Salary Processing Confusion: How Do You Calculate TDS Deductions?

At the time of processing salaries, how is the TDS amount deducted? What formula is used for this?

Hi Deepika, Before finalizing the salary amounts, it is essential to create a structured breakdown for various components such as Basic, HRA, Conveyance Allowance, Medical Allowance, and LTA. Once the split-up structure is in place, calculations for HRA exemption, tax exemption, savings, and other criteria can be accurately determined. Based on these calculations, the appropriate TDS deductions can be prepared.

Thank you.

TDS is calculated for those employees who come under the purview of professionals or consultants. Instead of paying income tax, these individuals pay TDS. I believe the TDS to be deducted is 10.33%.

The TDS is deducted after all the allowances and deductions are applied to the gross salary. Please find the Excel sheet attached. You can see for yourself how it would be calculated. Hope that helps.

Note: The salary structure is subject to change from organization to organization.

Regards

TDS on Salaries is calculated on the basis of the per annum salary structure. For example, take the employee's yearly salary structure and make a deduction under Chapter VI. Work out the deduction according to the salary slab as per the Income Tax Act and calculate the average monthly deduction.

Regards,
Krishna B.

The information provided by all the members is very useful. I have also worked for 2 years in the HR department and handled all the responsibilities related to salary and wages for around 1,000 employees. However, in our company, the HR manager was not responsible for TDS or any tax-related job; all of that fell under the accounts department's purview. We needed to maintain records of salaries paid in accordance with government compliance.

I hope TDS comes under the accounts department functions. Please clear the concept.

TDS and Accounts

TDS comes under the accounts purview. TDS from contractors also falls under accounts. TDS of employees likewise comes under accounts in many organizations where there is no HR department.

Dear Dr. CK Shah, I think only the taxable income needs to be rounded off to 10, and not the tax payable amount. Please do check and confirm.

Taxable income is rounded off to 10, you are correct, but also tax payable is rounded off to the nearest ones. You can find that in the tax calculator attached by me.

Warm Regards,
Vikas Goel