Understanding TDS in Salary: How Does It Affect Your Paycheck?

Role of TDS in Salary

What is the role of TDS in salary? Please help me.

With Regards,
Vineet

Understanding TDS in Salary

TDS means Tax Deduction at Source, in other words, Income Tax. According to income tax norms, every employer should deduct tax from employees who fall into the income tax purview.

You need to understand a few points here about TDS for salaried employees. The employer has to compute the employee's tax liability during the financial year, considering all tax exemptions according to norms. One who reaches the tax bracket after all savings and exemptions will come into the tax purview, and tax has to be deducted equally every month from 1st April to 31st March (12 months).

While computing the tax liability of employees, the employer has to consider the following exemptions:

1. HRA, Conveyance (up to Rs. 9600), LTA (if applicable), Professional Tax, Medical Allowance (up to Rs. 15,000), and deductions under section VI A such as 80G, 80D, 80DD, etc., Housing Loan (interest as well as repayment, if applicable), and 80C exemptions (PF, PPF, LIC, NSC, Mutual Funds, etc.) and 80CCF (Infrastructure bonds up to Rs. 20,000), etc.

The above exemptions are provided for informational purposes only. Apart from these exemptions, there are more exemptions available that vary from employee to employee.

These kinds of queries have been posted numerous times earlier in this forum. Hence, please use the search button; I hope you will find a bunch of appropriate answers.

I wish you all the best.

Regards

If the annual income crosses the below-mentioned tax-exempted limit, then TDS needs to be deducted at the source of the employee's salary. The maximum saving can be achieved with Rs. 80,000 to save tax from the income.

| Category | Male | Female | Senior Citizen | Tax (%) |
|------------------------|-----------------------------|-----------------------------|-----------------------------|---------|
| For Income Between 0 to 1,60,000 | For Income Between 0 to 1,90,000 | Income Between 0 to 2,40,000 | 0 |
| 1,60,001 to 5,00,000 | 1,90,001 to 5,00,000 | 2,40,001 to 5,00,000 | 10 |
| Between 5,00,001 to 8,00,000 | Between 5,00,001 to 8,00,000 | Between 5,00,001 to 8,00,000 | 20 |
| Above 8,00,001 | Above 8,00,001 | Above 8,00,001 | 30 |

Surcharge: 0
Education Cess: 3

Hi Mr. Abbas, Thank you for the detailed clarification. That means if a person's taxable income is Rs. 6,00,000:

For Non-Senior Male:
- Rs. 1,60,000 is exempted.
- For Rs. 3,40,000 (Rs. 5,00,000 - Rs. 1,60,000), Rs. 3,40,000 x 10% = Rs. 34,000 - (1)
- For Rs. 1,00,000 (Rs. 6,00,000 - Rs. 5,00,000), Rs. 1,00,000 x 20% = Rs. 20,000 - (2)
- Tax - (1) + (2) = Rs. 54,000
- Add Education cess 3% = Rs. 1,620
- Total TDS = Rs. 55,620; hence monthly TDS = Rs. 4,625

Hope I am right, please confirm.

Thanks and regards,
Vaishalee Parkhi