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How to Calculate TDS on Salary ?

TDS, often known as tax deducted at source, is a tax collecting strategy used in India. TDS must be deducted from the wages that employers pay their employees. In this article, we'll go over how to calculate TDS on a pay. Determine Your Gross Salary in


Step 1

The first step in figuring the TDS on a paycheck is figuring out the gross salary. The whole amount of pay, including base pay, a housing allowance, bonuses, and other benefits, is known as the gross salary. For instance, if the employee's basic pay was Rs. 40,000, HRA was Rs. 15,000, and supplementary allowances were Rs. 5,000, the gross compensation would be Rs. 60,000. Subtract Allowances and Exemptions in


Step 2

Subtracting the Income Tax Act-permitted exemptions and allowances is the next step. Here are a few examples of common exclusions and leeway:

Typical Deduction for the Years 2021–2022:


Rs. 50,000 Home Rent Allowance (HRA):

The lowest amount of HRA actually obtained, 50% of basic income if you live in a metro area, 40% if you do not, and rent that is more than 10% of your wage.


The Leave Travel Allowance (LTA) is exempt twice every four-year period.

Annual medical reimbursement of up to Rs. 15,000


Up to Rs. 1,600 per month in conveyance allowance

For instance, if an employee is eligible for a standard deduction of Rs. 50,000 and has earned HRA of Rs. 15,000, the taxable salary would be Rs. 60,000 - Rs. 50,000 - Rs. 15,000 = Rs. -5,000. No TDS will be applied because no tax is owing in this circumstance.

Calculate your tax liability and taxable income in step 3.


Step 3

Using the proper income tax slab rates for the current fiscal year, the next step is to calculate the taxable income and tax liability. The tax slab rates for the fiscal years 2021 and 2022 are as follows.


Income Range

Tax Rate

Upto Rs.2.5 Lacs

Nil

Rs.2.5 Lac to Rs.5.00 Lacs

5%

Rs.5 Lacs to Rs. 10 Lacs

20%

Rs. 10 Lacs and above

30 %


For instance, the tax obligation would be determined as follows if the taxable pay was Rs. 4,50,000: • Up to 2.5 lakh rupees: Nil • Taxable income between Rs. 2.5 lakh and Rs. 4.5 lakh: 5% of Rs. 2,00,000 equals Rs. In this instance, there is a Rs. 10,000 tax obligation.


Step 4:

Establish the TDS The final step is to determine how much TDS must be deducted from the salary. The basis for determining the TDS is the tax liability identified in step 3 of the process. The appropriate income tax slab rates for the fiscal year determine the TDS rate. For salaries, the TDS rate and the applicable income tax slab rate are the same.


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