How to Calculate the TDS Amount on Salary Income i.e Tax Deduction on Salary or What will be the TDS Rate on Salary Income.There is no fixed Tax Deduction Rate (TDS Rate) for Salary Income, TDS has be calculated based on the Income Tax rate applicable to that person. For each year Income Tax Slab Rates are different .i.e Income Tax for Year 2012-13 & 2013-14 (A.Y. 2013-2014 & A.Y. 2014-15) Salary Income upto Rs. 2 Lakh is not taxable and For Year 2011-12 (A.Y. 2012-13) Income upto Rs. 180000 was not taxable.
NATURE OF PAYMENT
Any payment chargeable under the head “salary”. Thus, where a firm pays salary to its partner, section 192 is not applicable because such payment is taxable in the hands of partner under the head “Income from BPV”.
Steps to calculate TDS on Salary Income:
Estimate income taxable under the head “Salary” as per provisions for salary
Where, the employee is employed simultaneously by more than one employee as responsible for TDS and provide the details of salary Income from other employees, TDS out of such salary and other necessary particulars to such selected employer in form No. 12B
Where the employee was in employment under same previous employer in the same year, he may furnish details of salary Income, TDS out of such income and other necessary particulars to his present employee in Form No. 12 B
Consider other incomes, if reported by the employee
If the employee submits details of other incomes and TDS out of such income and TDS out of such income in Form No. 12C and employer shall consider such other income and TDS while calculating TDS u/s 192.
However, following points should be kept in mind –
Allow deduction under chapter VI-A
The deduction under 80G can be allowed only in respect of certain donations.
Calculate Tax at the rates applicable to an individual. Include education cess and SH education cess as applicable
Allow relief u/s 89
If the employer is Govt. company, cooperative society, university, local authority, institution, association or body, it can consider relief u/s 89 provided the employee submits necessary details in Form No. 10E
The net tax liability shall be deducted
The TDS shall be deducted at the average rate of Tax.
DEDUCTION AT WHAT TIME?
Tax shall be deducted at the time of making payment of salary.
- Adjustment of excess / deficiency:
The employer can increase or reduce the amount of TDS so as to adjust previous excess / short-deduction during the same year.
- Tax payment on non-monetary perquisites:
The employer can make, at his option, payment of tax on non-monetary perquisites of employees. In such a case, no TDS shall be required to that extent. It is further provided that the tax payable by the employer in relation to non-monetary perquisites shall be calculated as follows –