How is TDS deducted from salary ?

by khalid on 25/02/2013 · 1 comment

TDS deducted

This article discusses the intricate details of when and how TDS deducted on salary. This shall be largely helpful for all employees, as in this article I will be discussing many facts that are either not known or overlooked by many employees.

Tax at source on salary can only be deducted by the employer at the time of making the payment. Hence the amount on which it can be deducted is the taxable salary of the employee. The taxable amount of salary can be determined keeping in mind the tax slabs for that particular assessment year. For eg. For A.Y 2013-14 the basic exemption limit for an individual is Rs. 2,00,000/-. Therefore any salary paid over and above Rs. 2,00,000/- would be considered as taxable salary.

The rate at which tax is deducted at source are the normal taxation rates that are applicable to an individual.

The tax rates applicable for A.Y 2013-14 are as follows :-

Income up to Rs. 2,00,000 – No tax
Income above Rs. 2,00,000 but less than or equal to Rs. 5,00,000 – 10% of the income exceeding Rs. 2,00,000
Income above Rs. 5,00,000 but less than or equal to Rs. 10,00,000 – 20% of the income exceeding Rs. 5,00,000
Income above Rs. 10,00,000 – 30% of the income exceeding Rs. 10,00,000.

Now once we’ve established how tax is computed on salary lets get to the finer points which will help all salaried employees.

1. All other incomes such as interest earned by the employee can be declared to his employer, which means that if the employee wishes to declare the other incomes to his employer. The employee is not bound to do so.

2. Always mention the amount of the interest paid on the home loan taken for construction of your residence. Also at the time mentioning such interest also make sure you tell your employer if your residence is a self occupied or a let out property. The reason behind this is that assuming the interest paid on your home loan for a let put property for 1 year is more than Rs. 1.5 lakh and you don’t tell your employer if your residence is a let out or a self occupied property, the employer might assume the same to be a self occupied property even if the actuality is otherwise. The repercussion of this is that the deduction would be limited to Rs. 1.5 lakh even though you are allowed the entire amount of interest paid on your home loan.

3. The employer always has to take into consideration at the time of calculation the amount of tax to be deducted at source the deductions from your total income. Deduction under section 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80GG and 80U have to be taken into consideration by the employer. Please note that any donations made to any charitable institutions made by the employee which is eligible for a deduction under section 80G will have to be claimed by the employee himself in his return of income.

4. When an person is employed under 2 or more employers, tax will be deducted by each employer separately. However the employee is under obligation to declare salary received and tax deducted thereon from other employers to one of the employers by submitting the information in form no. 12B.

5. To get salary without TDS or with lower TDS, the employee will have to approach the Assessing Officer by submitting an application in Form no. 13.

Author Bio :

Aashish Ramchand is Co-founder of an e-filing and online tax advisory website. A chartered accountant by profession and passionate about Indian taxation advisory and love to write about the Indian tax system and its various nuances. He suggests to visit www.makemyreturns.com for more information.

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Shweta Seth February 26, 2013

Nice Article Khalid! With the new Budget do you think the tax slabs would be relaxed for individuals (http://in.reuters.com/subjects/india-budget-2013).

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