Calculation of TDS from Salary

Under the scheme of tax deduction at source (TDS), persons responsible for making payment of income & covered by the scheme, are responsible to deduct tax at source & deposit the same to government treasury within the stipulated time.

Download Automated Tax Compute Sheet + Automatic HRA Calculation + Arrears Relief U/s 89(1) + Form 10E + Form 16 Part A&B and Form 16 Part B for Govt & Non-Govt employees for the Financial Year 2014-15 as per the new Tax Slab

The recipient of income – though gets only net amount, is liable to tax on the gross amount and the amount deducted at source is adjusted against his final tax liability.

DEDUCTION OF TAX FROM SALARIES

Any person responsible for paying any income chargeable under the head “salaries” is required to deduct at source on the amount payable. Tax is to be calculated at the rates prescribed for the financial year FY 2014-15 in which payment to employees is made.

Download the All in One TDS on Salary Preparation Excel Based Software for Private Employees For Financial Year 2014-15

POINTS TO CONSIDERED FOR COMPUTE THE SALARY & TAX THEREON

1.House rent allowance exemption- exemption pertaining to house rent allowance should be calculated by the employer on the basis of specified limit provided by the section10(13A) of income tax act.Click to Download HRA Calculator U/s 10(13A)

2.Deduction from gross total income- Employer should taken into consideration amount deductible under sections 80C, 80CCD, 80CCG, 80D, 80DDB, 80E, 80EE, 80GG, 80GA, 80TTA, and 80U. The employer should not give any deduction in respect of donation (deduction under section Sec 80G) given by the employee.

3. TAX LIABILITY- Tax is deductible on the taxable income at the rate applicable for the financial year 2014-15, which is reproduced below for your reference:-

3.1 For a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of previous year i.e., born during April 1,1935 and march 31,1955):-

Net income range	Income-tax rates	Surcharge	Education cess	Secondary &  higher education
Up to Rs 2,50,000	Nil	Nil	Nil	Nil
Rs.2,50,000-Rs.5,00,000	10% of (total income minus Rs.3,00,000)	Nil	2% of income-tax	1% of income-tax
Rs.5,00,000-Rs.10,00,000	Rs.20,000+20% of(total income minus Rs.5,00,000)	Nil	2% of income tax	1% of income- tax
Rs.10,00,000-Rs 1,00,00,000	Rs1,20,000+30% of (total income minus Rs.10,00,000)	Nil	2% of income- tax	1% of income- tax
Above Rs 1,00,00,000	Rs.28,20,000+30% of (total income minus Rs.1,00,00,000	10% of income tax	2% of income- tax &surcharge	1%of income –tax & surcharge-

3.2 .For a resident super senior citizen (who is 80 years or more at any time during the previous year, i.e., born before April 1, 1935)-

Net income range	Income-tax rates	surcharge	Education cess	Secondary &higher   education cess
Up to Rs 5,00,000	Nil	Nil	Nil	Nil
Rs.5,00,000 – Rs. 10,00,000	20% of (total income minus Rs.5,00,000)	Nil	2% of income -tax	1% of income-tax
Rs 10,00,000 – Rs 1,00,00,000	Rs.1,00,000+ 30% of (total income minus Rs.10,00,000)	Nil	2% of income -tax	1% of income-tax
Above Rs1,00,00,000	Rs.28,00,000+30% of (total income minusRs.1,00,00,000)	10% of income-tax	2% of income –tax & surcharge	1% of income-tax & surcharge

3.3 Any other case of individual, every HUF / AOP / BOI / AJP :-

Net income range	Income-tax rates	Surcharge	Education cess	Secondary & higher education
Up to Rs 2,50,000	Nil	Nil	Nil	Nil
Rs.2,50,000-Rs.5,00,000	10% of (total income minus Rs.2,50,000)	Nil	2% of income-tax	1% of income-tax
Rs.5,00,00-Rs.10,00,000	Rs.25,000+20% of(total income minus Rs.5,00,000)	Nil	2% of income tax	1% of income- tax
Rs.10,00,000-Rs 1,00,00,000	Rs1,25,000+30% of (total income minus Rs.10,00,000)	Nil	2% of income- tax	1% of income- tax
Above Rs 1,00,00,000	Rs.28,25,000+30% of (total income minus Rs.1,00,00,000)	10% of income tax	2% of income- tax & surcharge	1%of income –tax & surcharge

Download Automated Form 16 Part A&B for FY 2014-15 [ This Excel Based Software can prepare at a time 100 employees Form 16 Part A&B]

TDS RATES IN CASE PAN NO IS NOT FURNISHED
If the recipient does not furnish his PAN to the deductor, tax will be deducted by virtue of section 206AA at the normal rate or the rate of 20% whichever is higher.

4. WHEN A PERSON IS EMPLOYED BY TWO OR MORE EMPLOYERS DURING THE FINANCIAL YEAR – In such a case tax will be deducted by each employer separately. However, the employee is under obligation to declare salary receive & tax deducted thereon from other employers to one of the employers by submitting information in Form no. 12B.

