Need Help with Tax Deductions: How Do You Calculate Them from Your Salary?

Hello everyone,

Can anybody help me out or provide a sheet and formula on how to calculate tax deductions from salary?

Dear Sudha, There are many components for calculating TDS on salary. First of all, you have to check the salary structure, which should comprise Basic, HRA, Conveyance, Medical Allowance, etc. There could be optional points as well, like LTA, Reimbursement Policy, etc.

Tax-Free Salary Limit

Presently, up to Rs. 2.50 L salary is completely tax-free. Above that, before calculating the TDS, we need to consider the Deductions, Allowances, and Benefits allowed by the IT Department.

HRA Exemption

There are 3 criteria for HRA Exemption. Check with your payroll.

Conveyance Allowance Exemption

Conveyance Allowance Exemption of Rs. 1600/pm is permissible for deduction.

Medical Exemption

Medical Exemption is allowed Rs. 15000/pa.

After making the above exemptions, you will have Gross Salary Income (For IT).

Deductions from Gross Income

From the Gross Income, there are certain deductions towards Investment, Mediclaim, Donations, loans, etc.

Under Section 80C, Rs. 1.50 L deduction is allowed.

Interest on Housing Loan.

Mediclaim - Rs. 15k/pa.

Education Loan.

After considering the above, there is a tax slab with different percentages.

If you want to reduce the tax liability of employees, please launch some reimbursement policies.

The above is a short script of Tax Deductions, Allowances, etc. For detailed information, please contact the payroll or Finance Team of your company.

Regards

Thank you, Daisy, for your valued appreciation. Please find a list of some reimbursement expenses: Fuel Allowance, Telephone Expense, Uniform Allowance, Car/Vehicle Maintenance Allowance, LTA, etc. For proper taxation, please consult your finance/accounts team.

Thank you, Mr. Pan Singh, for providing your valuable time and for answering my query. Can you please elaborate more clearly with examples? Let's consider a scenario where a female person's salary components are as follows: Basic: Rs. 7000/pm, HRA: Rs. 3500/pm, Conv Allowance: Rs. 800/pm, Medical: Rs. 1500/pm, and her CTC is 300000. How would we calculate the tax on this amount? Additionally, she is given rent of approximately Rs. 5000/pm.

Dear Anonymous,

Thank you so much for your kind words and valued appreciation of my comments.

In the above case, NIL tax is applicable as already stated, ₹2.50 Lakh is tax-free for the financial year. The female employee will be entitled to conveyance, medical, and HRA exemptions.

After making these standard deductions, her salary income will be less than the tax slab. However, please note that there are certain rules for HRA exemption.

Before applying such deductions/exemptions, kindly review the guidelines issued by the IT department (you can seek advice from the Finance Team).

For better control, you can ask all such employees to submit a Tax Declaration Form. In the declaration, the employee will submit HRA proofs, saving details, and other deduction proofs. Based on these declarations and deductions, you can also issue them a Tax Computation Sheet reflecting the applicable tax.

Furthermore, this will help you create a platform for next year's tax liabilities.

You can keep such declarations for future reference. These documents may be requested by the Income Tax Officer during the scrutiny of your company's ITR.

I hope this meets your requirements.

Best regards,
[Your Name]