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Which Income is categorized as ‘Salary’?
To calculate ‘TDS for Salary’ – it is imperative to define which earnings come under salary. Salary is the type of payment received on specific intervals and by a specific amount for providing certain services as per a contract signed by two parties namely – the employer and the employee. If the relationship between the two parties connected by payment terms are not ‘Employer and Employee’, then the concept of salary does not work even though payment is given and income is earned. Such cases are called non-salary incomes.
Some of these include: Fees for technical or professional services, Payments to contractors and sub-contractors, Payment of Dividends, Interest earned on securities, Interests earned on Bank deposits, Payments for repurchase of units by Unit Trust of India or a Mutual Fund, Prizes from winning lottery or crossword puzzles, Commission and other profits on sale of lottery tickets, Payment of Insurance Commission, commission or brokerage, Rent and so on.
Income Tax slabs on Salary
To calculate the income tax on salary, the first thing to consider is the Income Tax slabs decided by the Income Tax Department of India for the financial year.
For financial year of 2023-24, the Tax slabs are as follows :
- General Category (Less than 60 years):
| Existing Tax Regime | New Tax Regime | ||
| Income Slab | Income Tax Rate | Income Slab | Income Tax Rate |
| Up to Rs. 2,50,000 | Nil | 0 – Rs. 3,00,000 | Nil |
| Rs. 2,50,001 – Rs. 5,00,000 | 5% above Rs. 2,50,000 | Rs. 3,00,000 – Rs. 6,00,000 | 5% |
| Rs. 5,00,001-Rs. 10,00,000 | Rs. 12,500 + 20% above Rs. 5,00,000 | Rs. 6,00,000 -Rs. 9,00,000 | 10% |
| Above Rs. 10,00,000 | Rs. 1,12,500 + 30% above Rs. 10,00,000 | Rs. 9,00,00 – Rs. 12,00,000 | 15% |
| Rs. 12,00,000 – Rs. 15,00,000 | 20% | ||
| Above Rs. 15,00,000 | 30% | ||
- Senior Citizens (60 years and above but below 80 years):
| Existing Tax Regime | New Tax Regime | ||
| Income Slab | Income Tax Rate | Income Slab | Income Tax Rate |
| Up to Rs. 3,00,000 | Nil | 0 – Rs. 3,00,000 | Nil |
| Rs. 3,00,001 – Rs. 5,00,000 | 5% above Rs. 3,00,000 | Rs. 3,00,000 – Rs. 6,00,000 | 5% |
| Rs. 5,00,001-Rs. 10,00,000 | Rs. 10,000 + 20% above Rs. 5,00,000 | Rs. 6,00,000 -Rs. 9,00,000 | 10% |
| Above Rs. 10,00,000 | Rs. 1,10,000 + 30% above Rs. 10,00,000 | Rs. 9,00,00 – Rs. 12,00,000 | 15% |
| Rs. 12,00,000 – Rs. 15,00,000 | 20% | ||
| Above Rs. 15,00,000 | 30% | ||
- Very senior citizens (80 years and above):
| Existing Tax Regime | New Tax Regime | ||
| Income Slab | Income Tax Rate | Income Slab | Income Tax Rate |
| Up to Rs. 5,00,000 | Nil | 0 – Rs. 3,00,000 | Nil |
| Rs. 5,00,001 – Rs. 10,00,000 | 20% above Rs. 5,00,000 | Rs. 3,00,000 – Rs. 6,00,000 | 5% |
| Above Rs. 10,00,000 | Rs. 1,00,000 + 30% above Rs. 10,00,000 | Rs. 6,00,000 -Rs. 9,00,000 | 10% |
| Rs. 9,00,00 – Rs. 12,00,000 | 15% | ||
| Rs. 12,00,000 – Rs. 15,00,000 | 20% | ||
| Above Rs. 15,00,000 | 30% | ||
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For all three categories in addition to appropriate taxes, the following are also collected :
- A surcharge consisting of 10% of the Income Tax in case income is between Rs. 50,000 lakh and Rs. 1 crore
- A surcharge consisting of 15% of the Income Tax in case income is above Rs. 1 crore but less than Rs. 2 crore
- A surcharge of 25% of the income tax in case income is between Rs. 2 crore to Rs. 5 crore
- A surcharge of 37% (under old regime) and 25% (under new regime) of the income tax has to be paid in case income is above Rs. 5 crore
- 4% of the income tax has to be paid as Health and Education Cess by all taxpayers irrespective of the slab they fall into
Income Tax Calculation on Salary
Salary consists of several components which together makes the CTC of the employee. The key component parts of salary include:
- The basic salary along with allowances like House Rent Allowance (HRA), Medical Allowance, travel allowance, transport allowance, dearness allowance, special allowance, other allowances and so on.
