TDS or Tax Deducted at Source is an amount that is deducted from the salary of an individual and thereafter submitted to the Income Tax department. By following the simple set of steps one can easily calculate the TDS over his/her Income.
When we say, TDS on Salary it means the tax which is deducted by the employer of an individual at the time of giving Salary into the employee's account. However, the amount of TDS which is deducted from the employee’s salary is deposited with the Government by the employer. Before deducting the TDS from the employee’s salary, the employer must get TAN registration. The TAN number is a 10-digit alphanumeric number that is used to track the deduction of TDS and the remittance by the IT Department.
The formula which is used to calculate the TDS over the Salary is as follows:
Income Tax Rate = Income Tax Payable (computed with slab rates) / Estimated Revenue for the financial year.
Below mentioned are the steps that can help you calculate the TDS on your income easily. The steps are as follows:
At the time of your joining the CTC which is quoted to you comprises various components like the basic salary, house rent allowance, travel allowance, medical allowance, dearness allowance, special allowance, and other allowances as well. Your CTC has divided into two categories the salary and the perquisites. These perquisites comprise all the facilities and benefits that are offered by the employer to the expenditure like canteen, fuel subsidies, hotel expenses, traveling, and much more.
The Government under Sections 80C and 80D allows tax exemption. Thus, it allows an individual to look for an exemption over different kinds of investments that he/she is making for that financial year. As said by the Income Tax department, the TDS on a salary can be easily determined by subtracting the exemption from the total annual earnings. Notably, the employer needs to get a declaration or proof from the individual to approve the tax exemption. Below mentioned are some of the categories that are considered for tax exemption:
For example : If your age bracket is under 60 and the taxable income is Rs. 5 lakhs then you have to pay 5% of 2.5 lakhs as tax. The TDS is subtracted every month by the employer, such that the tax liability over the year is divided by 12 and hence, collected per month.
Now, that we have understood how TDS is applied to the salary and to which Income bracket it is important to know that the deduction for TDS on a salary is compulsory under Section 192 of the Income Tax Act. The companies or the employers who are paying salaries to their employees have to deduct TDS on salary. However, the TDS on Salary is deducted if the income amount is over the basic exemption limit.