HOW TO DEDUCT TDS ON SALARY

Salary includes every payment made by an employer to his employee for Services Rendered. It is an inclusive definition and includes monetary as well as non-monetary items.

Any person responsible for paying any income under the head Salaries is to deduct Tax on the Amount payable at the Average rate of the Income Tax computed on the basis of the rates in force for the financial year in which the payment is made. Therefore the liability to deduct Tax at Source in the case of salaries arises only at the time of payment.

PROCEDURE:

1.       TDS ON SALARY

• Calculate Tax on Gross Salary received by the Assessee from his Employer during the Previous Year
• Calculate TDS to be deducted every month= Tax ÷ 12

TDS is to be deducted only when the salary exceeds the exemption limit.

2.       TDS ON NON-MONETARY PERKS PAID BY EMPLOYER

• Calculate Tax on Gross Salary (including Non-Monetary Perk)
•  Calculate Average Rate of Tax =Gross Salary ÷ Tax
•  Calculate TDS on Non-Monetary Perk =Average Rate of Tax (as computed above) * Non-Monetary Perk
• Amount required to be deposited every month by employer =TDS ÷ 12

TDS paid by employer will be exempt. It will not be added to the employee’s salary & also employer will not be allowed to deduct tax as per sec 40(a)(v) while computing his income. Employer will get the credit of TDS paid by employer at the time of computation of his Net tax liability.

3.       SALARY FROM MORE THAN ONE EMPLOYER

Where during the Previous Year the Assessee is employed simultaneously under more than one employer or has changed the employment during the Previous Year he may furnish to the employer of his choice or the subsequent employer such details of salaries due or received by him from other employer.

Deduction of TDS by

·         First Employer to whom No Details have been given

Same Procedure to be applied as discussed in point 1

·         Second Employer to whom Full Details have been Furnished

Income from Salaries
Salary from first employer (Salary per month* No. of months worked)	xxx
Salary from second employer (Salary per month * No. of months worked)	xxx
Total	xxx
Less: Deductions if any	(xxx)
Income under the Head Salaries (a)	xxx
Computation of Tax
Tax on (a) including Education & Secondary Higher Education Cess	A
Less: TDS deducted by first Employer	B
TDS to be deducted by second employer (b)	(A-B)
TDS to be deducted every month= (b) ÷ 12

4.       IF AN EMPLOYEE RESIGNS FROM SERVICE

If an Employee resigns or otherwise leaves the service, tax should be deducted only on the salary due and payable upto the date on which he leaves or resigns from the service.

This Article has been Shared by Student of ICAI Palak Aggarwal. She Can be reached at aggarwal.palak2809@gmail.com

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