How do you define Salary? TDS

How do you define Salary

Salary is defined as the remuneration that a person receives periodically for rendering services based on an implied or express contract. If you are in an employee-employer relationship, you belong to the salaried class of individuals.

However, not all income is termed as salary. If a professional is being paid for his/her expertise in a professional capacity, it is termed as 'Professional/Technical Fees'. Similarly, a partner earning salary from his/her company is charged taxes under 'Profits & Gains from Profession or Business'. Other examples include the salary paid to a Member of Parliament or a Member of Legislative Assembly. According to the Indian Income Tax Act (ITA), 1961, a salary includes pension or annuity, wages, commission or fees, GRATUITY, profits or perquisites on salary, salary advance etc.

How to Calculate TDS on Salary

What is TDS Calculated on?

The CTC quoted to you at the time of joining includes components such as basic salary, travel allowance, HOUSE rent allowance, medical allowance, dearness allowance, special allowances and other allowances. The CTC is divided into two major categories : salary and perquisites. Perquisites, or perks as they are popularly called, include facilities and benefits provided by the employer towards expenses such as traveling, canteen and fuel subside, hotel expenses and so on.

Income Tax Calculator

TDS Rate Chart :

Rates for Tax Deduction at Source for FY 2017-18

Particulars	TDS Rates (in %)
Section 192: Payment of salary	According to Income Slab as specified above
Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee (with effect from 01.06.2015).	10
Section 193: Interest on securities
a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act;	10
b) any debentures issued by a company where such debentures are listed on a recognized stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made there under;	10
c) any security of the Central or State Government;	10
d) interest on any other security	10
Section 194: Dividend other than the dividend as referred to in Section 115-O	10
Section 194A: Income by way of interest other than "Interest on securities"	10
Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort	30
Section 194BB: Income by way of winnings from horse races	30
Section 194C: Payment to contractor/sub-contractor
a) HUF/Individuals	1
b) Others	2
Section 194D: Insurance commission	5 (10% till Assessment year 2016-17)
Section 194DA: Payment in respect of life insurance policy	1 (2% till 31-5-2016)
Section 194EE: Payment in respect of deposit under National Savings scheme	10 (20% till 31-5-2016)
Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India	20
Section 194G: Commission, etc., on sale of lottery tickets	5 (10% till 31-5-2016)
Section 194H: Commission or brokerage	5 (10% till 31-5-2016)
Section 194-I: Rent
a) Plant & Machinery	2
b) Land or building or furniture or fitting	10
Section 194-IA: Payment on transfer of certain immovable property other than agricultural land	1
Section 194J: Any sum paid by way of a) Fee for professional services, b) Fee for technical services c) Royalty, d) Remuneration/fee/commission to a director or e) For not carrying out any activity in relation to any business f) For not sharing any know-how, patent, copyright etc.	10
Section 194LA: Payment of compensation on acquisition of certain immovable property	10
Section 194LBA(1): Business trust shall deduct tax while distributing, any interest received or receivable by it from an SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders.	10
Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]	10
Section 194LBC: Income in respect of investment made in a securitization trust (specified in Explanation of Section 115TCA)	25% in case of Individual or HUF 30% in case of other person
Any Other Income TDS Deduction Rate for Financial Year 2017 - 2018 Tax applicable for individuals below 60 years Annual Income Tax Rates Education Cess Secondary and Higher Education Cess Up to Rs.2,50,000 Nil Nil Nil Rs.2,50,001-Rs.5,00,000 5% 2% of income tax 1% of income tax Rs.5,00,001-Rs.10,00,000 Rs.12,500 + 20% 2% of income tax 1% of income tax Above Rs.10,00,000 Rs.1,12,500 + 30% 2% of income tax 1% of income tax Tax applicable for individuals over 60 years and under 80 years Annual Income Tax Rates Education Cess Secondary and Higher Education Cess Up to Rs.3,00,000 Nil Nil Nil Rs.3,00,001-Rs.5,00,000 5% 2% of income tax 1% of income tax Rs.5,00,001-Rs.10,00,000 Rs.10,00 + 20% 2% of income tax 1% of income tax Above Rs.10,00,000 Rs.1,10,000 + 30% 2% of income tax 1% of income tax Tax applicable for individuals over 80 years and above Annual Income Tax Rates Education Cess Secondary and Higher Education Cess Up to Rs.5,00,000 Nil Nil Nil Rs.5,00,001-Rs.10,00,000 20% 2% of income tax 1% of income tax Above Rs.10,00,000 Rs.1,12,500 Rs.1,00,000 + 30% 2% of income tax 1% of income tax TDS should be deducted at applicable rates as above along with surcharge and Education Cess. How is TDS calculated? Calculate TDS from Salary The government allows tax exemption under Section 80C and 80D. This allows an individual to seek for exemption on tax based on various types of investment he/she is making for that particular financial year. The TDS on salary can be calculated by reducing the exemption from total annual earning as specified by the Income Tax department. The employer is required to obtain a declaration and proof from individuals to approve tax exemption. The following categories are considered for exemption: House Rent Allowance - If an employee is paying towards accommodation as rent and entitled for HRA from the employer, the employee can declare this amount for tax exemption. Conveyance or Travel Allowance - If an employee is provided with conveyance allowance, the employee can declare them for tax exemption. Medical Allowance - If an employee is entitled to a medical allowance, he/she can declare and produce medical bills for tax exemption. There are limits to the maximum amount that can be considered for exemption. TDS Deductions The following process is involved in the deduction of TDS: Calculating total earning - The employer is required to calculate the total earning of the employee. Calculating total amount eligible for the exemption - The employer is accountable for calculating the total amount that is considered for tax exemption. The employee needs to declare the type of amount that is eligible for exemption. Obtaining declaration and investment proof - The employer is required to collect investment and proofs from employees Depositing TDS deductions - The employer will require depositing the collected TDS to the central government. Section 80C An employee can declare for a maximum of Rs.1,50,000 for tax exemption. The following investments schemes are considering for exemption under 80C: Investment in mutual funds and equity shares, such as ULIP, Linked Saving Scheme of a Mutual Fund/UTI Life insurance Premium paid Contribution to statutory PF, 15 years P.P.F., and superannuation funds Payments towards subscription for National Saving Certificates and Home Loan Account Scheme Interest earned through few of the National Savings Certificates are eligible for a certain amount of tax Fixed deposit scheme for a period of minimum 5 years Section 80CCG An employee is eligible for a maximum of Rs.25,000 annual exemption if the employee has made an investment under certain equity saving schemes. The investment should be made for at least 3 years from the date of scheme acquisition. Section 80D The section 80D offer exemption for the premiums paid for a Medical Insurance. The exemption is also extended to the individual's dependents. There are various other Sections that regulates many other types of exemptions.	10