TDS

# TDS for Salaried Individuals

Last Updated : May 21, 2024, 11:02 a.m.

Section 192 of the income tax act, 1961, deals with the tax deducted at source (TDS) on salary. It is the employer which deducts tax from the salary of its employees every month based on the prevailing income tax slabs. Since your earnings and income tax rates are subject to change from time to time, the eventual TDS can vary across periods. You can read further to know TDS is calculated and the ways by which you can save tax..

## How is the TDS Calculated for Salaried?

Employers calculate the TDS on employees’ salaries using the following details.

Total earning: The total earning of an employee over the financial year including their hikes, commission, bonus, etc.

Investment Declaration: If you are investing in tax-saving products, mention the details in an investment declaration proof and submit it to your employer which will consider the same while calculating the TDS on your salary.

Example: Suppose your annual gross income is INR 8 lakh. Your home loan interest payment amounts to INR 1.5 lakh a year and the annual ELSS investments stand at INR 1 lakh. In addition to this, you have paid annual health insurance premiums amounting to INR 8,000.

Particulars TDS Calculation
Income INR 8,00,000
Standard Deduction INR 50,000
Income Post Standard Deduction INR 7,50,000
Home Loan Interest Payments (Under Section 24) INR 1,50,000
ELSS (Under Section 80C) INR 1,00,000
Health Insurance Premium (Under Section 80D) INR 8,000
Total Deductions INR 2,58,000
Taxable Income (Income Post Standard Deduction-Total Deductions Excluding Standard Deduction) INR 4,92,000
Total Tax Payable NIL

Note: As per the income tax slab, there is no tax for individuals having income upto INR 5 lakh post all eligible deductions. If it goes beyond, tax rates will apply.

## What is the Income Tax Slab Rate for FY 2023-24?

To figure out the income tax on your salary, start by looking at the tax slabs set by the Income Tax Department of India for the financial year.

• For individuals (Age < 60 years)
 Income Slab Existing Tax Regime Rate Income Slab New Tax Regime Rate Up to Rs. 2,50,000 NIL Up to Rs. 3,00,000 NIL Rs. 2,50,001 – Rs. 5,00,000 5% above Rs. 2,50,000 Rs. 3,00,001 – Rs. 6,00,000 5% Rs. 5,00,001 – Rs. 10,00,000 Rs. 12,500 + 20% above Rs. 5,00,000 Rs. 6,00,001 – Rs. 9,00,000 10% Above Rs. 10,00,000 Rs. 1,12,500 + 30% above Rs. 10,00,000 Rs. 9,00,001 – Rs. 12,00,000 15% Rs. 12,00,001 – Rs. 15,00,000 20% Above Rs. 15,00,000 30%

• Resident Senior Citizens (More than 60 but less than 80 years)
 Income Slab (Existing Regime) Tax Rate (Existing Regime) Income Slab (New Regime) Tax Rate (New Regime) Up to Rs. 3,00,000 NIL Up to Rs. 3,00,000 NIL Rs. 3,00,001 – Rs. 5,00,000 5% above Rs. 3,00,000 Rs. 3,00,001 – Rs. 6,00,000 5% Rs. 5,00,001 – Rs. 10,00,000 Rs. 10,000 + 20% above Rs. 5,00,000 Rs. 6,00,001 – Rs. 9,00,000 10% Above Rs. 10,00,000 Rs. 1,10,000 + 30% above Rs. 10,00,000 Rs. 9,00,001 – Rs. 12,00,000 15% Rs. 12,00,001 – Rs. 15,00,000 20% Above Rs. 15,00,000 30%

• Resident Super Senior Citizens (80 years and above)
 Income Slab (Existing Regime) Tax Rate (Existing Regime) Income Slab (New Regime) Tax Rate (New Regime) Up to Rs. 5,00,000 NIL Up to Rs. 3,00,000 NIL Rs. 5,00,001 – Rs. 10,00,000 20% above Rs. 5,00,000 Rs. 3,00,001 – Rs. 6,00,000 5% Above Rs. 10,00,000 Rs. 1,00,000 + 30% above Rs. 10,00,000 Rs. 6,00,001 – Rs. 9,00,000 10% Rs. 9,00,001 – Rs. 12,00,000 15% Rs. 12,00,001 – Rs. 15,00,000 20% Above Rs. 15,00,000 30%

In addition to the standard taxes, the following additional charges are also applied:

• A 10% surcharge on the income tax is added for incomes between Rs. 50 lakhs and Rs. 1 crore.
• A 15% surcharge on the income tax is applied for incomes above Rs. 1 crore but less than Rs. 2 crore.
• A 25% surcharge on the income tax is levied for incomes between Rs. 2 crore and Rs. 5 crore.
• For incomes above Rs. 5 crore, a 37% surcharge is applied under the old tax regime and 25% under the new tax regime.
• Additionally, all taxpayers must pay a 4% Health and Education Cess on the income tax, regardless of their income slab.

## Conditions for Opting for the New Tax Regime

Taxpayers who choose the new tax regime will give up some deductions and exemptions that are available under the old tax system.

Exemptions you need to give up while choosing the new tax regime include the following.

• Leave Travel Allowance (LTA)
• House Rent Allowance (HRA)
• Conveyance
• Daily expenses in the course of employment
• Relocation allowance
• Helper allowance
• Children education allowance
• Other special allowances [Section 10(14)]
• Standard deduction
• Professional tax
• Interest on housing loan (Section 24)
• Chapter VI-A deduction of 80C,80D, 80E and so on

## Common Deductions Allowed Under New Tax Regime

• Investment in Notified Pension Scheme under section 80CCD(2)
• Conveyance allowance for expenditure incurred for travelling to work.
• Depreciation under section 32, except additional depreciation.
• Deduction for employment of new employees under section 80JJAA.
• Any allowance for travelling for employment or on transfer.
• Transport allowance for specially-abled people.

## Main Differences Between Old and New Tax Regime

The current tax rates for incomes over INR 5 lakh are quite high. To lower this tax burden, the government has introduced a new tax regime with lower tax rates for incomes above INR 5 lakh.

However, if you choose this new regime, you won't avail as many as 70 tax deductions and exemptions, including a standard deduction.

Here are two significant distinctions between old and new income tax regimes:

• The new tax regime offers more tax slabs with lower rates compared to the old regime. Therefore, the tax slabs for the financial year 2024-25 will vary depending on whether you choose the new or old regime.

• Additionally, if you opt for the new tax regime, you won't be able to use many of the major deductions and exemptions that were available before, such as those under Section 80C and Section 80D.

## TDS on Fixed Deposit, Savings Accounts

The interest income of the user is taxable under section 194A of the Income Tax Act (ITA), 1961. Banks deduct tax on fixed deposits if the interest earned on the same exceeds INR 40,000 in a year. The TDS rate will apply once the earnings go past the threshold limit of INR 40,000. The TDS threshold for savings accounts is INR 10,000 under Section 80TTA. However, if the interest income exceeds the threshold limit, the following TDS rates will apply.

Case TDS Rate
When PAN is not available 20%
If the PAN number is given 10%
If you submit the form 15G/15H NIL

Banks will deduct TDS if the interest earnings go past the threshold limit in a financial year. But if your total income is not taxable, you can submit Form 15G/15H to prevent banks from deducting TDS.

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