If you are employed, your major source of income is your salary. It is a fixed amount of money that you receive on a
\npre-determined date every month to compensate you for the services you provide.<\/p>\n
If your salary falls within a certain income tax slab, then it is taxable under Section 192 of the Income Tax Act, 1961.
\nYour employer will deduct tax before crediting your salary to the bank account. This is referred to as Tax Deducted at
\nSource or TDS.<\/p>\n
Wondering what is TDS on salary? To understand this, you need to know how it is computed, when it is deducted, and how
\nyou can reduce your tax liability.<\/p>\n
Section 192 requires that your employer credit your salary after deducting TDS. Typically, a TDS deduction on salary
\ntakes place on an estimate of your income.<\/p>\n
This is also the reason why you are required to provide information about your income, investments, and other deductions
\neither at the beginning of the year or when you join the organization, whichever is earlier.<\/p>\n
TDS on salary is deducted when your salary is paid. It does not happen before or after. It is not applicable when your
\nsalary is in accrual.<\/p>\n
However, if your employer chooses to pay you an advance on your salary or if they pay you your outstanding salary in one
\ngo, then that will be taxed and a TDS deduction on salary will occur.<\/p>\n
Moreover, it is important to note that TDS is only applicable on salaries above a certain limit. So, if your annual
\nincome falls below the taxable limit, then you do not need to worry about TDS on salary.<\/p>\n
According to Section 192, the TDS rate is not specific. The TDS calculation on salary is based on the income tax slab
\nand rate in the particular financial year during which your salary is credited.<\/p>\n
Moreover, TDS deduction on salary occurs only after factoring in tax exemptions, allowances and rebates, and other
\ndeductions you are eligible for.<\/p>\n
Essentially, the total tax that has to be deducted from your income for a specific financial year is divided by 12 or
\nthe number of months remaining in that year.<\/p>\n
The subsequent amount is considered as the tax at source to be deducted.<\/p>\n
Here are a few entities that can deduct TDS. However, as per the TDS Section 192 for salary, there must be an
\nemployer-employee relationship between the following entities and the taxpayer.<\/p>\n
Read on to find out how your TDS on salary is calculated.<\/p>\n
Your employer will ideally arrive at an estimate of your net taxable income and make a TDs deduction on that. To do so,
\nthe employer will deduct allowances and tax exemptions from your gross salary.<\/p>\n
If you have any other income, in addition to your salary, and have declared that, then your employer will add that to
\nyour taxable salary.<\/p>\n
If you have declared any tax-saving investments under Section 80C, 80D, and other sections of the Income Tax Act, 1961,
\nthen your employer will deduct those too from your income.<\/p>\n
Finally, your employer will deduct TDS on salary depending on the tax slab in which your taxable income falls.<\/p>\n
These steps will be much clearer with an example.<\/p>\n
Let us say your basic salary is INR 8 lakhs. In addition to this, the following items are included in your salary<\/p>\n
Your gross salary would be the sum of all these components which is INR 14 lakhs. Now, to calculate the TDS, the
\nfollowing steps are to be followed.<\/p>\n