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What is the TDS Rate on Salary?

Verify TDS (Tax Deducted at Source) on salary under Section 192 of the Income Tax Act of 1961. Understand the rules for TDS, TDS exemptions and TDS limit for salary.

  • 3,084 Views | Updated on: Mar 20, 2024

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 is deducted from their ultimate tax liability. The receiver is given credit for the money which has already been deducted and paid on their behalf.

TDS On Salary

Businesses are also obligated to subtract the TDS rate on salary under Section 192 when giving wages and salaries to their employees. The remaining amount after the deduction of TDS is due to be given to the employees. The TDS rate on salary needs to be collected based on the taxpayer’s average income tax rate for the financial year. The average earnings taxation rate is determined using the income tax slab rates in effect for that fiscal year. Every financial year has a different rate. For example, by utilizing the TDS calculator for FY 2021-22, you can find out what TDS slab you fall into each year.

TDS On Salary Limit FY 2021-22

TDS On Salary Limit 2021-22

TDS Calculator FY 2021-22

Income up to ₹2.5 Lakhs

NIL

Income From ₹2.5 Lakhs to ₹5 Lakhs

5% Of Total Income

Income From ₹5 Lakhs to ₹10 Lakhs

20% Of Total Income + ₹12,500

Income > ₹10 Lakhs

30% Of Total Income + ₹1,12,500

TDS On Insurance

While TDS is normally taken from a life insurance policy’s maturity value, it is not the same everywhere. Under Section 10 (10D), you can save TDS on life or term insurance if:

1.The plans were issued on or before March 31, 2012, with an amount assured of at least 5 times the average premium paid.

2. The policies were issued on or after April 1, 2012, with an amount assured of at least 10 times the yearly premium paid.

TDS Tax benefits on specific allowances exist, just as they do for other forms of taxes. The Income Tax Department offers TDS exemptions and tax benefits under the following conditions:

1. Those who are not required to file a Section 139 income tax return.

2. For those taxpayers who make a disclosure under Section 15G/15H at the start of the fiscal year and have it validated by the tax deductor in accordance with the regulations.

3. For those instances that are explicitly exempted under Section 194A of the Income Tax Act (subsection 3).

4. For those who acquire a certification from the assessment authority under Section 197 of the Income Tax Act. This certification orders the deductor not to deduct tax on that specific assessment, to deduct tax at a reduced rate, or to deduct tax in accordance with the certificate’s terms. The Income Tax Officer also determines the legitimacy.

To summarize, if you don’t have the right and adequate understanding of the TDS rate on salary, the entire notion might be confusing. Although, after completing thorough research and becoming aware of everything that it includes, this feature of a perfectly operating economy only serves to benefit everyone.

How to Calculate TDS On Salary?

If you are under 60 and have a taxable income totalling ₹5 lakh, you must pay tax on ₹2.5 lakh, or 5% of ₹(income up to ₹2.5 lakh is not taxable). Please be aware that your employer will deduct TDS each month. Therefore, your anticipated yearly tax liability is divided by 12 and paid in full each month.

Who Is Liable to Deduct TDS On Salary?

Amounts that are owed at the average income tax rate must have tax at source withheld by the employer in accordance with Section 192. The calculation for this must be done using the rates that are in effect for the fiscal year in which the payment is made.

Is TDS Deducted Every Month from Salary?

Yes, TDS is subtracted from salaries each month. In accordance with Section 192, the employer will take TDS from the employee’s wage at the time of payment. Since the employee receives a salary each month, the employer will deduct TDS on the salary limit from the employee’s monthly pay.

Is TDS Deduction On Salary Mandatory?

According to Section 192, the employer must deduct tax at source from the amount due at the average income tax rate. This needs to be calculated using the rates that are in effect for the fiscal year that the payment is made.

How to Claim Your TDS On Salary?

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.

How Can I Be Exempt from TDS Payment?

Tax deductions (TDS) on the interest generated from bank accounts are not applicable to seniors aged 60 or over. However, if the interest on deposits from each bank totals up to Rs 50,000 per year, the exemption applies.

Is TDS On Salary Refundable?

When the TDS on a payment is larger than the employee’s actual tax burden, the difference is refundable. The investment information disclosed at the beginning of the fiscal year frequently diverges from the actual investments made by year’s end.

How to Claim Revised TDS Return?

All additional updates, excluding PAN number and challan changes, must be made using the offline mode using TIN-FC. By registering on the online portal TRACE, you have the option of using the service of online TDS challan correction as a tax-paying citizen.

What Are TDS Deduction Rules 2022?

At the moment of payment for the transfer of virtual digital assets, a person is responsible for Tax Deduction at Source (TDS) at a rate of 1%. The amount on which TDS should be deducted on the sale of immovable property made pursuant to Section 194-IA is being suggested to be changed.

What Happens If TDS Is Not Deposited?

It is the employer’s duty to timely file a TDS return because tax is withheld at the source before the payment reaches the employee. The employer may also be fined by the Central Board of Direct Taxes (CBDT) for failing to deposit the government’s tax on time.

How Can I Save TDS?

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.

Wrapping Up

Every professional deducts TDS as a significant amount of their pay. The employee or professional is still required to submit this tax while filing their tax returns, even if your employer or payee neglects to deduct it or pay it to the government. This implies that you should always keep track of the taxes withheld from your income or salary.

FAQs

1.When Can TDS On Salary Be Claimed?

Only when the actual payment is made may TDS be deducted from a salary. Additionally, it will be subtracted when the employee’s salary is taxed. TDS rate on salary won’t be deducted, however, if the remuneration is equal to or less than ₹2,50,000.

2.How Many Types of TDS Are There?

Form 16 and Form 16A are the two different types of TDS Certificates. A certificate indicating the amount deducted as tax must be given to the deductee in accordance with Section 203 of the Income Tax Act of 1961.

3.What Is the Main Difference Between PAN card and TAN card?

PAN, or a Permanent Account Number, is given to taxpayers, whereas TAN is given to tax deductors. For anybody who does financial transactions or pays income tax, the Income Tax Department also requires a PAN, a 10-digit identity number.

4.How Is TDS On Salary Calculated?

At the employee’s “average rate of income tax,” the employer deducts TDS from the employee’s salary. It will be computed as follows: Average Income tax rate = Income tax payable (calculated through slab rates) divided by the employee’s estimated income for the financial year.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

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.

Amit Raje
Reviewed By :
Prasad Pimple

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

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