Feb 142015
 
Calculation of TDS from Salary

Scheme of TDS: Under the scheme of tax deduction at source (TDS), persons responsible for making payment of income & covered by the scheme, are responsible to deduct tax at source & deposit the same to government treasury within the stipulated time.

The recipient of income – though gets only net amount, is liable to tax on the gross amount and the amount deducted at source is adjusted against his final tax liability.

DEDUCTION OF TAX FROM SALARIES

Any person responsible for paying any income chargeable under the head “salaries” is required to deduct at source on the amount payable. Tax is to be calculated at the rates prescribed for the financial year in which payment to employees is made.

POINTS TO CONSIDERED FOR COMPUTE THE SALARY & TAX THEREON

1.House rent allowance exemption- exemption pertaining to house rent allowance should be calculated by the employer on the basis of specified limit provided by the section10(13A) of income tax act.

2.Deduction from gross total income- Employer should taken into consideration amount deductible under sections 80C, 80CCD, 80CCG, 80D, 80DDB, 80E, 80EE, 80GG, 80GA, 80TTA, and 80U. The employer should not give any deduction in respect of donation (deduction under section Sec 80G) given by the employee.

3. TAX LIABILITY- Tax is deductible on the taxable income at the rate applicable for the financial year 2014-15, which is reproduced below for your reference:-

3.1 For a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of previous year i.e., born during April 1,1935 and march 31,1955):-

Net income range Income-tax rates Surcharge Education cess Secondary & higher education
Up to Rs 3,00,000 Nil Nil Nil Nil
Rs.3,00,000-Rs.5,00,000 10% of (total income minus Rs.3,00,000) Nil 2% of income-tax 1% of income-tax
Rs.5,00,000-Rs.10,00,000 Rs.20,000+20% of(total income minus Rs.5,00,000) Nil 2% of income tax 1% of income- tax
Rs.10,00,000-Rs 1,00,00,000 Rs1,20,000+30% of (total income minus Rs.10,00,000) Nil 2% of income- tax 1% of income- tax
Above Rs 1,00,00,000 Rs.28,20,000+30% of (total income minus Rs.1,00,00,000 10% of income tax 2% of income- tax &surcharge 1%of income –tax & surcharge-

3.2 .For a resident super senior citizen (who is 80 years or more at any time during the previous year, i.e., born before April 1, 1935)-

Net income range Income-tax rates surcharge Education cess Secondary &higher education cess
Up to Rs 5,00,000 Nil Nil Nil Nil
Rs.5,00,000 – Rs. 10,00,000 20% of (total income minus Rs.5,00,000) Nil 2% of income -tax 1% of income-tax
Rs 10,00,000 – Rs 1,00,00,000 Rs.1,00,000+ 30% of (total income minus Rs.10,00,000) Nil 2% of income -tax 1% of income-tax
Above Rs1,00,00,000 Rs.28,00,000+30% of (total income minusRs.1,00,00,000) 10% of income-tax 2% of income –tax & surcharge 1% of income-tax & surcharge

3.3 Any other case of individual, every HUF / AOP / BOI / AJP :-

Net income range Income-tax rates Surcharge Education cess Secondary & higher education
Up to Rs 2,00,000 Nil Nil Nil Nil
Rs.2,00,000-Rs.5,00,000 10% of (total income minus Rs.2,50,000) Nil 2% of income-tax 1% of income-tax
Rs.5,00,00-Rs.10,00,000 Rs.25,000+20% of(total income minus Rs.5,00,000) Nil 2% of income tax 1% of income- tax
Rs.10,00,000-Rs 1,00,00,000 Rs1,25,000+30% of (total income minus Rs.10,00,000) Nil 2% of income- tax 1% of income- tax
Above Rs 1,00,00,000 Rs.28,25,000+30% of (total income minus Rs.1,00,00,000) 10% of income tax 2% of income- tax & surcharge 1%of income –tax & surcharge

**The rates are subject to maximum marginal relief.

TDS RATES IN CASE PAN NO IS NOT FURNISHED
If the recipient does not furnish his PAN to the deductor, tax will be deducted by virtue of section 206AA at the normal rate or the rate of 20% whichever is higher.

4. WHEN A PERSON IS EMPLOYED BY TWO OR MORE EMPLOYERS DURING THE FINANCIAL YEAR – In such a case tax will be deducted by each employer separately. However, the employee is under obligation to declare salary receive & tax deducted thereon from other employers to one of the employers by submitting information in Form no. 12B.

5. TDS CERTIFICATE – TDS certificate will be given to the employee in form no. 16 annually on or before if few condition are satisfied. Form no. 16 can be given in digital signature. The employer should also give a statement of perquisites / profit in lieu salary.

6. SALARY WITHOUT TDS OR WITH LOWER TDS – To get salary without TDS or with lower TDS, the employee will have to approach the assessing officer by submitting an application in Form no.13 under the section 197.

7. Other points:-

7.1 TAX ON PREQUISITE PAID BY EMPLOYER – Section 192(IA) provides that the employer responsible for paying an income in nature of perquisite referred to in section 17 (2) may pay at his option, tax on the whole without making any deduction therefrom. In case employer opts to make payment of tax on perquisites, such tax payments will added back to income of employee. However, such tax payments shall not be allowed as tax deduction in the hands of employer.

7.2 MORE THAN ONE EMPLOYER – When an employee has more than one employer, he is required to furnish in form no.12B to one of the employer the detail of salary due /receive by him other employer.

Only after submission of information in FORM no 12B, it becomes obligation of the employer (to whom Form No 12B is submitted) to deduct tax at the source after considering the information submitted by the employee.

7.3 Relief under section 89: Section 192(2A) provides that in respect of salary payment of employees deduction of tax at source is to be made after allowing relief under section 89. To avail this benefit the concerned employees should furnish information in Form no. 10E to the employer.

7.4 Supporting documents: No need to collect supporting evidence for giving exemption in respect of LTC/ Conveyance allowance. For other deduction and allowances employees must have proper supporting documents and must satisfy himself for correctness of claim by employee.

7.5 Tax deduction in respect of other incomes of employee: Following points are notable before including other income of employees for tax deduction:-

  • The employee may (or may not) declare his other income to employer.
  • If the employee wants to declare his other incomes to the employer, then such information should be given plain paper to the employer.
  • The employer may declare details of his other incomes (including loss under the head” Income from house property” but not any other loss) & tax deducted thereon by others.

If the aforesaid information is not submitted by the employee to the employer, then employer cannot take into consideration other incomes of the employee.