Buy a Life Insurance Plan in a few clicks
A plan that offer guaranteed returns and financial protection for your family.
Kotak Guaranteed Fortune Builder
A plan that offers guaranteed income for your future goals.
Thank you
Our representative will get in touch with you at the earliest.
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Section 192 mandates employers to deduct tax at source from an employee's salary based on their applicable income tax slab rates.
TDS is the tax deducted at source from income payment at the time of making essential payments, such as rent, profit, professional fees, salary, interest, and so on, by the people who make those payouts. In most cases, the individual who receives money is responsible for paying income tax. However, the government ensures that income tax is taken in advance from your payments by using Tax Deducted at Source (TDS) regulations. After deducting TDS, the net amount is given to the income receiver.
The total amount is added to the recipient’s income, and the amount of TDS on salary is deducted from their ultimate tax liability. The receiver is given credit for the money already deducted and paid on their behalf.
Sec 192 of Income Tax Act does not prescribe a specific TDS rate. Instead, TDS on salary is deducted according to the income tax slab rates applicable to the taxpayer for the relevant financial year in which the salary is paid.
With the introduction of the new tax regime under Section 115BAC, employees now have the option to choose between the old and new tax regimes at the start of the financial year. Based on their choice, income tax is calculated on the total income, taking into account any applicable exemptions, deductions, and other considerations.
If an employee does not make a choice regarding the tax regime, the default tax regime will be applied, and taxes will be calculated accordingly. For FY 2023-24 and onwards, the new tax regime is the default option.
Typically, the employer calculates the tax liability at the beginning of the financial year. The TDS is then deducted by dividing the estimated tax liability for the year by the number of months the employee will be employed by that employer.
Any excess or shortfall in earlier deductions is adjusted by the employer in subsequent deductions during the same financial year. If the employee has made any advance tax payments, these can also be adjusted in the TDS calculation in salary, provided the employee informs the employer of such payments.
The employer is responsible for deducting tax deducted at Source (TDS) from an employee’s salary based on the employee’s average income tax rate. This rate is determined using the following formula:
Average Income Tax Rate = Total Income Tax Payable (calculated using slab rates) / Estimated Income for the Financial Year
Let us consider an example: Mr. Sharma, who is 58 years old, earned a monthly salary of ₹1,00,000 for the financial year 2023-24.
To calculate Mr. Sharma’s TDS section 192 for the financial year 2023-24, you need to follow these steps:
Determine the Total Annual Income:
Monthly Salary: ₹1,00,000
Annual Salary: ₹1,00,000 × 12 = ₹12,00,000
Calculate the Income Tax Payable:
Compute the income tax for the total annual income based on the applicable tax slab rates for FY 2023-24.
Compute the Average Income Tax Rate:
Divide the total income tax payable by the estimated annual income.
Determine the TDS Amount:
Apply the average income tax rate to the monthly salary to calculate the TDS amount to be deducted each month.
This approach ensures that TDS is deducted at a rate reflecting the employee’s average tax liability for the year, aligning the monthly deductions with the overall tax obligation.
Under Section 192 of Income Tax Act, TDS (Tax Deducted at Source) is deducted based on the actual payment of salary rather than when the salary is accrued. This means that tax is deducted when your employer disburses your salary, whether paid on time, in advance, or arrears.
If your estimated annual salary does not exceed the basic exemption limit, no tax is payable; thus, TDS will not be deducted. This rule applies even if you do not have a PAN (Permanent Account Number).
The table below outlines the basic exemption limits under the old tax regime according to age groups, indicating when TDS is not required:
| Age |
Minimum income |
| Resident in India below 60 years |
₹2.5 lakh |
| Senior Citizens between 60 years and below 80 years |
₹3 lakh |
| Super Senior Citizens above 80 years |
₹5 lakh |
When managing personal finances, understanding how Tax Deducted at Source (TDS) on salary works is crucial. As an employee, it is essential to know how much tax is being deducted from your salary, why it’s deducted, and how you can manage your taxes efficiently.
Step 1: Estimate Gross Salary
The employer first estimates the employee’s salary for the relevant financial year. This estimate should encompass all components of salary, including:
Step 2: Apply Exemptions
Next, the employer calculates the exemptions allowable under Section 10 of the Income Tax Act. These exemptions might include:
Step 3: Compute Taxable Salary
The employer then subtracts these exemptions from the gross monthly income. The resultant figure is considered the employee’s taxable salary income.
Step 4: Include Additional Incomes
If the employee has reported other sources of income, such as rental income from house property or interest from bank deposits, these amounts are added to the taxable salary. Interest paid on housing loans can be deducted from the house property income. If there is no income from the house property, the interest will result in a negative figure under ‘income from house property.’ The sum of all these adjustments gives the employee’s gross total income.
