TDS on Salary: Deductions, TDS Calculation with Example

TDS has to be deducted by any person who is responsible for paying any income chargeable under head “Salaries “at the time of payment. TDS has to be deducted on the estimated income of employee at the average rate of Income-tax computed on the basis of rates in force for that financial year. There is no tax on salary if the annual salary of employee is below maximum amount not chargeable to tax.

The tax to be deducted from the salary payable in foreign currency shall be calculated in INR. The salary paid in foreign currency shall be converted into Rupees (INR) as per the “Telegraphic Transfer Buying Rate” prevailing on the date on which tax is required to be deducted.

The employer shall take into consideration the following exemptions and deductions for the purpose of TDS calculation: a) Exemptions covered under Section 10 (HRA, Conveyance Allowance, other allowances or perquisites exempt from tax, etc.) b) Deductions allowed under Chapter VI-A (Section 80C to 80U) Employer shall obtain proof and evidences from employee before allowing exemptions and deductions.

In case an employee is employed by more than one employer during the financial year, he may furnish the details of salary due or received from one employer to another employer in Form 12B. In that case, the tax will be deducted on the aggregate salary by one of the employers to whom the information is furnished.

Employee who has received arrears from earlier years in any financial year shall furnish the particulars of such receipt in Form 10E to his employer for computation of relief under section 89.