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How To Deduct Tax On Salary - Gross Earnings

anuj verma VPN INDIA Started The Discussion:

Hi All,

I want to know that how to calculate TDS on salary and do we suppose to deduct it monthly or at the time when payment to employee exceeds tax limit.

We are paying to our employees as below:-


Basic 12500
H.R.A 1500
T.A 2000
Total Amount Paid:- 16,000.00

Employee is residential Male

Do we suppose to pay ESI Contribution for the above as celling for ESI has raised to Rs. 15,000.00 Per Month.

Please help me.

TELIKEPALLI - Contributing Member
Hi Varma,

to deduct TDS from Salary Income we have to compute total income per annum in tax calculation sheet.

TDS Should be deduct in equal instalments.that is per month not per annum.

for example an employee has to pay Rs. 12,000/- as TDS after entire dedutions and exemptions, we have to deduct 12,000/12 months. it is Rs. 1000/- Per Month.

for above celling you need not to deduct or pay ESI because his salary range is beyond the ESI braket .

Gross per Month Rs 16,000/- x 12 = Rs 1,92,000/- Gross Earnings Per Year (FY Apr-Mar)
Less Tax Exemption Limit = Rs 1,60,000/-
That leaves Rs 32,000/- balance
Now if u have deducted Prof Tax per month rate x 12 months then you can claim that amount to lessen from 32,000/-
Plus conveyance exemption of Rs 9,600/-
Plus Medical Allowance exemption of Rs 15,000/-
I dont think TDS would come into play at a monthly salary of Rs 16,000/- if the CTC is structured in the right way with proofs.........Regards ss

pushpendrasingh30 - Contributing Member
Hi, Could anyone tell me about TDS calculation while making salary/payroll of employees. regards, Pushpendra

vviyer1957 - 
Hi ,
The answer to the above Query is as shown below.

COMPUTATION OF INCOME FROM SALARY

FINANCIAL YEAR 2010-11 AY 2011-12

01.04.10 TO 31.3.11

Salary P.M P.M P.A. Total
Basic 12500
HRA 1500
CCA 0
Trav-All 2000 16000 192000
192000
Less PT (Sec 16(iii) 2500*12 30000
Less: HRA10(13A) 15000 147000
Conveyance 9600 9600
137400
P.F 9360
LIC 0 9360
Total Taxable Income 128040
Tax Payable 0
Education Cess 0
Total Tax Payable 0
TDS 0
Payable 0 0

Computation of HRA
Exemption u/s 10(13A)
a) HRA received 18000 18000
b) Rent Paid (Rs ) 30000
Less 1/10 of Salary 15000 15000
(Basic Rs 132000
c ) 50% of salary 75000

Least of the above amount Rs 15000

Note:
-Profession Tax is considered at 2500 p,a.
-HRA: Rent paid is considered to be Rs 2500 P.m.
-PF is considered to be 12% of Basic (Max Rs 6500*12%=9360)
-Person is considered to be living in mumbai
-Investment in LIC and other investment u/s 80c and Sec 80D will have to be considered if the investment is made by the employee concerned.
-We have to get investment details etc from the employee at least before dec or jan.
- Also consider the last years income before deducting tax from his salary, if tax has been deducted (last yr)
-TDS on salary has to be deducted on monthly basis after computing the Income on estimated basis for the current yr or on the basis of the previous yrs computation .

- U/s 192 of the Income -tax Act ,Tax has to be deducted at source on Salary Payments if the annual estimated income under this head exceeds the maximum amount not liable to tax .The employer should make an estimate of the total emoluments payable to the employee during the financial year after taking into account the Increment/arrears of pay which are expected to be paid during the financial year.
-U/s 192 Tax has to be deducted on salary at the rates applicable to the estimated salary for the entire relevant financial year.


Regarding ESIC if the gross salary exceed Rs 15000 then no need to deduct ESIC .

Regards
IYER

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