Income Tax

What Is TDS on Salary – A Detailed Overview

Salaried employees are inquired for their investment details of any kind at the start of every financial year by their employer. TDS on Salary is deducted according to these investment declarations. Based on the investment declaration statement of an employee, an accountant of an employer estimates the taxable income and deducts the tax every month in the form of Tax Deducted on Source (TDS). Hence, we can conclude that TDS is a mode of collecting income tax. TDS is managed by the Central Board of Direct Tax (CBDT)^[1] and it is the part of the Department of Revenues. This amount is collected to keep stable the revenue source of Government and it also helps in preventing tax evasion.  

Applicability Of TDS

TDS is applicable on:

• Salary
• Commission
• Royalty payments
• Contract payment
• Interest earned on financial investments
• Earning from lotteries
• Rent income
• Professional fee
• Brokerage

TDS Return Filing Due Dates

The employer needs to furnish quarterly TDS return within one month from the end of a particular quarter. Employer issue the form 16 to an employee with complete details of TDS and other complete tax paid. Due dates for the return filing of TDS are as under:

QUARTER	DUE DATE FOR GOVERNMENT DEDUCTOR	DUE DATE FOR NON-GOVERNMENT DEDUCTOR
1st April- 30th June	31st July4	31st July
1st July- 30th September	31st October	31st October
1st October- 31st December	31st January	31st January
1st January- 31st March	31st May	31st May

TDS Return Forms

Depending upon the purpose of deduction, the following forms are filed for TDS return:

1. TDS on salary: form 24Q
2. TDS in case of a foreign company: form 27Q
3. TDS for transfer of immovable property: 26QB
4. TDS for other cases: 26Q

TDS Payment Due Dates

The employer deducts the TDS monthly and deposits it with the government on or before the due dates. TDS shall be deposited through Challan No. 281. Due dates for deducting & depositing TDS are as under:

MONTH	DUE DATE FOR GOVERNMENT DEDUCTOR	DUE DATE FOR NON-GOVERNMENT DEDUCTOR
January	7th February	7th February
February	7th March	7th March
March	7th April	30th April
April	7th May	7th May
May	7th June	7th June
June	7th July	7th July
July	7th August	7th August
August	7th September	7th September
September	7th October	7th October
October	7th November	7th November
November	7th December	7th December
December	7th January	7th January

Steps To Calculate TDS On Salary

TDS on salary can be calculated by following the procedure:

• Calculate gross income by adding up basic income, allowances & perquisites.
• Calculate the maximum amount of exemption that can be claimed by an employee. Following categories are exempted from salary:
• House Rent Allowance
• Travel Allowance
• Medical Allowance
• The exemption can be claimed up to the following amount:

DETAILS	FOR THE FY 17-18	FOR THE FY 18-19	FOR THE FY 19-20
Transport Allowance Deduction	19200	N/A	N/A
Medical Allowance Deduction	15000	N/A	N/A
Standard Deduction	N/A	40000	50000

• Deduct the exemption as calculated above from the gross monthly income.
• TDS is calculated on annual income. Thus multiply the amount calculated above by 12.
• Deduct the amount of investment done up to INR 150000. Investment can be claimed under Section 80C. Investment is done in avenues such as PF, life insurance, home loan repayment, Sukanya Samriddhi Account, etc.

• Now deduct the maximum allowable income tax exemption on salary as per the slab. And pay the tax as per the slab:

Also, Read: Updates About TDS on Cash Transactions.

Income Tax Slab For Individual Below 60 Years Of Age

INCOME SLABS	INCOME TAX RATE + EDUCATION CESS
Up to INR 250000	Nil
INR 250000- INR 500000	5% OF INCOME + 4% CESS
INR 500001- INR 1000000	INR 12500 + 20% OF INCOME ABOVE 500000 + 4% CESS
INR 1000001 OR MORE	INR 112500 + 30% OF INCOME ABOVE 1000000 + 4% CESS

Income Tax Slab For Individual Above 60 Years Of Age (Senior Citizen)

INCOME SLABS	INCOME TAX RATE + EDUCATION CESS
Up to INR 300000	Nil
INR 300001- INR 500000	5% OF INCOME + 4% CESS
INR 500001- INR 1000000	INR 12500 + 20% OF INCOME ABOVE 500000 + 4% CESS
INR 1000001 OR MORE	INR 112500 + 30% OF INCOME ABOVE 1000000 + 4% CESS

Income Tax Slab For Individual Above 80 Years Of Age (Super Senior Citizen)

INCOME SLABS	INCOME TAX RATE + EDUCATION CESS
Up to INR 500000	Nil
INR 500001- INR 1000000	20% OF INCOME ABOVE 500000 + 4% CESS
INR 1000001 AND ABOVE	INR 100000 + 30%  OF INCOME ABOVE 1000000 + 4% CESS

As per the budget 2019, there are no changes in the slab are introduced, i.e. it is similar to that of FY 2017-18 & 18-19. However, a rebate of INR 12500 will be available for all the taxpayers with taxable income up to INR 50000 under section 87A. 

Rate Of Tax Deduction At Source

SECTION	PARTICULARS	RATES FOR RESIDENT IN INDIA	RATES FOR NRIs
192	Payment of salary	As per the slab	As per the slab
193	Interest on securities	10	–
194	Dividend	10	–
194A	Interest income	10	–
194B	Lottery income	30	30
194BB	Income from winning horse rides	30	30
194C	Payment to contractors	1 & 2	–
194D	Insurance commission	5 (w.e.f. 01.06.2016) 10% (FY15-16)	–
194DA	Life insurance policy	1 (w.e.f. 01.06.2016) 2 (FY15-16)	–
194E	Payment to non-residents sportsmen	–	20
194EE	Deposit under NSS	10 (w.e.f. 01.06.2016) 20 (FY15-16)	10
194F	Repurchase of the unit by Mutual Fund	20	20
194G	Commission on lottery	5 (w.e.f. 01.06.2016) 10 (FY15-16)	5
194H	Commission or brokerage	5 (w.e.f. 01.06.2016) 10 (FY15-16)	–
194-I	Rent on Plant & machineryLand & building In budget 2019, TDS limit for deduction of tax is increased to 240000 from 180000	2%10%	–
194J	Fees paid for professional service, technical service, royalty, etc	10	–
194LA	Compensation on acquisition of Immovable property	10	–
194LB	Interest on infrastructure debt fund	–	5
194LBA	Income distributed by a business trust to the unit holder	10	5
194LC	Interest paid by an Indian company for the money borrowed in foreign currency	–	5

Penalty And Late Filing Fee

The penalty under section 234E, fine is imposed at the rate of INR200 per day until the return is filed. This penalty is required to be paid until the amount paid as fine is equal to the amount of TDS required to be paid.  

The penalty under section 271H is imposed by the assessing officer to the person who fails to file the TDS statement within due date has to pay a penalty of the minimum amount of INR 10000 to the maximum of INR 100000.

Interest Fee

Section 201A, interest is paid for the following defaults:

• Non-deduction of tax at source:  1% per month
• For non-payment of tax deducted at source: 1.5% per month
• These interests are required to be paid before filing of TDS return.

Recommended Article: TDS Penalty in India.