TDS Calculation Considerations for Payroll Processing
TDS is not deducted either on Gross or on Net Salary. There are many considerations as outlined below:
- Full Basic + DA is considered as taxable income.
- Conveyance Allowance is exempted up to ₹9,600 per annum.
- Medical Allowance is exempted up to ₹15,000 per annum.
- HRA is exempted as actuals or 40% of Basic.
- Other allowances are considered as taxable income except for washing, food coupons, and LTA.
- After that, you should deduct PT and any other taxes on the employee.
- Later, you should calculate the deductions under Section 80 for PF, housing loan, insurance, and education fees.
- Based on those, only you should deduct TDS.
I hope this helps clarify the considerations for deductions and exemptions in payroll processing. Let me know if you need further assistance or clarification.
Regards,