Section 192: How to Calculate TDS on Salary FY 2017-18 [AY 2018-19]

TDS SALARY
Every employer should deduct TDS at an average rate of income tax while paying salary to their employees if annual salary payment exceeds Rs.2.5 lakh (for individual below 60 years) or 3 lakh (for individual of 60 years or more but less than 80 years) or Rs.5 lakh (for individual of 80 years or more). [Section 192 of Income Tax Act]

So,

TDS Deductor– The Employer

TDS Deductee– The Employee

TDS Rate- Average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made

TDS deducted- At the time of actual payment of Salary

Calculation of TDS on Salary

Step 1:

Calculate taxable income of the employee under the head “Income from Salary” and add any other income reported by the employee.

Employee shall give a statement of Incomes from sources other than salary and any TDS already deducted in prescribed form to their employer. [Rule 26B]

Losses other than house property losses will not be considered by the employer. Maximum House Property loss for AY 2018-19 is Rs 2 Lakh.

Computation of Income From Salary
Basic Salary
	1	Wages		xx
	2	annuity or pension		xx
	3	Gratuity		xx
	4	Fees or commission		xx
	5	Advance Salary		xx
	6	Fees or commission		xx
	7	Leave Encashment		xx
	8	Employer’s PF contribution in Excess of 10% of Salary		xx
	9	Interest in PF a/c in excess of 1/3 of salary or prescribed rate		xx
	10	Pension under section 80CCD		xx
Perquisites	[u/s 17(2), Form no 12BA]			xx
Profits in lieu of Salary			[u/s 17(3), Form no 12BA]	xx
Total				xxxx
Less:
	1	Allowances u/s 10		(xx)
	2	Entertainment Allowance		(xx)
	3	Tax on Employment (Professional tax)		(xx)
Taxable Income under the head Salary				xxxx
Add: Any other income reported by Employee				xx
Gross Total Income				xxxx
Less: Deductions under Chapter VI-A
	1	80C, 80CCC, 80CCD		(xx)
	2	Other sections under Chapter VI-A		(xx)
Total Income				xxxx

Tax on total income including cess @ 3%				xx
Less- Relief under section 89				(xx)
Net Tax payable				xx

Step 2:

Ask employee to submit Form 12BB along with the evidences For:

Nature of Claim			Evidence or particulars
House Rent Allowance			If rent paid in a year exceeds Rs. 1 Lakh- 1. Name of Landlord 2. Address of Landlord 3. PAN of Landlord
Leave travel concession or assistance			Evidence of Expenditure
Deduction of interest under the head “Income from house property”			Name, address and permanent account number of the lender/Bank/Financial Institution
Deduction under Chapter VI-A Like 80C			Evidence of investment or expenditure like Life insurance Premium Receipts

Step 3:

After getting satisfactory evidence and particulars from step 2, calculate average income tax rate for total income specified in step 1. Apply this rate on each month’s salary to deduct appropriate TDS.

After initial calculation of Average tax rate, if employer finds any excess or deficient in TDS deduction, he can adjust (increase or reduce) TDS amount of subsequent period/months.

The employer should deposit TDS and file TDS return within the due dates. Once TDS return has been filed, these TDS deduction will get reflected in employee’s 26AS.

Example: Mr.Ram, age 28, have estimated total income of Rs.5,80,000/- . If his employer pays Rs.60000/- for August 2017. Calculate TDS under salary and Net pay-out.

Solution: Tax on total income = [12500 + (580000-500000)*20%] + Cess 3% = Rs.29,355/- (refer calculator or slab rate)

Average income tax rate = [29355/580000] * 100 = 5.06%

Therefore, TDS on salary while making actual payment for August 2017 = 60000*5.06% = Rs.3,036/-

Net pay-out = 60000-3036 = Rs.56,964/-

Income Tax Slab Rate For AY 2018-19 (Normal Individuals)

Total Income	Rate of Tax
Upto 2,50,000	Nil
From 2,50,001 to 5,00,000	5% on Total income in excess of Rs.2.5 lakh
From 5,00,001 to 10,00,000	Rs.12,500/- Add (+) 20% of total income in excess of Rs. 5 lakh
From 10,00,001 and more	Rs.1,12,500/- Add (+) 30% of total income in excess of Rs. 10 lakh

TDS on Salary From More Than One Employer

As per section 192(2), where an assessee is working under more than one employer or has changed from one employer to another, he can ask any one of his employer to deduct TDS. However, when the assessee has changed employer during the year, his present employer should deduct required TDS. [Not Mandatory]

The assessee should disclose to his chosen or present employer his salary income and TDS already deducted (if any) by other employer in writing and duly verified by him and by the former/other employer. [Use Form 12B]

The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

Reference: Circular No 29/2017