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How to calculate Tax to be deducted (TDS) from Salary

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1
Introduction-

How to calculate the amount of TDS from salary every month- First, we have to calculate the salary for the year and deduct all exempted incomes & eligible deductions if any. We have to take declaration from the employee regarding their Investments/Savings or details regarding whether he is living in rented accommodation or own house, if living in rented accommodation take the receipts for rent paid or rent agreement. There after calculate his tax liability.

   
Budget 2019, has made the following changes as compared to previous year-
  • No Income tax till Income of Rs 5 lakh for individual tax payers.
  • Standard deduction for salaries persons has increased to Rs 50,000 from Rs 40,000. 
  • Rebate under the Section 87A of the Income Tax Act has been modified. Tax Rebate Limit under 87A increased from Rs. 3.5 lakhs to Rs. 5.0 lakhs. The maximum limit of the tax rebate increased to Rs.12,500 from the present limit of Rs. 2,500. This will be applicable only for those peoples having net taxable income of less than Rs.5 lakh.
 
Here is an example how to calculate tax to be deducted from Salary-

Example-

Mr. X, aged about 35 years, living in Chandigarh at rented house, having the following details of income and investments for the year are as under-

Particulars

F.Y. 2018-19 (Rs.)

F.Y. 2019-20 (Rs.)

Basic Salary

6,00,000

6,00,000

Dearness Allowance

2,40,000

2,40,000

House Rent Allowance

90,000

90,000

Children Education Allowance

2,400

2,400

Special Allowance

12,400

12,400

Medical Allowance

15,000

15,000

Transport Allowance

19,200

19,200

Employer’s contribution to PF

72,000

72,000

Insurance Premium Paid (self)

50,000

50,000

Mediclaim Premium paid (self)

22,000

22,000

Deposited in PPF

20,000

20,000

Leave Travel Allowance

60,000

-

Rent Paid

10,000

10,000

Mr. X travelled to Kashmir with his family on 28.05.2018 and spends Rs. 35,000 in respect of travelling, Rs. 10,000 in respect of food, Rs. 10,000 in respect of stay or Rs. 15,000 on shopping. What will be the amount of Income tax for the F.Y. 2018-19

Answer-

Computation of Taxable Income of Mr. X, for the year 2018-19

Particulars

Amount (Rs.)

F.Y. 2018-19 (Amount Rs.)

F.Y. 2019-20 (Amount Rs.)

Basic Salary

 

6,00,000

6,00,000

Dearness allowance

 

2,40,000

2,40,000

Less: HRA Exempted

(Least of the following-)

 

Actual Rent paid or

Rent paid – 10% of Salary* or

40% of Salary*

*(Salary means Basic Salary)

90,000

60,000= 30,000 Taxable

 

1,20,000 or

1,20,000 – 60,000= 60,000 or

24,000

30,000

30,000

Children Education Allowance

Rs. 100 per month, per child exempted= 100*2*12=2400

-

-

Special Allowance

12,400

12,400

Medical Allowance

Taxable

15,000

15,000

Transport Allowance

Taxable

19,200

19,200

Less: Exempted towards travelling expenses only

60,000

35,000= 25,000 taxable

25,000

-

Gross Total Income

 

9,41,600

9,16,600

 

 

 

80C (Allowed up to Rs. 1,50,000)

Insurance Premium paid

Deposited in PPF

Employee’s Cont. to PF

 

50,000

20,000

72,000

 

 

 

-1,42,000

 

 

 

-1,42,000

80D Mediclaim Insurance premium paid up to Rs. 25,000

22,000

-22,000

-22,000

 

-40,000

-50,000

Net Taxable Income

 

7,37,600

7,02,600

Up to Rs. 2,50,000 = Nil

Rs. 2,50,001 to Rs. 5,00,000= 5%

Rs. 5,00,001 to Rs. 10,00,000=20%

F.Y. 2018-19-

Nil = 0

12,500 (5% of 2,50,000)

47,520 (20% of Rs. 2,37,600)

F.Y. 2019-20-

Nil = 0

12,500 (5% of 2,50,000)

40,520 (20% of Rs. 2,02,600)

 

 

 

60,020

 

 

 

53,020

Add: Ed.Cess/H. Ed. Cess @ 4%

4% of Rs. 60,020 (F.Y. 2018-19)

4% of Rs. 53,020 (F.Y. 2019-20)

2,401

2,121

Total Amount of Income Tax

 

62,421

55,141

Deduction is available for GTI below Rs. 3,50,000 (F.Y. 2018-19)

Deduction is available for GTI below Rs. 5,00,000 (F.Y. 2019-20)

 

-

 

-

Net Tax Liability

 

62,421

55,141

Tax to be deducted monthly

Total Tax Liablity / 12(Months)

5,202

4,595


TDS which is deducted on salary should be deposited in Time i.e. up to 7th of next month, for example, TDS for the month of April should be deposited up to 7th May. Otherwise Interest will be charged on monthly basis. Form ITNS/281 is used to deposit TDS.

TDS return should be filed in Form 24Q, quarterly basis. For example TDS return for the quarter ending June 2018 will be filed up to 31st July 2018. Otherwise Penalty for late filing or non filing will be imposed.


It depends upon Source of Income.

For example- Resident Individuals having salary income has to file ITR-1.


How to calculate HRA : Use HRA exemption calculator-



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