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How To Calculate TDS on Salary? Understanding TDS Deductions From Salary in India (2024)

Ever wondered why your salary seems a bit lower than expected? It's likely due to TDS deductions. This guide explains how much TDS is deducted on your salary in India, factors affecting the amount, and how to potentially claim a refund.

If your salary seems a bit lower than what your payslip indicates? It's likely due to a mechanism called Tax Deducted at Source (TDS). This system plays a crucial role in collecting income tax from salaried individuals in India.


    Understanding TDS deductions is essential for several reasons:


    • Accurate Salary Budgeting: Knowing how much TDS is deducted allows you to accurately budget your monthly expenses and manage your finances effectively.
    • Tax Planning: By understanding the factors affecting TDS, you can optimize your tax planning strategies throughout the year.
    • Claiming Refunds: In some cases, the TDS deducted might exceed your actual tax liability. Understanding the process for claiming refunds ensures you receive any overpaid amount.


    Recent Union Budget Updates:

    The Union Budget plays a key role in determining income tax slabs and, consequently, TDS deductions. It's essential to stay updated on any changes announced in the most recent budget, as these can impact your take-home salary.

    By being aware of these key points, you can navigate the world of TDS deductions with greater clarity and ensure a smooth tax filing process.


    Factors Affecting TDS Deductions on Your Salary

    While TDS deductions might seem like a complex mystery, understanding the key factors influencing them can bring clarity and empower you to manage your finances effectively. Here's a breakdown of the crucial elements that determine how much TDS gets deducted from your salary in India:


    TDS Deductions From Salary


    1. Income Tax Slab For AY 2024-25

    Below are the income tax slabs applicable to individuals for AY 2024-25:


    Income RangeTax Rate
    Up to ₹2.5 lakhNo tax
    ₹2.5 lakh to ₹5 lakh5%
    ₹5 lakh to ₹10 lakh20%
    Above ₹10 lakh30%


    It's important to note that these tax rates apply to individuals who choose to follow the old regime tax slabs. The old regime allows for a variety of deductions and exemptions. However, taxpayers also have the option to opt for the new regime, which offers lower tax rates but restricts the number of deductions available.


    Income Tax Slabs for Senior Citizens

    The income tax slabs for senior citizens (age 60 years and above) differ slightly from the general slabs. The rates applicable to senior citizens for AY 2024-25 are as follows:


    Income RangeTax Rate
    Up to ₹3 lakhNo tax
    ₹3 lakh to ₹5 lakh5%
    ₹5 lakh to ₹10 lakh20%
    Above ₹10 lakh30%


    Senior citizens can choose between the old and new regime tax slabs based on their specific financial situation.


    Your applicable TDS rate is directly linked to your tax bracket based on your total taxable income.


    2. Salary Components:

    It's important to understand that TDS is not calculated on your gross salary but on your "taxable salary." This means certain allowances and exemptions are excluded from the TDS calculation. Common examples of these exclusions include:


    • House Rent Allowance (HRA)
    • Leave Travel Allowance (LTA)
    • Children's Education Allowance (CEA)
    • Standard Deduction

    Submitting proof of these allowances to your employer can significantly reduce your taxable income and, consequently, the amount of TDS deducted.


    3. Investment Declarations:

    Another crucial factor influencing TDS deduction is your investment declarations. Investments like Public Provident Fund (PPF), Employee Provident Fund (EPF), and National Pension Scheme (NPS) contributions qualify for tax deductions.


    Submitting investment proofs to your employer allows them to adjust the TDS deduction based on your claimed deductions, potentially lowering the amount deducted from your salary.


    Remember, staying informed about these factors and submitting necessary documentation can significantly impact your TDS deductions and optimize your tax planning throughout the year.


    Income Tax Calculator - New Tax Regime


    How To Calculate TDS on Salary?

    It is always a question that how much TDS is deducted on salary per month? Estimating your monthly TDS deduction doesn't have to be a complex calculation. Here's a simplified formula to get you started:


    Monthly TDS = (Annual Taxable Income x Applicable Tax Rate) / 12


    Explanation:

    • Annual Taxable Income: This is your total taxable income for the financial year after considering all eligible deductions and exemptions.
    • Applicable Tax Rate: This refers to the income tax rate that falls within your tax bracket based on your annual taxable income. Refer to the income tax slabs mentioned earlier for this information.
    • 12: This represents the number of months in a financial year.


    Example:

    • Let's say your annual taxable income is Rs. 6,00,000, and you fall under the 20% tax bracket. Here's how to calculate your monthly TDS:
    • Monthly TDS = (6,00,000 x 20%) / 12 = Rs. 10,000
    • Therefore, your estimated monthly TDS deduction would be Rs. 10,000.