- The perquisites (in short ‘Perks’) include the benefits and facilities offered by the employer for expenses like Subsidized fuel and canteen facilities, travel allowance and expenses towards hotels if the employee needs to travel for work and so on.
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Method of TDS Calculation
While talking about Tax calculations, the first thing comes up in this context is the tax deductions and exceptions that are available in the Indian Tax return contexts. Both deduction and exemption of taxes are the ways to lower the tax burden and give some benefits to the people.
There will be certain standard tax exemptions allowed by the Government of India. While computing TDS for the salary, these exemptions are deducted first from the total annual salary as per specification of Income Tax Department of India. Then tax is calculated on the non-exempt part of annual income. There are several provisions by Income Tax Department of India regarding availing tax exemptions. The employees need to submit those proofs of exemption along with the declaration to their employers so that TDS could be computed properly. Employer is responsible for computation of TDS based on the proofs and declaration, deducting the taxes from salary and depositing those with the authority.
Items Eligible for TDS Exemption
Deduction of allowances under Section 10A of IT Act
- HRA – If the employee lives in a rented facility and is paying rent towards accommodation, then it will be allowed for House Rent allowance deduction. A maximum of Rs. 180,000 could be deducted annually from tax as Allowance for House Rent (HRA).
- Transport Allowance – The employer pays this to cover the commute expenses of employees to and from work. An annual deduction in this category is a maximum of Rs. 19,200.
- Savings under Section 80C of IT Act – A whole array of savings and investment options are available under this section to select from and it is among the most popular tax saving options currently. The total tax deduction under 80C is a maximum of Rs. 150,000 invested in either single or in combination of instruments. Some of the 80C instruments include:
- Public Provident Fund
- Contribution to Employers’ Provident Fund
- Premiums paid on Policy of Life Insurance
- Equity-Linked Saving Schemes (ELSS) – these are the Mutual Funds available for tax saving
- Bank Fixed Deposits – Of certain duration
- National Savings Certificates – issued by post offices
- Repayment of the Principal amount for your Home Loan
- TDS Under Sections 80CCC and 80CCD– For contribution towards some annuity plan of any insurance company for receiving pension comes under 80CCC while 80CCD is for contribution towards Nation Pension Scheme (NPS) of Central Government.
Cumulative total for Sections 80C, 80CCC and 80CCD cannot go beyond Rs. 200,000 i.e. Rs. 1.5 lakhs plus an additional Rs. 50,000 is tax deductible for NPS contribution.
- TDS under Section 80TTA– Up to Rs. 10,000 per annum is tax deductible on the interest earned in the savings account of the bank.
- TDS under Section 80D– This section deals with tax deduction for medical expenditure and on payments of medical insurances.
- Medical Allowance – Employees can declare Medical Allowance by producing Medical bills for tax exemptions.
- Premium for purchase of Medical insurance for self, spouse and dependent children – This savings could be up to Rs. 25000 for resident tax payers aged less than 60 years and Rs. 50,000 for senior citizens from FY 2018-19.
- TDS under Section 80U and 80DD– These sections deal with the deduction in case of physical disability of the tax payer and their dependent(s) respectively. Based on the extent of disability, the deduction ranges from Rs. 75,000 to Rs. 125,000 per annum.
- TDS under Section 80DDB– This is applicable towards expenses incurred in the treatment of certain specified diseases. This deduction is capped at Rs. 40,000 annually, even if the treatment expenses exceed these, if less than Rs. 40000.
