Let’s understand this with the help of example. It is very important to understand that how TDS is calculated and deducted from your salary to avoid any surprises on your salary credit day! Usually, most of the employers have this cycle of taking the estimated investments between the April to December months and taking the Actual investment amounts during January to March months so that income tax can be calculated accordingly and paid within the financial year based on your tax liability.Īnd in this way, in order to pay your income tax for a financial year, TDS is deducted from your salary every month in a financial year. In many cases, you as employee, might provide various investment deductions that you want to claim like Employee Provident Fund, Public Provident Fund or investments in ELSS (Equity linked saving saving), you can inform about these deductions to your employer based on which your taxable income is adjusted and income tax is calculated accordingly. Based on employees income, and using income tax calculator, employees income tax is calculated and accordingly it is divided into remaining months of the financial year. So, employers are instructed to collect Tax at source, that is while transferring employees salary to their bank accounts. This paying of income tax based on your income for financial year is covered under Section 192 of the Income Tax Act. This income tax need to be paid by you and government cannot wait for the financial year end for you to file your ITR (Income Tax Return) to pay your income tax during filing process. So based on your income, your income tax is calculated. Use Income Tax Calculator to calculate your income tax: instant calculator click here Why TDS is deducted from Salary Watch above video to understand TDS on Salary calculation using excel and various examples including salary increments in a financial year due to bonuses or job switch.
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