Comprehensive Guide on TDS Calculation, Salary Tax Deduction, and ESI Contribution for Employers

Hi All,

I want to know how to calculate TDS on salary and whether we are supposed to deduct it monthly or when the payment to the employee exceeds the tax limit. We are paying our employees as follows: Basic 12500, H.R.A 1500, T.A 2000. The total amount paid is 16,000.00. The employee is a residential male. Are we supposed to pay ESI Contribution for the above, as the ceiling for ESI has been raised to Rs. 15,000.00 per month?

Please help me.

Hi Varma,

To deduct TDS from salary income, we have to compute total income per annum in the tax calculation sheet. TDS should be deducted in equal installments, that is per month, not per annum.

For example, an employee has to pay Rs. 12,000/- as TDS after all deductions and exemptions. We have to deduct 12,000/12 months, which is Rs. 1,000/- per month. For amounts above the ceiling, you do not need to deduct or pay ESI because his salary range is beyond the ESI bracket.

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 you have deducted Professional Tax per month rate x 12 months, then you can claim that amount to lessen from Rs 32,000.

Plus conveyance exemption of Rs 9,600

Plus Medical Allowance exemption of Rs 15,000

I don't 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

Hi,

Could anyone tell me about TDS calculation while making salary/payroll of employees?

Regards,
Pushpendra

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 year's income before deducting tax from his salary if tax has been deducted (last year) -TDS on salary has to be deducted on a monthly basis after computing the income on an estimated basis for the current year or on the basis of the previous year's 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 exceeds Rs 15000, then no need to deduct ESIC.

Regards IYER

I will get my increment in the salary of June '15 w.e.f 1st April '15 along with 2 months arrears.

Arrear income will be around Rs. 15,000, and the tax implication on arrears becomes Rs. 3,000.

Can this tax of Rs. 3,000 be deducted/deposited by the employer equally in the remaining 10 months of the year, or does it have to be deducted/deposited in July '15?