Is It Fair for Payroll to Deduct a Full Year's Tax in Advance? Seeking Advice on Policies

Hi Friends,

In our company, I have seen our payroll team deducting tax in advance. For example, one of our employees joined in June 2006, and the payroll department deducted the full year's tax from his first month's salary. Here, I just want to know if we have any policies as per government guidelines on when and how the tax should be deducted. Because if payroll deducts my salary in advance, and in the future, I will definitely show my savings, then what will happen?

Waiting for a kind reply.

Regards,
Rupendra

Hi Rupendra,

As far as I know, TDS is deducted for a person who is working throughout the year, whether in one organization or in several organizations. When an employee joins an organization, along with all the other documents, he will have to submit even the deducted amount of tax he paid in the previous organization. I think the person you were talking about did not pay the tax in his previous organization even though he comes under the tax preview, or did not provide information to your payroll department. Just clarify this, and you might get your answer.

Hope you get your answer.

Satya

Rupender,

I advise the following:

The employee has to calculate his potential earnings for the year, i.e., from June '06 to March '06, and add it to the earnings from April '06 to June '06. While doing this, he has to consider income from salaries and other sources as well. Based on this, he has to calculate the taxable income. Thereafter, consider the investments and proposed investment to calculate the tax payable. An undertaking may be required by the employee. Divide the sum by the number of months left and ask the Payroll to deduct on a monthly basis. Lack of information may be the reason for such ad hoc deductions.

Thanks,
Anindya

Hello,

I believe that in the month of April, the payroll department will request declarations regarding the investments we are planning to make. Based on this information, they will deduct taxes at year-end.

I hope my understanding is correct.

Regards,
Sridevi

Hi All,

I agree with all of you, but what I feel is we have to give at least 1 month's time to every new joiner to declare their declarations. However, we are not supposed to deduct the employee's first salary. What do you say?

Regards, Rupendra

Hi all,

No need to pay the TDS amount in advance. Pay it for the current month. We should collect saving declarations from the employees (their saving options as well as HRA, medical, etc.) and according to that, we need to calculate the tax for that year. Please note that employees can submit these saving details until January 15th of the next year.

Regards,
Pradeep