Income Tax

What Is TDS on Salary – A Detailed Overview

WHat is TDS

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:

  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:

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:
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

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  

NOTE: In budget 2018 cess on income tax was increased from 3% in FY 2017-18 to 4% for FY 2018-19.

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

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)

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

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.

Savvy Midha

"Savvy Midha holds the degrees of Bachelor of Commerce(honors), LL.B and Company Secretary. She is an experienced Legal and Financial writer with expertise in research, drafting, and copy-writing."

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