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Section 192 – TDS on Salary

What is Salary?

Salary include Wages, Annuity or Pension, Gratuity and others as per Section 17(i). It also includes Perquisites as per Section 17(ii) and Profit in lieu of Salary as per Section 17(iii)

Tax Deduction (TDS) under section 192

No specific TDS rate is specified, however, the deduction is as per the income tax slab rates applicable in the relevant financial year for which the salary is paid to an employee.

At first, the total projected taxable income of the employee is determined after taking into consideration the expected income and the exemptions / deductions. Based on this monthly TDS is calculated by dividing it by 12 (twelve). This amount is to be deducted from the employee’s salary each month.

In case of change in projected income during the course of the year, tax liability is re-computed as per the revised total income. Any excess or deficit arising out of any earlier deduction is adjusted in the subsequent deductions during the same financial year.

If change in projected income leads to excessive tax deduction, employer shall not deduct any tax in subsequent months. The refund of excess tax paid during the financial year, shall be claimed as a refund by the employee during filing IT Return.

Important Notes:

Illustrations

Employee #1

Annual Tax based on Projected Income: Rs. 12,000

Note: No change in the Projected Income

TDS – Rs. 1,000 each month

Total TDS for the Year – Rs. 12,000

Employee #2

Annual Tax based on Projected Income: 12,000 (April to June)

Annual Tax based on Projected Income: 15,000 (July to Dec)

Annual Tax based on Projected Income: 12,600 (Jan to Feb)

Actual Tax: 18,000

Formula for Calculation:

[(Annual Tax / 12) X Month Serial No.] Less: Cumulative TDS till Date = TDS for the Month

Note: April is 1, May is 2 and so on.

TDS for each Month

Apr        (12,000/12 X 1 = 1,000) – 0 = 1,000

May       (12,000/12 X 2 = 2,000) – 1,000 = 1,000

Jun         (12,000/12 X 3 = 3,000) – 2,000 = 1,000

Jul          (15,000/12 x 4 = 5,000) – 3,000 = 2,000 (increase in tax)

Aug        (15,000/12 x 5 = 6,250) – 5,000 = 1,250

Sept       (15,000/12 x 6 = 7,500) – 6,250 = 1,250

Oct         (15,000/12 x 7 = 8,750) – 7,500 = 1,250

Nov        (15,000/12 x 8 = 10,000) – 8,750 = 1,250

Dec        (15,000/12 x 9 = 11,250) – 10,000 = 1,250

Jan         (12,600/12 x 10 = 10,500) – 11,250 = (-750) no TDS (decrease in tax)

Feb         (12,600/12 x 11 = 11,550) – 11,250 = 300

Mar        (18,000/12 x 12) = 18,000) – 11,550 = 6,450 (increase in tax)

Authored by – CA Anushka Saraogi

⇒Tax on Salary – Popular Exemptions & Deductions⇐

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