How Should I Deduct TDS for an Employee Working Only 8 Months? Need Guidance!

I want to know how I can deduct TDS from the salary if the employee works only for 8 months. The employee is a female. Kindly, let me know when I can deduct TDS normally. Do I have to deduct TDS every month, quarterly, half-yearly, or yearly?

Thanks for your immediate input.

If I forget to deduct on a monthly basis, am I able to deduct the same annually? Is it wrong?

Also, I want to know how to deduct Professional Tax. Is it done monthly, half-yearly, or yearly?

Hi,

If you have missed out on deducting earlier, you can make the deduction now. However, what is important to note here is that you have to estimate the salary for the full year (actual salary paid so far + projected salary for the balance of the year) and arrive at the annual income tax liability. Then, divide the liability by the number of years, which is 4 months if you are starting from this year.

I hope this clarifies the first part.

For professional tax, you will have to deduct on a monthly basis and remit to your professional tax authorities as per local law.

Regards,
Vishwanath

Hi,

The attachment contains an example of the computation of income. I have taken this from a site, which may give you an idea of how to make the computation. Additionally, please find enclosed a circular issued by the Income Tax Department last year pertaining to TDS on salary. I hope this may help you.

Regards,
Vishwanath

Hi Vasanth,

It is better if you deduct TDS every month. To know TDS calculation, please find the attachment. It will definitely help you, as it is very easy to calculate using this simple software.

Regards,
Madhu

Hi Vasanth,

Since you need to calculate it for females, in my previous attachment, please move towards the right of the sheet "IT 2007-08" and change it to "Female".

For your information, I am attaching the file again.

Regards,
Madhu

Our company is an IT company, and they may conduct reviews every three months. Therefore, the salary of an individual may increase based on their performance, either within three or six months. As a result, I cannot calculate the salary for the entire year based on what they are currently earning, as it may increase over time. This is why I have not been deducting TDS every month; I plan to deduct it only at the end of the financial year. Is this approach incorrect? Please let me know if it is wrong.

Vasanthi

Vasanthi,

To comply with income tax laws, it is the employer's responsibility to ensure that all employees' tax liability is properly estimated, and deductions have been made monthly based on such estimations.

Assuming you have not complied with such provisions, it will be considered non-compliance for which the disbursement officer is accountable.

Furthermore, all employee salary information should be provided to the income tax department through e-filing of salary returns concerning employees who fall under the tax bracket.

I understand that you have a portion of the salary as a fixed component and another portion as a variable component. You may find it challenging to estimate the variable component. However, you will need to estimate the fixed component and determine the tax liability accordingly.

You have all details of the actual salary payments made from April 2007 to date. Include the fixed component of the salary payable for December to March 2008 (assuming the individual will still be on your payroll). Calculate the tax and deduct TDS accordingly. Pay attention to their investment declarations and housing loan-related exemptions and deductions available under the Income Tax Act to arrive at the net tax liability.

Regards,

Vishwanath

Vishwanath,

Thanks for your input. We have a fixed and variable component in the salary breakup. The variable component consists of only allowances. The fixed part includes the basic salary, HRA, and conveyance. If we give any increment, then the fixed component will be affected, right? In that case, as per what you mentioned, I have to calculate the tax for the existing salary. If there is any increment, I will have to amend the tax accordingly, correct?

Kindly clarify if I am correct or not.

Vasanthi

Vasanthi,

You are right. It may not be too complicated if you have some simple payroll application that takes care of tax computation on its own. In case you need any clarification, feel free to contact me at 09845358280.

Regards,
Vishwanath

Hi,

I am new to this site but got through to it because of the TDS problem I am facing. I have to deduct TDS from an employee whose salary bifurcation is as given below:

Basic: Rs. 9,200.00
HRA: Rs. 2,000.00
Conveyance Allowance: Rs. 800.00
Profession Tax deduction per month is Rs. 175/-.

How do I calculate how much TDS I have to deduct for the whole year based on the above details? If anyone can respond immediately, please do.

Regards,
Priti

Priti,

You need to give me information on PF contribution. The attached file gives you a fair idea of how the TDS computation should be made. If you need clarity, please let me know.

Regards,
Vishwanath

Vishwanath,

Please clarify, how to come to the total salary figure? (In your sample Excel sheet, the figure is "400680"). I mean - What components of the salary structure are included in the total salary for TDS calculation purposes? I am referring to your "tds_2007_08_102" Excel sheet.

Please reply,

Naren

Can you please tell me briefly how to deduct TDS on salary on a monthly basis? Also, could you provide some examples to help me understand how to properly deduct TDS from salary each month?

Thank you.