Step 5: Apply Deductions
The employer then applies deductions per Chapter VI-A of the Income Tax Act based on the employee’s investment declarations. These declarations might include:
Additionally, deductions under various sections, such as Section 80D (health insurance premiums) and Section 80G (donations), are also applied as per the employee’s declaration.
Income tax is calculated using the following formula:
Taxable Income = Gross Salary - Deductions;
Income Tax = (Taxable Income x Applicable Tax Rate) - Tax Rebate
If you are employed by two or more employers simultaneously, you can submit your salary and TDS details using Form 12B to any employer. Once the employer has received all necessary information from you, they will be responsible for computing your gross salary and deducting TDS accordingly.
If you resign and join a new employer, you can provide your previous employment details in Form 12B to the new employer. This employer will then consider your previous salary, and TDS will be deducted for the remaining months of the financial year.
If you choose not to provide income details from other employment, each employer will only deduct TDS from your salary.
Amounts owed at the average income tax rate must have tax withheld at source by the employer under Section 192. The calculation must use the rates in effect for the fiscal year the payment is made.
To download the appropriate form for an income tax refund, simply go to the income tax portal and log in. Fill out the form completely and submit it. You could claim the money if your employer withheld taxes from your pay when you weren’t entitled to them by filing income tax returns.
Tax deductions (TDS) on the interest generated from bank accounts do not apply to seniors aged 60 or over. However, the exemption applies if the interest on deposits from each bank totals up to ₹50,000 per year.
The difference is refundable when the TDS on a payment is larger than the employee’s actual tax burden. The investment information disclosed at the beginning of the fiscal year frequently diverges from the actual investments made by year’s end.
All additional updates, excluding PAN number and challan changes, must be made offline using TIN-FC. By registering on the online TRACE portal, you can use the online TDS challan correction service as a tax-paying citizen.
Employers are required to deduct TDS from the salaries of employees surpassing the maximum exempt limit. In contrast, employees can furnish evidence of tax-saving investments and expenditures to mitigate the TDS deducted by their employer. Banks will levy a 10% TDS on interest payments for fixed deposits.
The employer must file a TDS return on time because tax is withheld at the source before the payment reaches the employee. The Central Board of Direct Taxes (CBDT) may also fine the employer for not depositing the government’s tax on time.
When Form 15G or 15H is submitted, TDS can be avoided. Form 15H is for senior citizens. It can be submitted if there is no tax on total income. Form 15G is for everybody else except NRIs.
The employer must provide you with Form 16, which includes details of your salary, such as the amount paid and tax deducted. This may also be accompanied by Form 12BA, which shows particulars of perquisites and profits in lieu of salary.
The employer must file a salary TDS return using Form 24Q, which must be submitted quarterly. This form reports the employee salary and the TDS deducted from these payments.
The employer is responsible for providing a TDS certificate to the employee for the tax deducted from their salary.
After filing the TDS return, the TDS certificate (Form 16) is generated in a specified format and can be downloaded from the TRACES utility. Form 16 comprises Part A and Part B.
Part A of Form 16 primarily includes details of the quarterly TDS deducted and deposited, the employer’s PAN and TAN, and other relevant information.
Part B of Form 16 is an annexure to Part A. The employer prepares it for their employees and contains a salary breakdown, exemptions, deductions approved under Chapter VI-A, and the income tax amount.
Uderstanding what is TDS on salary Section 192 is a pivotal when it comes to understand the Indian tax framework, ensuring systematic tax collection and compliance. It places the responsibility of tax deduction on employers, simplifying the process for employees and contributing to a streamlined tax system. Understanding the nuances of TDS on salary helps employers and employees navigate their tax obligations efficiently, promoting transparency and accountability in income tax payments.
1
You can obtain your TDS certificate (Form 16) from your employer, who must issue it to you by June 15th of the following financial year.
2
Filing a TDS return involves preparing and submitting the required forms (such as Form 24Q for salary TDS) every quarter through the Income Tax Department’s e-filing portal or authorized TIN facilitation centers.
3
TDS on salary is considered a pre-paid tax. It reduces your overall tax liability when you file your annual income tax return. The TDS amount is credited against your total tax due, and any excess TDS can be claimed as a refund.
4
You can reduce your TDS liability by investing in tax-saving instruments such as PPF, ELSS, NSC, and other schemes eligible for deductions under Sections 80C, 80D, and other relevant sections of the Income Tax Act.
5
If your employer fails to deposit the TDS deducted from your salary, they may face penalties and interest. However, you will still receive credit for the TDS amount reflected in your Form 26AS, and the employer is responsible for any discrepancies.
6
Yes, there are penalties for late payment or non-payment of TDS. Employers may be charged interest, and additional penalties may apply for failure to comply with TDS regulations.
7
Yes, if your actual tax liability is less than the TDS claim on ITR, it is a refund by filing your annual income tax return. The excess amount will be refunded to you by the Income Tax Department.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
