It is the responsibility of every tax paying citizen of a country to remain informed about which taxes as well as how much taxes are applicable for him or her in a financial year. Among these, one of the most important taxes that every working professional should stay apprised of are the taxes on salary. In India, TDS makes up one such crucial form of tax on an individual’s income.
Having said that, not all professionals are always aware of whether TDS is being deducted from their salaries and more specifically how the amount is being calculated. In order to effectively save income taxes in India, this knowledge about the calculation and deduction of TDS on your salary can be vital. Let us further discuss the topic in detail.
To start off, let us review how TDS is defined and what it represents. TDS essentially stands for Tax Deducted at Source and its aim is to deduct tax directly at the source of income, provided it crosses certain threshold limits. Unlike income tax which is direct in nature, TDS is not paid directly to the government by a taxpayer. Instead, an applicable portion of TDS is deducted by the person (deductor) who is making a payment to another (deductee). The resulting amount is then deposited by the deductor to the government, on behalf of the deductee.
TDS is applicable on a number of types of payments, including rent payments, interest paid by banks, commissions, consultation fees and many more. However, for our purpose, we will focus on TDS as the calculated tax on salary issued by an employer.
As per Section 192 of the Income Tax Act, TDS can be deducted on salaries provided by employers such as private or public companies, partnership firms, individuals and even HUFs. This TDS must be deducted by your employer at the time of payment of your salary, and this tax on salary can be claimed by you later in your annual tax returns.
Keep in mind that unlike various other forms taxes, TDS does not have a specific rate of deduction of tax on your salary. If your salary falls below the basic exemption limit (which is Rs 2.5 lakhs for people below the age of 60), you are exempted from paying any TDS. However, beyond that figure, the rate of TDS that applies to you depends on your income tax slab and taxable income after deductions.
To determine how much tax on salary you are liable to pay in the form of TDS, you must first determine your taxable income and applicable tax slab. Here are a few steps that can get you started:
With these steps, you too can calculate the applicable TDS rate on your own annual salary and find relevant means of saving income tax in India. One of the most effective means of tax-saving as well financially safeguarding your loved ones is to avail a trusted life insurance policy such as the iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. Apart from being eligible for tax benefits, this term insurance plan comes with a number of beneficial features such as extensive coverage, payout options, and add-on covers to enhance your coverage for years to come.
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