TDS stands for Tax Deduction at Source, and it is deducted from a person’s pay. Furthermore, TDS in salary refers to deductions made by employers on their employees’ paycheck. Furthermore, these deductions are made monthly.
TDS on Salary is a method for the government to collect professional tax at the source. There are several features of TDS on payments that you should be aware of and adhere to.
What is TDS on Salary?
Salary is the payment you earn on a monthly basis for offering professional services or expertise to organizations or corporations. Furthermore, an employer who gets pay is classified as having an income that must be deducted under the ITA requirement.
According to the Indian Income Tax Act (ITA), 1961, a salary comprises pension, wages, gratuity, fees, commission, perquisites, and so on.
Section 192 of the Income Tax Act governs TDS on pay. This Act provision requires that every employer deduct the expected TDS payment amount of their workers. It is utilized while calculating a monthly wage using an income tax calculator.
Professional tax deducted at source on salary is often refundable. However, if the professional tax deduction exceeds the workers’ tax due, it is typically feasible.
Also, keep in mind that the investment details at the start of the fiscal year change from the investments at the conclusion of the year. In such a case, the TDS on salary will be repaid.
How to Calculate TDS?
Salary is generally computed as CTC (Cost to Company), and it is made up of two major components. Salary and perquisites are examples of these components.
Special allowance, housing rent allowance, travel allowance, medical allowance, basic income, dearness allowance, and so on are all covered by CTC.
Perquisites or perks, on the other hand, are rewards and services supplied by an employer. It also includes travel expenses, fuel subsidies, food costs, and lodging costs.
Furthermore, depending on the information, workers may claim professional tax exemptions on the following items:
- Use the travel allowance to claim the amount spent on commuting.
- Medical expenditures may be claimed with the proper paperwork.
- The employee is excluded from the house rent allowance if he or she lives in a leased property.
If you don’t want to do it manually, try our income tax calculator.
When TDS is deducted?
Section 192 permitted deductions to be made at the time of payment rather than when the salary was accrued. Employees are paid on a monthly basis, hence TDS is deducted on that basis as well.
TDS must be deducted by the employer on a monthly basis, including any advance payment or salary arrears. Furthermore, TDS is only levied if an employee’s salary exceeds the baseline exemption limit.
Remember that TDS is not payable if your total income after all deductions and allowances is less than the appropriate slab rate. The employer must deposit TDS to the credit of the Central Government on the 7th of the next month. TDS deducted in February must also be remitted to the credit of the Central Government by March 7th.
How To Minimize TDS?
If your salary exceeds the threshold limit, your employer will always withhold professional tax deducted at source (TDS) from your pay. There are, however, a few things you may do to lower your professional tax bill as a result of TDS being taken from your pay.
1. LTA and Medicals
If your compensation breakdown does not include a travel allowance, you might request that your company add it. Please keep in mind that as an honest taxpayer, you should be incurring travel allowance charges before claiming an exemption.
Travel expenses are excluded for up to Rs 1600 per month, or Rs 19,200 per year. The previous maximum was Rs 800, but Finance Minister Arun Jaitley recently upped it. Similarly, you may claim medical reimbursement of up to Rs 15,000 each year for your medical costs.
When you go to the pharmacy or the doctor, be sure to bring medical bills or consultancy bills with you and pass them over to your employer to decrease your TDS responsibility.
2. Food coupons
If your firm does not provide food coupons or meal vouchers, you might request that they examine your suggestion. Meal coupons are exempt up to Rs 50 for each meal. This implies that during a 25-day working month, meal coupons may be tax-free up to Rs 2,500 per month, including lunch and supper (Rs. 100 x 25 days).
This equates to Rs 30,000 each year. Thus, if you are in the 10% professional tax category, you may save up to Rs 3000 on taxes with meal vouchers, Rs 6000 if you are in the 20% tax bracket, and Rs 9,000 if you are in the 30% professional tax bracket.
3. Saving TDS through Sec 80C benefits
Aside from the aforementioned, to avoid TDS on income, ensure that you use the whole money by investing in section 80C and other instruments. Investing in a PPF is one of the most popular ways to lower your TDS or tax due from your paycheck. The PPF provides a tax credit of up to Rs 1.5 lakhs each year.
4. LTA To help save tax and reduce TDS
You may also request that your company provide you with Leave Travel Assistance, which can assist you to decrease your professional tax burden. However, it is essential that you present documentation of your journey in order to obtain LTA tax advantages. LTA may be claimed twice in a four-year period. Keep in mind that this advantage to decreasing your TDS or salary does not apply to trips outside of India.
5. Other ways to reduce tax
You may claim a tax deduction if you have made charitable contributions. However, this must be limited to a certain set of institutions and not to all and all. So, be cautious where you give and make sure you get the institution’s PAN card number to assist you to save on taxes.
Wrapping It Up
TDS refers to professional tax deducted at the source of income. TDS on pay refers to the tax deduction made by an employer on your salaried income. TDS on pay assists the government in collecting income tax at the source of an individual’s salary.
The employee may reduce TDS on compensation by investing in specified tax-saving products. As previously indicated, the deduction advantages on TDS on pay may be obtained under the terms of several sections.