Is TDS Deduction Necessary for a Salesman with Conveyance Reimbursement and Rent Payments?

If a salesman is receiving a basic salary of 9600 per month, DA of 6820 per month, HRA of 6568 per month, incentives of 5200, and reimbursement of conveyance of 10511 per month, should we deduct TDS from his salary?

Annually, he is receiving:
- Basic = 115200
- DA = 81840
- HRA = 78816
- Incentives = 62400
- Reimbursement of conveyance = 126132

He is also paying rent of Rs 8000 per month and also submits a rent deed.

Kindly help me, please.

At the time of TDS deduction, you (company) shouldn't think of the other side - what he gives or deposits. You should only consider if the person falls under TDS; you must deduct the TDS frequently. When the assessee presents the Form 16 for ITR of the benefit, he must ascertain what he deposited or gave to the government.

Thank you,

Ashutosh
HR Gen.

Dear Gurwin, in short, HRA up to ₹1,600 per annum is exempted, beyond which it should be treated as taxable income. All other components are subject to TDS and are eligible to gain exemptions overall. Take into consideration contributions to EPF, LIC, Mediclaim, pension (if any), and other savings allowable under sections 80C, D, or DD. You can also utilize the TDS computation in an Excel sheet available on many online portals, provided conveniently by our knowledgeable members, which should be helpful to you in this regard. Please note there is a difference between conveyance allowance paid for commuting from residence to the office and back, whereas reimbursements for traveling expenses claimed as reimbursements are not subject to TDS. If you have any specific doubts, feel free to raise them here.

Thank you.

Dear Mr. Gurwin555, in continuation of the response to your query by the expertise above, I have some suggestions regarding the tax deductions at source on salary under sections 192A and 192B, applicable to both government and non-government employees. In most organizations, the process involves calculating the tax deduction based on the previous year's taxable income, adding a percentage for increments, Dearness Allowances (DA), if applicable, and then tentatively estimating the current year's annual income. Subsequently, deduct all regular deductions as per the previous year and calculate the current year's tax based on the current year's tax slab.

After determining the tax amount including Cess, divide this total by 12 months to arrive at the monthly tax obligation. This monthly tax should then be deducted from the employee's salary every month. It is important to note that if the individual falls within a specific tax bracket, appropriate actions should be taken.

I hope this information is helpful. Let me know if you need any further clarification or assistance.

Sincerely,
[Your Name]

Dear Loginmiraclelogistics, please note that the exemption of Rs. 1600/- is not related to HRA; it is actually for Conveyance Allowance. Secondly, the exemption is for a monthly amount and not per annum (as mentioned by you).

Dear Gurwin555, if the conveyance is being paid against reimbursement, then it will not be included in his taxable income. However, please note the definition of reimbursement carefully. Reimbursement is applicable when conveyance is paid by the employee during the course of his employment. It can be for his tour and traveling, local conveyance, etc. The reimbursement amount cannot be fixed on a monthly basis. It should vary every month based on actual expenses. Moreover, the reimbursement amount should not be credited to the salary account.

If the amount is fixed and being paid with the monthly salary, then it will be called "Conveyance Allowance." In such a case, the exemption is restricted to Rs. 1600 per month.

My advice is to pay Rs. 1600 per month as conveyance allowance with the salary and some amount on a reimbursement basis. The reimbursement needs to be processed separately against the submission of adequate proofs and HOD approval.

HRA Exemption Criteria

In the case of HRA exemption, there are three criteria. You have to check the applicable criteria accordingly, and the HRA exemption can be given.

HRA Allowance is specifically granted to meet expenditure actually incurred on payment of rent for residential accommodation occupied and is exempt to the extent of the limit:

In the case of Mumbai/Kolkata/Delhi/Chennai: The minimum amount of the below

- HRA Amount Actually Received
- Rent Paid Less 10% of Basic Salary
- 50% of Basic Salary

In the case of other cities, the minimum amount of the below:

- HRA Amount Actually Received
- Rent Paid Less 10% of Basic Salary
- 40% of Basic Salary

Reducing Tax Burden

In order to reduce the tax burden, you can include Medical Allowance (exemption of Rs. 15000 per annum allowed), LTA (can be paid as per company policy). Consider the exemption under 80C (up to Rs. 1.50 lakh per annum).

After all deductions and exemptions, the TDS can be deducted as per the applicable IT rate.

Hope you will agree with my points. More inputs on the matter are most welcome.

Sorry, I stand corrected myself - the exemption of Rs. 1600 p.a. in fact should be read for Conveyance Allowance and not for HRA.

Some other allowances/payments are exempted from income tax, and the maximum limit is provided in the attachment.

Salary Breakdown

BASIC: 9600
DA: 6820
HRA: 6568
INCENTIVE: 5200
GROSS: 28188

Annually:
BASIC: 115200
DA: 81840
HRA: 78816
INCENTIVE: 62400
GROSS: 338256

HRA Calculation

Rent Paid: 96000
10% of Salary: 19704
C: 76296
B: 50% of BASIC: 57600
A: HRA: 78816
Minimum of A, B, C: 57600

Total Salary: 338256

Tax Calculation

LESS: HRA: 57600
Taxable: 280656
First 250000:
Next 30656: Tax 10% = 3066
Tax Liability: 3066
LESS 87A Relief: 3066
Net Tax: 0

As you have submitted that the local conveyance is a reimbursement, he must have submitted the bills/expenses for that amount, which is why it is not taxable. Regarding the conveyance allowance, it is free up to Rs.1600 per month. This allowance is paid for attending the office. Obviously, if someone is absent for the entire month, this allowance is not payable to him.

Regards, Ramakant