How to Calculate TDS on Salary | Online TDS Calculator | Advance Tax Salary Calculator 2023-24 FY

How to Calculate TDS on Salary | Online TDS Calculator | Advance Tax Salary Calculator 2023-24 FY

How to Calculate TDS on Salary How to Calculate Advance Tax on Salary 2023-34
Tax Deducted at Source (TDS) is the amount which is deducted from the income of an individual by an authorised deductor and deposited to the IT department. The TDS can be calculated by following a few simple steps.
How to Calculate TDS on Salary | Online TDS Calculator | Advance Tax Salary Calculator 2023-24 FY

How to Calculate TDS on Salary | Online TDS Calculator | Advance Tax Salary Calculator 2023-24 FY

What is TDS on Salary?
TDS on salary means that tax has been deducted by the employer at the time of depositing the salary into the employee's account. The amount deducted from the employee's account is deposited with the government by the employer. Before an employer deducts tax at source from an employee's salary, he/she must obtain TAN registration. The Tax Deduction and Collection Account Number or TAN number is essentially a 10-digit alphanumeric number that is used to track TDS deduction as well as a remittance by the Income Tax Department.

Formula to Calculate TDS on Salary

The formula to calculate TDS on Salary is as follows:
  • Income Tax Rate = Income Tax Payable (computed with slab rates) / Estimated Revenue for the financial year.

How do I Calculate TDS on my Salary?

While the basic salary is fully taxable according to the 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 TDS from Salary

Step 1: Calculate gross monthly income as a sum of basic income, allowances and perquisites.

Step 2: Calculate available exemptions under Section 10 of the Income Tax Act (ITA). Exemptions are applicable on allowances such as medical, HRA, and travel.

Step 3: Reduce exemptions according to step (2) for the gross monthly income calculated in step (1).

Step 4: As TDS is calculated on yearly income, multiply the corresponding figure from the above calculation by 12. This is your yearly taxable income from your salary.

Step 5: 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).

Step 6: 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 an 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.

Step 7: Now, reduce the maximum allowable income tax exemptions on a salary. Currently, income up to Rs.2.5 lakh is fully exempt from paying taxes, while income from Rs.2.5 lakh to Rs.5 lakh is taxed at 10%, and Rs.5 lakh to Rs.10 lakh income bracket is taxed at 20%. All income above this amount is taxed at 30%.

Step 8: Do note that senior citizens have different tax slabs and receive higher exemptions than those discussed above.

Link to Calculate TDS Online Calculator 2023-24

Here is the excellent software for calculating the TDS Online. Just give some inputs and the rest will be done by the Software. 
The Online TDS Calculator for 2023-24 is prepared based on the Finance Bill 2023. 

Example TDS Calculation on Salary 2023-24

As per the steps outlined above, let's consider a numeric example for better understanding.

Steps (1) & (2)Suppose your monthly gross income is Rs.80,000. This figure may contain divisions as - basic pay Rs.50,000, HRA of Rs.20,000, travel allowance of Rs.800, medical allowance of Rs.1,250, child education allowance (CEA) of Rs.200 and other allowances totalling 12,750.

Steps (3) & (4)Assuming that you stay at your own property, your monthly exemption from allowances equals Rs.2,250 (medical + travel + CEA). Therefore, your yearly taxable amount comes to (Rs.80,000 - Rs.2,250)*12, which comes to Rs.9,33,000.

Step (5)Let's say you just experienced a loss of Rs.1.5 lakh on house loan interest repayments over the year. Reducing this exempted amount from the taxable income, your taxable income becomes Rs.7,83,000.

Step (6)Suppose you have invested Rs.1.2 lakh in various categories that fall under Section 80C exemptions, and made another Rs.30,000 investment in categories falling under Section 80D. So, the resulting Rs.1.5 lakh is exempted from taxes according to Chapter VI-A. Deducting this amount from the gross taxable income calculated above, your taxable income becomes Rs.6,33,000.

Step (7)Finding out your tax slab Your final tax breakup according to income slabs listed by the IT department is as follows: 
Therefore, the final TDS to be deducted from your yearly income is Rs.25,000 + Rs.26,600, which comes to Rs.51,600 for the current year's income, or Rs.4,300 per month for the current fiscal.

How is TDS Calculated?

The government allows tax exemption under Section 80C and 80D. This allows an individual to seek exemption on tax based on various types of investments he/she is making for that particular financial year. The TDS on salary can be calculated by reducing the exemption from the total annual earnings as specified by the Income Tax department. 
The employer is required to obtain a declaration and proof from individuals to approve tax exemption. The following categories are considered for exemption:

House Rent Allowance - If an employee is paying towards accommodation as rent and entitled to HRA from the employer, the employee can declare this amount for tax exemption.

Conveyance or Travel Allowance - If an employee is provided with conveyance allowance, the employee can declare them for tax exemption.

Medical Allowance - If an employee is entitled to a medical allowance, he/she can declare and produce medical bills for tax exemption.

There are limits to the maximum amount that can be considered for exemption.

FAQs on Calculate TDS on Salary

Can HRA be claimed as a deduction when calculating TDS on salary?
Employees will have to declare the amount paid as rent and it can be claimed as an exemption.

How much deduction can I claim under Section 80C when calculating TDS on salary?

The maximum amount that can be claimed under Section 80C of the Income Tax Act is Rs.1.5 lakh.

What are the few items are allowed for TDS exemption?
PPF, ELSS, EPF, Bank FDs, NSC, Transport allowance, House Rent Allowance and Savings under Section 80C are eligible for exemption

When is TDS on salary deducted under section 192?
TDS is required to be deducted by the employer, when taxable income of an employee exceeds basic exemption limit

Can I find out how much tax the payer deducted from the income?
Yes, Form 26AS is available on the Income Tax Portal under the ‘View Your Tax Credit’ tab. You can also request a TDS certificate from the payer.

Do I have to provide my PAN card for TDS?
Yes, a PAN card is required for TDS deductions and deposits. However, TDS would be deducted at a flat rate of 20% if you fail to provide your PAN card information.
Is there any penalty for the payee if the payer fails to deduct TDS?

You, as the payee, are required to pay your tax liability when filing returns. You will not incur any penalties if the payer fails to deduct TDS; this is because it is the payer's responsibility to do so.

When is the TDS rate calculated by the employer?
At the start of each fiscal year, the applicable TDS rate is calculated by the employer based on the salary of the employee and available deductions and exemptions. When you change jobs, the employer will start calculating the TDS from the date you join the company.

I got a bonus of Rs.1 lakh from my employer. Would TDS be applicable?
Yes, TDS would apply to the bonus you get from your company.