview of section 192 TDS. As per the income tax provision, employers are entitled to deduct tax at source on the salary amount payable to an employee. Salary is an income received from the employer and it attracts a TDS based on the average prevailing rates of tax. If an employer pay a salaried income to their employees, then ITA is mandatory for employers to deduct TDS on salary. By the way this deduction can only be carried out if the salaried income is more than the minimum exemption limit. It is refundable in the salary section.
When is TDS on salary deducted?
Employers have to deposit TDS to the government. These are some of the employers that can deduct TDS under section 192 in India- Individuals, HUFs, Partnership firms, Public and private companies, trusts, and Cooperative societies. When the salary of one month is paid out then TDS is deducted. The deduction on salary is carried out at the time when the salary is paid and not at the time of its accrual. Employees who are receiving advance salary will still be liable for tax deduction, if any employer fails to deduct the salary, they will be subject to a penalty and additional interest. If the salary of any employee is less or equal to the minimum exemption threshold then the tax will not be deducted. Let’s see the TDS on the salary slabs. The below table shows the salary slab.
| S.no | Income Threshold | Tax slab |
|---|---|---|
| 1 | Up to Rs.2.5 lakhs | NIL |
| 2 | Rs. 2,50,000-Rs. 5,00,000 | 5% |
| 3 | Rs. 5,00,000-Rs. 7,50,000 | 10% |
| 4 | Rs. 7,50,000-Rs. 10,00,000 | 15% |
| 5 | Rs. 10,00,001-Rs. 12,50,000 | 20% |
| 6 | Rs.12,50,001- Rs. 15,00,000 | 25% |
| 7 | More than Rs. 15,00,000 | 30% |
Also Read:- What is Gratuity in Salary | How to Claim Medical Allowance | What is Gross Salary
What is TDS Computed on?
Salary comprises two main elements: salary and perks. Salary is computed as the cost to a company method. Perks are the benefits and facilities offered by an employer to the employee, perks include fuel subsidy, travel expenses, canteen, hotel expenses, and other services. So the cost to the company includes perks like basic salary, house rent allowance, travel allowance, medical allowance, dearness allowance, and special allowance, etc. Employees can claim exemptions of tax in the following allowance from the employer-
- Employees can claim an exemption for travel allowance to claim the amount spent on commuting TDS.
- Employees can also claim for house rent allowance exemption in case the employee resides in a rented place.
- Employees can claim an exemption for medical allowance by submitting the required bills.
TDS Deductions
Besides these exemptions, employees can also take benefits under the following exemptions.
- Under the section 80C
Employees can declare an amount above Rs.150000 for the exemptions. Some of these factors are considered for exemptions such as investments in mutual funds, life insurance premiums paid, 5-year FD schemes and equity shares.
- Under the section 80CCG
Employees can claim exemptions up to Rs.25000 in a year, if they have invested under specific tax saving schemes. These investments should be active for at least 3 years.
- Under section 80D
They can also claim exemptions against the premiums paid toward medical insurance.
Let’s see all the items that are factors for TDS exemptions in the following table-
| S.no | Factors for exemption |
|---|---|
| 1 | Public Provident Fund or PPF |
| 2 | Bank fixed deposits |
| 3 | Equity-linked savings scheme or ELSS |
| 4 | National savings certificate |
| 5 | Employees provident fund |
| 6 | Contribution to EPF |
| 7 | House rent allowance |
| 8 | Transport allowance |
| 9 | Insurance policies premiums |
| 10 | Repayment of the amount of home loan |
| 11 | Savings which comes under section 80C of ITA, 1961 |
Lets see the income tax slabs before calculating the income tax on salary, it is decided by the income tax department of India for the financial year 2023-24 for the general category :
Income Tax Slabs on Salary
| Existing tax regime | |
|---|---|
| Income slab | Income tax rate |
| Up to Rs. 2,50,000 | NIL |
| Rs.2,50,001 – Rs. 5,00,000 | 5% above Rs. 5,00,000 |
| Rs. 5,00,001 – Rs. 10,00,000 | Rs. 12,500+20% above Rs. 5,00,000 |
| Above Rs. 10,00,000 | Rs. 1,12,500 + 30% above Rs. 10,00,000 |
| New tax regime | |
|---|---|
| Income slab | Income tax rate |
| 0-Rs. 3,00,000 | NIL |
| Rs. 3,00,000-Rs. 6,00,000 | 5% |
| Rs. 6,00,000-Rs. 9,00,000 | 10% |
| Rs. 9,00,000- Rs. 12,00,000 | 15% |
| Rs. 12,00,000-Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% |
In addition to these taxes, the following are also collected from the employee-
- If the employee’s income is between Rs. 50,000 lakh and Rs. 1 crore then a surcharge consisting of 10% of the income tax will be collected.
