Business news: TDS on salary is not fixed, this is how tax is deducted

Every company deducts TDS on the salaries of its employees. However, the rate of TDS is not fixed. For this reason the employer deducts TDS at the average rate of tax on the employee’s salary. Ajit Singh’s report explains the mathematics of this tax to be deducted from the hard-earned money of the employees-

TDS on salary is not fixed, this is how tax is deducted
The calculation of Tax Deduction at Source (TDS) depends on the estimated net tax liability of the employee. It also considers various factors such as the tax regime chosen by the employee, tax free income, deductions on expenses and tax saving investments. For this, companies require employees to clarify their expenses and investments at the beginning of the financial year, which are eligible for tax deduction or exemption.

Based on the information of employees, companies deduct average TDS every month till the last quarter of the financial year. Average TDS means that once the net taxable income is estimated, the total tax liability will be estimated and deducted from the net salary. The total tax amount will then be divided by 12 months. The figure that comes will be deducted from the monthly salary as TDS.

TDS rate may change
The TDS deduction rate is based on the tax regime chosen and the information provided by the employee, hence it is subject to revision if there is any change in certain circumstances. In this, if there is a difference between the tax saving investment made by the employee during the year and the investment declared at the beginning of the financial year, then TDS can change.

The TDS rate is revised due to increment or bonus received by the employee which is not forming part of the total compensation or modification in the salary structure of the employee such as change in allowances given to him or change of job of the employee in the middle of the financial year. May go. If an employee has income from multiple sources, it may affect the TDS deduction. The company has to take into account all sources of income while calculating TDS.