    While the above formula provides a basic understanding, several online resources offer more comprehensive TDS calculators:


    Such as HR Calcy can be used to calculate your income tax liability according new & old both tax regime. 


    These calculators allow you to input your specific income details and receive a more precise estimate of your monthly TDS deduction. Remember, this is just an estimate, and the actual amount deducted by your employer may vary slightly due to factors like rounding off or specific company policies.


    Claiming Your TDS Refund: Getting Back What's Yours

    While TDS deductions are a necessary part of the tax collection system, there might be instances where the deducted amount exceeds your actual tax liability. In such cases, you can claim a refund for the excess amount paid. Here's a breakdown of the process:


    Claiming a TDS Refund:

    1. File Your Income Tax Return (ITR): This is the crucial step for claiming any potential TDS refund. Filing your ITR accurately allows the Income Tax Department to assess your total tax liability for the financial year.
    2. Verification: Ensure you e-verify your ITR within the stipulated timeframe. This verification confirms the authenticity of your return and initiates the processing of any potential refund.
    3. Refund Processing: Once your ITR is verified and processed, the Income Tax Department will determine if you are eligible for a refund. If applicable, the refund will be credited directly to your bank account.

    Importance of Filing ITR:

    Filing your ITR is not just a legal obligation; it's the key to claiming any TDS refunds you might be entitled to. Without filing your return, the department has no way to assess your overall tax liability and determine if you've overpaid through TDS deductions.


    Step-by-Step Guide to Claiming TDS Refund:

    Here's a breakdown of how to claim your TDS refund in India:


    Step 1: File Your Income Tax Return (ITR):

    This is the most crucial step. Filing your ITR accurately allows the Income Tax Department to assess your total tax liability for the financial year. This helps them determine if you've overpaid through TDS deductions.


    Things to do:

    • Register or log in to the Income Tax Department's e-filing portal.
    • Download the relevant ITR form based on your income sources.
    • Fill in the required details accurately, including your income from salary, deductions claimed, and TDS deducted.
    • Ensure you pre-validate your bank details (account number and IFSC code) and nominate the bank account for the refund.
    • Submit your ITR electronically.

    Step 2: E-verify Your ITR:

    Verification confirms the authenticity of your return and initiates the processing of any potential refund.


    Options for e-verification:

    • Digital Signature Certificate (DSC)
    • Aadhaar-based OTP
    • Net banking

    Step 3: Refund Processing:

    Once your ITR is verified and processed, the Income Tax Department will determine if you are eligible for a refund. If applicable, the refund will be credited directly to your nominated bank account.


    Processing Time:

    The processing time can vary, but it typically takes several weeks after filing your ITR. You can track the status of your refund online through the e-filing portal.


    Additional Points:

    • The processing time for TDS refunds can vary, but it typically takes several weeks after filing your ITR.
    • If there's a delay in receiving your refund, you can track the status online or contact the Income Tax Department for further information.
    • In some cases, you might be eligible for interest on the delayed refund amount.

    Remember, filing your ITR on time is essential for claiming any potential TDS refunds and ensuring you receive the full amount you're entitled to.


    Additional Tips for Managing TDS Deductions:

    Here are some additional tips to optimize your TDS deductions and ensure a smooth tax filing experience:


    1. Submit Investment Proofs on Time:

    As mentioned earlier, submitting investment proofs like HRA receipts, PPF contributions, and other eligible deductions to your employer on time is crucial. This allows them to adjust your TDS deduction based on your claimed exemptions, potentially minimizing the amount withheld from your salary each month. Remember, late submissions might not be considered for the current financial year, leading to higher TDS deductions.


    2. Regularly Review Your Form 16:

    Form 16 is a TDS certificate issued by your employer that summarizes the total TDS deducted from your salary throughout the financial year. It's essential to review this document regularly to ensure accuracy and identify any discrepancies. In case of any errors, contact your employer for rectification before filing your income tax return.


    3. Seek Professional Advice:

    For individuals with complex financial situations, claiming large refunds, or navigating intricate tax deductions, seeking professional advice from a tax consultant can be highly beneficial. They can help you optimize your tax planning, ensure accurate TDS calculations, and guide you through the intricacies of claiming refunds efficiently.


    By following these additional tips, you can gain greater control over your TDS deductions and ensure a more streamlined tax filing process each year.


    FAQ

    What is the minimum salary on which TDS is deducted?

    Currently, TDS is not deducted on salaries below Rs. 2,50,000 per annum.

    Can I avoid TDS deduction altogether?

    No, TDS deduction is mandatory for salaried individuals above the exemption limit. However, submitting investment proofs can significantly reduce the amount deducted.

    How long does it take to get a TDS refund?

    The processing time for TDS refunds can vary, but it typically takes several weeks after filing your income tax return.

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