For Senior citizens and super senior citizens, it is Rs. 1,00,000 exemption.
- TDS under Section 80E– The interest paid on repay of Education loan for higher education is tax deductible. This education loan can be for self, spouse, or children of the employee and there is no upper limit for claiming deduction for this payment.
- TDS for the payment of interest on Home Loan – This comes under Section 80EE. Up to Rs. 50,000 interest payment towards home loan is tax exempted per annum. This deduction is also over and above the Rs. 2,00,000 limit under section 24 of the income tax act.
- TDS under Sections 80G, 80GGA, 80GGB and 80GGC– These are applicable for donations. 80G is general donation, 80GGA is donation towards Rural Development or scientific research, 80GGB and 80GGC are the donations towards political parties.
There are some other profession-specific sub-sections where the TDS is applicable. These Government supported tax saving benefits include:
- A decrease in taxable income of people resulting in more disposable income.
- Decrease in tax payment helps people to engage the disposable income in generating savings and other investment opportunities.
- A reduction in taxable income many a times results in lowering of tax bracket which otherwise a person would not been eligible for.
- Tax exemptions available for charitable activities encourage people to be more engaged in various philanthropic activities.
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TDS Payments of Salary Due Dates
TDS return filing dates for FY 2023-24
| Quarter | Quarter Period | TDS Return Due Date |
| 1st Quarter | 1st April to 30th June | 31st July, 2023 |
| 2nd Quarter | 1st July to 30th September | 31st Oct, 2023 |
| 3rd Quarter | 1st October to 31st December | 31st Jan, 2024 |
| 4th Quarter | 1st January to 31st March | 31st May, 2024 |
Time-Limits to Deposit | Payment TDS for FY 2023-24
- Where tax is deducted by the office of the Government :
| S. No. | Particulars | Due Date |
| 1. | Tax Deposited without Challan | Same Day |
| 2. | Tax Deposited with Challan | 7th of next month |
| 3. | Tax on perquisites opted to be deposited by the employer | 7th of next month |
- In any other cases,
| S. No. | Particulars | Due Date |
| 1. | Tax Deductible in March | 30th April of next year |
| 2. | Other Months and Tax opted to be deposited by the employer | 7th of next month |
How to calculate TDS on Salary?
Below mentioned is the given format for calculation of TDS on Salary (in Rs.):
Gross annual salary
Less: Exemption under Section 10 (Rs.)
(i.e. HRA, Conveyance Allowance, Medical Allowance, etc.)
Income chargeable under Salary head
Add: Income from House Property
Rental Income
Less: deduction under Sec. 24(b)
– 30% of rental Income
– Interest paid on housing loan
Add: Income from any Other Sources
Gross Total Income
Less: Chapter VI-A deduction
Taxable Income
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How to Make payment of TDS on Salary?
Tax deduction at source is a system where income tax is deducted at the time of making payment by the employer to the employee. The TDS amount deducted shall be deposited to the government within the due dates specified. With the advent of technology, TDS on salary can be paid through online mode easily.
Let’s have a look at the steps for making payment of TDS on Salary:
Step 1: Visit the NSDL’s website at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp for e-payment of taxes.
Step 2: Select “CHALLAN NO./ITNS281” under TDS/TCS section. After clicking you will be redirected to e-payment page.
Step 3: Select ‘Company Deductees’ under Tax applicable section, if TDS deducted is made for payment to company. In any other case, select ‘Non- Company Deductees’.
Step 4: Enter your TAN and Assessment Year for which the payment is to be made. Fill in your ‘Pin Code’ and ‘State’ from the drop down menu.
Step 5: Select whether the payment is made for TDS deducted and payable by you or TDS on regular assessment.
Step 6: Select ‘Nature of Payment’ and ‘Mode of Payment’ for further processing for payment of TDS on Salary and then click submit button.
Step 7: After submission, a confirmation screen will be displayed. On confirmation of the data entered you will be redirected to net banking portal of your bank.
Step 8: Enter your credentials for payment. On successful payment, a challan counterfoil will be displayed containing CIN, payment details, and bank name through which e-payment has been made. Keep this counterfoil with you as this acts as a proof for the payment made.