- If an employee’s income is above Rs. 1 crores and less than 2 crores, a surcharge consisting of 15% of the income tax will be collected.
- A surcharge of 25% will be collected from the income tax if the income of the employee is between Rs. 2 crores to Rs. 5 crores.
- A surcharge of 37% under the old regime and 25% under the new regime of the income tax will be collected if employees income is above Rs. 5 crores.
- All the taxpayers have to pay 4% of the income tax as health and education cess.
Also Read:- How to Calculate Income Tax For Salaried Persons | What is PF in Salary | Tax Benefit To Employee On Medical Reimbursement
Calculate TDS on Salary
| You can also calculate the TDS on salary in the following format- Gross annual salary – exemption under section 10 Income chargeable under salary head + income from house property Rental income – deduction under section 24B -30% rental income -interest paid on housing loan then add your income from any other sources Gross total income – chapter VI-A deduction = Taxable income |
Make a Payment of TDS on Salary Online
You can deposit the TDS online mode easily without any interference, the TDS amount deducted shall be deposited to the government. Let’s see how to make payment of TDS on salary through online mode:
- You have to visit the NSDL’s website.
- On the website select ‘Challan No’ under the TDS/TCS section. Click here.
- In the e-payment page select ‘Company deductees’ under the tax applicable section, only if TDS is made for payment to the company in other cases select ‘Non-Company deductees’
- Employees have to enter their TAN and assessment year for which payment is to be made. Then fill in your PIN code and state on the next page.
- On the next page select the mode of payment to pay TDS on salary and submit it.
- After submitting this, you will receive a confirmation and on the confirmation of data, you will be redirected to the net banking portal of the bank.
- Fill in all the details for payment and after paying TDS on the salary you will receive proof, keep the proof of the payment made.
FAQ’s:-
1. What is the Full Form of TDS?
Ans. The full form of TDS is “Tax Deducted at Source.” It alludes to the framework where the charge is deducted from the source of salary at the time of installment itself. This component guarantees a relentless collection of charges by deducting a certain rate.
2. What is the use of TDS challan?
Ans. TDS challan is utilized to store charges deducted at Source (TDS) to the government. It encourages the installment of TDS deducted from different sources of pay, such as pay rates, intrigued, or lease.
3. What is the TDS rate on salary?
Ans. The TDS rate on compensation shifts based on the pay piece and pertinent derivations. As of a recent data overhaul, for the evaluation year 2023-24, TDS on compensation ranges from 0% to 20%, depending on the individual’s add-up to salary.
4. Is PAN required for payment of TDS?
Ans. Yes, PAN (Permanent Account Number) is required for the installment of TDS (Assess Deducted at Source). It serves as a special identifier for citizens and guarantees precise following of assessed installments or other payments.
5. What is the penalty if an employer fails to submit the returns within the due date?
Ans. If an employee fails to submit the TDS returns within the due date, they may bring about punishments beneath Segment 234E of the Salary Charge Act. The punishment is ₹200 per day of default until the disappointment proceeds, with the most extreme punishment not surpassing the whole sum of TDS.
6. How to deposit TDS?
Ans. To deposit TDS, one must begin with generating a Challan 281 online through the TIN-NSDL or authorized banks’ entries. At that point, fill in precise points of interest such as TAN, PAN, sum, and nature of installment. At long last, store the TDS sum utilizing online managing an account or physically at authorized bank branches to total the exchange.
7. Is TDS required to be paid only by salaried individuals?
Ans. No, TDS ( Tax Deducted at Source) isn’t as it was required to be paid by salaried people. It applies to different sorts of salary, counting pay rates, intrigued, lease, proficient expenses, etc. Anybody making installments indicated beneath the Pay Assess Act is committed to deducting and storing TDS as per the endorsed rates.
8. Where is TDS applicable?
Ans. TDS (Tax Deducted at Source) is applicable over different sources of pay such as pay rates, intrigued, lease, commission, proficient expenses, etc. It is deducted and kept by the payer at the time of making indicated installments