5. TDS CERTIFICATE – TDS certificate will be given to the employee in form no. 16 annually on or before if few condition are satisfied. Form no. 16 can be given in digital signature. The employer should also give a statement of perquisites / profit in lieu salary.

6. SALARY WITHOUT TDS OR WITH LOWER TDS – To get salary without TDS or with lower TDS, the employee will have to approach the assessing officer by submitting an application in Form no.13 under the section 197.

Download Automatic Form 16 Part B for the Financial Year 2014-15 [ This Excel Based Software can prepare at a time 50 employees Form 16 Part B]

7. Other points:-

7.1 TAX ON PREQUISITE PAID BY EMPLOYER – Section 192(IA) provides that the employer responsible for paying an income in nature of perquisite referred to in section 17 (2) may pay at his option, tax on the whole without making any deduction therefrom. In case employer opts to make payment of tax on perquisites, such tax payments will added back to income of employee. However, such tax payments shall not be allowed as tax deduction in the hands of employer.Click to download the Master of Form 16 Part B with Form 12 BA for FY 2014-15

7.2 MORE THAN ONE EMPLOYER – When an employee has more than one employer, he is required to furnish in form no.12B to one of the employer the detail of salary due /receive by him other employer.

Only after submission of information in FORM no 12B, it becomes obligation of the employer (to whom Form No 12B is submitted) to deduct tax at the source after considering the information submitted by the employee.

7.3 Relief under section 89: Section 192(2A) provides that in respect of salary payment of employees deduction of tax at source is to be made after allowing relief under section 89. To avail this benefit the concerned employees should furnish information in Form no. 10E to the employer.Click to Download Arrears Relief Calculator U/s 89(1) with Form 10E ( Up dated)

7.4 Supporting documents: No need to collect supporting evidence for giving exemption in respect of LTC/ Conveyance allowance. For other deduction and allowances employees must have proper supporting documents and must satisfy himself for correctness of claim by employee.

7.5 Tax deduction in respect of other incomes of employee: Following points are notable before including other income of employees for tax deduction:-

The employee may (or may not) declare his other income to employer.

If the employee wants to declare his other incomes to the employer, then such information should

be given plain paper to the employer.

·The employer may declare details of his other incomes (including loss under the head” Income from house property” but not any other loss) & tax deducted thereon by others.

If the aforesaid information is not submitted by the employee to the employer, then employer cannot take into consideration other incomes of the employee.

Download Automated Master of Form 16 Part B with 24Q & 26Q for FY 2014-15 [ This Excel Utility can prepare at a time 50 employees Form 16 Part B with 24Q & 26Q ]

On February 16, 2015 by www.taxexcel.net

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Download All in One TDS on Salary for Financial Year 2014-15( You can prepare at a time your Tax Compute Sheet + Arrears Relief Calculator + Form 10E + HRA Exemption Calculation + Form 16 Part A&B and Part B for Govt and Non-Govt Employees)

Income earned by an individual can be broadly classified under 5 distinct heads and taxed according to the Income tax rules governing them. The 5 heads of income are: 

• ·                                 Salary Income
• ·                                 Income from house property
• ·                                 Business or Professional Income
• ·                                 Capital Gains
• ·                                 Other Income 

We shall discuss in detail the first head of income namely Salary Income and how is tax calculated on the same.

What is Salary Income?

Salary means remuneration paid to the employee by the employer for the services rendered by him during a period of time. It is taxed on due basis or receipt basis, whichever is earlier. Salary comprises of 5 components namely: 

• ·                                 Basic Salary
• ·                                 Fees, Commission and Bonus
• ·                                 Allowances
• ·                                 Perquisites
• ·                                 Retirement Benefits

Basic Salary

Basic salary is a fixed component of the salary which is agreed upon as per terms of employment or as per the graded system of salary. As per the graded system, the increments are fixed till the basic salary reaches a prescribed limit for the grade.

Fees, Commission and Bonus

Fees and bonus paid to the employee is part of taxable salary. Commissions paid to employees maybe fixed or a percentage of turnover achieved by the employee. If commission is paid a s part of percentage of turnover, the same is added to the basic salary for the purpose of computation of retirement benefits.

Allowances

Allowances are fixed amounts paid by an employer to an employee to meet his expenses for personal use or for performance of his professional duties. The allowances are over and above the basic salary and are taxable as per their nature and guidelines laid by the Income Tax Act. These allowances can be classified as:

Fully Taxable

Fully taxable allowances are as under:

Dearness Allowance

This allowance is paid to meet the mounting expenses due to inflation. In some cases it forms part of basic salary for computing retirement benefits.

City Compensatory Allowance

This allowance is paid to employees who are transferred to big metros like Mumbai, Delhi, and Chennai where the cost of living is higher than other cities.

Overtime Allowance

Any allowance paid for working over and above the prescribed hours is called overtime allowance and is fully taxable

Other Allowances

There are many other allowances that are taxable such as deputation allowance, servant allowance, etc. 

