Calculate TDS On Salaries under Sec 192 of IT Act Step by Step Guide Online TDS Calculation on Salaries

Calculate TDS On Salaries under Sec 192 of Income Tax Act- Online TDS Calculator on Salaries,
TDS on Salary under Section 192 of the Income Tax Act.  Section 192 deals with the TDS on salary income. It mandates every employer to deduct TDS on salary payment, in case the salary of the employee exceeds the basic exemption limit. This section impacts most of the salaried people in India. In this guide, we will explain all the important provisions of TDS under section 192. How to calculate Online TDS Calculator on Salaries for 2022-23 financial Year explained. 
Calculate TDS On Salaries under Sec 192 of IT Act Step by Step Guide Online TDS Calculator on Salaries

Guide on Calculating TDS On Salaries under Sec 192 of IT Act

The concept of Tax deduction at Source (TDS) was introduced with an aim to collect tax from the source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee. from whose income. tax has been deducted at source, would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor. 

Section 192 of the Income Tax Act, 1961 deals with tax deducted at source (TDS) on salary. Your employer will deduct TDS from the salary payable to you. The salary you receive from your employer is categorised in ‘Income’ under the head ‘Salary’ and the employer will be responsible for deducting TDS at normal income tax rates applicable to you on your estimated income
for the relevant financial year. The TDS deducted u/s 192 is reflected in Form 16, which is issued by the employer to the employee.
TDS on Salaries under Sec 192 of Income Tax Act Points of Discussion:
  • Who is required to deduct TDS u/s 192 on Salaries of the Income Tax Act?
  • When is TDS on salary deducted u/s 192?
  • What are the Section under Sec 192?
  • What is the rate of TDS u/s 192?
  • How to calculate tax deduction under section 192?
  • How to Use Online TDS on Salaries Calculator

Who is required to deduct TDS u/s 192 on Salaries of the Income Tax Act?

Any employer who pays salary to an employee(resident or non-resident) is required to deduct TDS every month under section 192.  All these employers are required to deduct TDS monthly and deposit it to the government within the specific time period. According to section 192 of the Income Tax Act, there must be an employer-employee relationship for the deduction of tax at source. The employer’s status such as HUF, firms or company is irrelevant for the deduction of tax at source under this section. Moreover, the number of employees employed by the employer does not matter while calculating and deducting TDS.

When is TDS on salary deducted u/s 192?

Under Section 192, TDS on Salaries is deducted at the time of actual payment of salary and not during the accrual of salary. It means tax will be deducted if your employer pays salary in advance or at the time of salary payment in arrears.
In case your estimated salary is not more than the basic exemption limit, tax amount will be zero and hence, TDS will not be deducted. This rule is applicable even to those who do not have a PAN.

TDS is required to be deducted by the employer at the time of payment of salary income when taxable income (i.e Gross Total Income less Deductions under Chapter VIA) of an employee exceeds basic exemption limit which is

The table below shows the basic exemption limit as per the age that does not require TDS to be deducted:
  • Rs. 2,50,000/- in case age is below 60 years
  • Rs. 3,00,000/- in case age is 60 years or more but below 80 years
  • Rs. 5,00,000/- in case age is 80 or above

What is the rate of TDS on Salaries u/s 192 ?

Section 192 does not specify a TDS rate. TDS will be deducted as per the income tax slab and the rates thereof applicable to the taxpayer for the relevant financial year for which the salary is paid.

The tax calculation is usually done by the employer at the beginning of the financial year. The TDS to be deducted by dividing the estimated tax liability of the employee for the financial year by the number of months of his employment under the particular employer. However, if there is no PAN of employee, TDS shall be deducted at the rate of 20% plus 4% cess.

TDS under this section is calculated on the estimated income earned during the year at an average tax rate. Unlike other sections of TDS under Income Tax, there is no fixed rate of TDS under section 192. To compute the rate of TDS, the estimated total tax liability on such estimated income is divided over the period of employment i.e. months.
  • TDS on salary = (Estimated Total Tax Liability  /  Period of Employment)

How to calculate tax deduction under section 192?

For the purpose of calculation of TDS on salary, following points shall be considered :Income other than salary like rent income etc shall also be considered by the employer for calculation of TDS on salary if details of such income submitted by the employee.

Interest on home loan (if any) upto Rs. 2,00,000/- will be set off from salary income to arrive at estimated income for the purpose of TDS calculation if evidence is given in Form 12BB by the employee.

It also happens that many employees make investments to enjoy tax benefits i.e. to reduce their tax liability. But, as the employer does not know about such investment, TDS amount increases than the actual tax liability. In such cases, you can declare information about all your tax saving investments to the employer using Form 12BB. When an employer sees this, he/she will consider these investments and calculate your TDS amount accordingly.

Step by Step Procedure on How do I calculate TDS on my salary?

  • While the basic salary is fully taxable according to respective tax bracket, some exemptions are available for payments made as allowances and perks. 
  • You can calculate TDS on your income by following the below steps.
  • Calculate gross monthly income as a sum of basic income, allowances and perquisites.
  • Calculate available exemptions under Section 10 of the Income Tax Act (ITA). 
  • Exemptions are applicable on allowances such as medical, HRA, travel.
  • Reduce exemptions according to step (2) for the gross monthly income calculated in step (1).
  • As TDS is calculated on yearly income, multiply the corresponding figure from above calculation by 12. This is your yearly taxable income from salary.
  • If you have any other income source such as income from house rent or have incurred losses from paying housing loan interests, add/subtract this amount from the figure in step (4).
  • Next, calculate your investments for the year which fall under Chapter VI-A of ITA, and deduct this amount from the gross income calculated in step (5). 
  • An example of this would be exemption of up to Rs.1.5 lakh under Section 80C, which includes investment avenues such as PPF, life insurance premiums, mutual funds, home loan repayment, ELSS, NSC, Sukanya Samriddhi account and so on.
  • Now, reduce the maximum allowable income tax exemptions on a salary. 
  • Currently, income up to Rs.2.5 lakhs is fully exempt from paying taxes, while income from Rs.2.5 lakhs to Rs.5 lakhs is taxed at 10%, and Rs.5 lakhs to Rs.10 lakhs income bracket is taxed at 20%. All income above this amount is taxed at 30%.

TDS on Salaries Example Calculation Illustration

Particulars Amount
Estimated Salary Income 9,60,000
Less :- Standard Deduction 50,000
Estimated Gross Total Income 9,10,000
Less : Deduction under Chapter VI-A
Section 80C 1,50,000
Estimated Total Income 7,60,000
Estimated Tax Liability 64,500
Add : Health & education cess @ 4% on Rs. 64,500 2,580
Estimated Total Tax Liability (A) 67,080
TDS per month (A/12) 5,590

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