Article explains How TDS is deducted on Salary, What is the Rate of TDS, How is TDS deposited to Govt. Account, How to know that TDS has been deducted, When you are required to make Direct Payment of Tax, How salary can be received without deduction of TDS or with Lower TDS, How to deduct TDS if salary is received by two or more Employer, How TDS is deducted if non-monetary benefit(Perquisite) is received, Whether you should give details of Other Income earned by you apart from salary to Employer, How TDS is deducted in case Salary is payable in Foreign Currency, How to deduct TDS in case of relief u/s 89 and Deferment of TDS in case of ESOP of Start-ups. v
The population of India is 1.25 crores and majority of working population earns income from salary. It would have been huge task for Govt. to regulate each salaried person and collect taxes from them. Therefore concept of TDS was introduced which aimed at collecting tax from sources itself.
Section 192 of Income-tax Act puts an obligation on employer to deduct tax at the time of making payment of salary to employee. The terms of deducting TDS mentioned in Income-tax Law are as follows-
|S.No.||Particulars||Amount (In Rs.)|
|(b)||Less: Deduction under Chapter VI-A||1,50,000|
|(c)||Less: Standard deduction||50,000|
|(f)||Rate of TDS(e/a)*100||14.04%|
|(g)||TDS to be deducted monthly (125000*14.04%)||17,550|
Employee has to make sure that TDS has been deducted or not. If TDS is not deducted than section 191 of Income-tax Act, 1961 is attracted and he has to make direct payment of taxes. Otherwise he would be treated as assessee in default and has to pay interest. For details click here.
To get salary without TDS or with lower TDS, employee will have to approach Assessing Officer by submitting application in Form No.13 u/s 197.
|Particulars||Amount (In Rs.)|
|Tax on 25lacs||5,69,400|
|Less: Tax deducted by Divya Agrawal & Associates on 10lacs||1,06,600|
|Tax to be deducted by FTC||4,62,800|
♣ Perks is non-monetary benefit given by employer to employee like rent free accommodation, motor car, free/concessional educational facility, etc. Employer has two options-
(a) He can deduct TDS from salary
(b) He himself can make payment without deducting any TDS from salary of employee.
♣ But employer has to pay tax at the same time when TDS was required to be deducted. For Eg: Mr. Rajesh works for FTC and receives salary of Rs.6,00,000/- which includes value of perks of Rs.50,000/-. If employer opts to pay tax on perks, then TDS shall be calculated as follows-
|Particulars||Amount (In Rs.)|
|Income chargeable under head Salary||6,00,000|
|Tax on salary||33,800|
|Avg. rate of tax||5.63%|
|Tax payable on Perks (50000*5.63%)||2,815|
|Amt. required to be deposited each month(Rs.2815/12)||235|
If employees earn income from other sources apart from salary the he may give details of income to employer for deduction of TDS. But detail of loss is not allowed to be given except loss under the head House Property. Other sources of income included while computing TDS to be deducted should not have effect of reducing TDS. Employer should obtain evidence of claims made by assessee.
If salary is payable in FC, then salary shall be converted into Indian rupees and then TDS shall be deducted. Rate of exchange shall be telegraphic transfer buying rate adopted by SBI on date of deduction of TDS.
In respect of salary payments of employees of Govt., public sector undertakings, company, co-operative society, local authority, university, institution, TDS is to be computed after allowing relief u/s 89. To avail this benefit, the concerned employee should furnish information in Form No.10E to employer.
Employer is required to deduct TDS at the time when employee exercises the option and shares are allotted. In case of start-ups deduction of TDS has been extended to certain happening of events. For details you can click here.
Deduction of TDS is statutory obligation of every employer whether it is Govt. or Non-Govt. employer. Filing of TDS returns is expeditious task and requires good amount of knowledge and effort. I have received various comments and emails that we want to file TDS returns ourselves and wanted to know procedure of filing TDS returns. Here I want to clear one thing that being layman you should always take help of expert. For saving few amount of money you should never take risk of doing things yourself. Also every person who is required to file return should always take help of expert. There are many videos and content which guides to do these things yourself but you should always take help of expert. Otherwise you will invite unnecessary income tax notice in your life and put yourself in trouble for long run.