Partly Taxable

Partly taxable allowances are as under:

House Rent Allowance (HRA) Calculate HRA Exemption U/s 10(13A)

This allowance is paid to the employee to meet the rental expenses for residential accommodation for self. If the employee lives in his own house, then the HRA is completely taxable. The exemption amount of HRA for rental property is least of the following: 

• ·                                 Actual HRA
• ·                                 Additional rent paid over and above 10% of salary due to him
• ·                                 An amount equal to 50% of salary due to him if living in metros (40% of salary if living in other places) 

Entertainment Allowance( Only for Govt Employees)

This allowance is first included in the salary and is then allowed as an exemption only to Central and State Government employees.

Special Allowance

This allowance is given to the employee for carrying on his official duties and is exempt to the extent it is actually incurred. This includes uniform allowance, travel allowance, research allowance, etc.

Special Allowance to meet personal expenses

A fixed allowance is paid to the employee to meet his personal expenses. This allowance is fixed and a reimbursement of the entire expenditure incurred. Eg: Children Education Allowance, Children Hostel Allowance, etc.

Fully Exempt

Fully exempt allowances are as under:

Use this Excel based All in One Master of Form 16 Part B for Financial Year 2014-15 [ This utility can prepare at a time 50 employees Form 16 Part B with Individual Salary Structure + Individual Salary Sheet ]

Perquisites

Perquisites are emoluments received by an employee by virtue of holding the position and office over and above his salary. They benefit the employee and are not just reimbursement of expenses. These benefits are also in kind and can be valued. Perquisites can be again classified under three heads:

Perquisites that are taxable for all employees: Some perquisites that are taxable for all employees are: 

• ·                                 Rent free accommodation
• ·                                 Concession in rent of accommodation
• ·                                 Interest free loans or subsidized loans
• ·                                 Movable assets or transfer of assets
• ·                                 Payment of club fees
• ·                                 Payment of educational expenses
• ·                                 Payment of insurance premium, on behalf of employees 

Perquisites that are taxable only for specified employees

Specified employees are employees who are either directors in the organization or have substantial interest in the organization or their salary was over Rs.50000/- in the previous year: 

• ·                                 Free gas, electricity, water supply for domestic purposes
• ·                                 Free or concessional educational expenses
• ·                                 Gardener, sweeper, attendant
• ·                                 Free or concessional transport facility
• ·                                 Any other benefit or amenity 

Perquisites that are exempt from tax

Some perquisites are notified by the Income Tax Departmentwhere fringe benefit tax has to be paid by the employer on the expenses incurred by them on the perquisites. These fringe benefits are absolutely exempt from tax in the hand of the employee. These include: 

• ·                                 Medical Benefits
• ·                                 Leave Travel Concession
• ·                                 Health Insurance Premium
• ·                                 Car, laptop, computers for personal use
• ·                                 Staff Welfare Schemes

·                                 The perquisites which are taxable are valued as per the rules laid down in the Income Tax Act. 

Retirement Benefits

These benefits are provided either at the time of retirement or during the period of the service. Each benefit has a different tax treatment. The various benefits are:

Pension

Pension is a reward for the services rendered by the employee. It is usually disbursed as a monthly payment, but sometimes the employee may opt for a lump sum payment. The tax treatment depends on the option chosen and on the category of employee.

Gratuity

Gratuity is a payment received in appreciation of past performance. It is received on retirement. It is exempted upto a certain limit and also dependent on the type of employee.

Leave Salary

Privilege leave is accumulated in the account of the employee. The employee may avail of leave or may opt for encashment of leave accumulated. This is permitted either during the tenure of service or at the time of retirement. The tax treatment will depend on the option chosen and on the category of employee.

Provident Fund

Contribution towards Provident fund is deducted on a monthly basis from the salary of the employee. An equal amount is also contributed by the employer. At the time of retirement the accumulated balance in the Provident fund account along with the interest is given to the employee. The tax treatment of the proceeds depends on the type of provident fund maintained by the employer.

Deductions allowed from Salary: The following deductions are made from the salary income to reach the net salary income:

Standard Deduction: This deduction has been discontinued from Assessment year 2006-07[The Standard Deduction is up to Rs. 2.5 Lakh for the Financial Year 2014-15 below 60 years age]

Entertainment Allowance: This is first included in the salary and then allowed as a deduction to the State and Central Government employees. The deduction amount is the least of 

·                                 Rs.5000/-

·                                 Entertainment allowance actually received

·                                 20% of basic salary

Professional Tax: Professional tax also known as tax on employment is first paid by the employer and then allowed as a deduction from salary. It is allowed only in the year in which it is actually paid.

Computation of Net Salary of an Employee

Particulars	Amount (Rs)
Basic Salary	................
Fees Commission and Bonus	................
Allowances	...............
Perquisites	...............
Retirement Benefits	...............
Gross Salary	-------------------
Less: Deductions from Salary	-------------------
Entertainment Allowance	-------------------
Professional Tax	-------------------
Deduction Chapter VIA ( including 80C)	-------------------
Standard Deduction	-------------------
Net Salary	-------------------

On October 13, 2014 by www.taxexcel.net

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