Complete Guide to TDS Deduction from Employee Salaries in India FY 2024-2025

Introduction

Tax Deducted at Source (TDS) on salary is a crucial responsibility for every employer in India. Under Section 192 of the Income Tax Act, employers must calculate and deduct TDS when an employee’s salary exceeds the basic exemption limit. This guide will walk you through the entire process, from calculation to compliance.

TDS Calculation Process

Step 1: Calculate Gross Annual Salary

First, determine the employee’s total annual income by including:

  • Basic salary
  • Allowances (HRA, transport allowance, etc.)
  • Perquisites
  • Bonuses and commissions

Step 2: Consider income & deductions submitted by employee through Form 12BB

Subtract the following eligible deductions:

  • Standard deduction
  • Professional tax
  • Section 80C investments (up to ₹1.5 lakhs)
  • Section 80D health insurance
  • Housing loan interest (Section 24)
  • Other applicable deductions

Step 3: Calculate Taxable Income as per the regime chosen by the employee.

After applying all eligible deductions, you’ll arrive at the taxable income figure.

TDS Rate Chart for FY 2024-25

New Tax Regime

Income SlabTax Rate
Up to ₹3,00,000Nil
₹3,00,001 – ₹6,00,0005%
₹6,00,001 – ₹9,00,00010%
₹9,00,001 – ₹12,00,00015%
₹12,00,001 – ₹15,00,00020%
Above ₹15,00,00030%

Old Tax Regime

Income SlabTax Rate
Up to ₹2,50,000Nil
₹2,50,001 – ₹5,00,0005%
₹5,00,001 – ₹10,00,00020%
Above ₹10,00,00030%

Monthly TDS Calculation Formula

The formula for calculating monthly TDS is: Monthly TDS = (Annual Tax Liability ÷ Remaining Months in Financial Year)

Important Deadlines and Compliance

TDS Deposit Timeline

  1. For tax deducted from April to February: Due by 7th of the following month
  2. For March deductions: Due by April 30th

Quarterly Return Filing Deadlines for FY 2024-25

QuarterPeriodDue Date
Q1April – JuneJuly 31, 2024
Q2July – SeptemberOctober 31, 2024
Q3October – DecemberJanuary 31, 2025
Q4January – MarchMay 31, 2025

Essential Compliance Requirements

  1. TDS Certificate (Form 16)
    • Must be issued annually by May 31st
    • It should contain complete salary and tax details for the entire financial year
  2. Quarterly Returns
    • File Form 24Q for salary TDS
    • Include all employee details and tax deduction information
    • Submit within prescribed deadlines to avoid penalties
  3. PAN Verification
    • Verify the employee’s PAN before processing the salary
    • A higher TDS rate applies if PAN is not provided

Best Practices

  1. Regular Updates
    • Keep track of tax slab changes
    • Monitor deduction proofs submitted by employees
    • Update tax calculation software regularly
  2. Documentation
    • Maintain proper records of all TDS-related documents
    • Keep copies of investment proofs
    • Store Form 16 and other tax certificates securely
  3. Employee Communication
    • Inform employees about monthly TDS deductions
    • Provide quarterly updates on tax liability
    • Help employees plan their tax savings

Common Mistakes to Avoid

  1. Incorrect tax regime selection
  2. Missing investment declaration deadlines
  3. Wrong calculation of taxable perquisites
  4. Delayed TDS deposits
  5. Incomplete employee records

Conclusion

Employers must stay vigilant and comply with the TDS rules throughout the year. This process requires accurate calculations, timely deposits, and regular employee communication. By following the steps outlined in this guide and adhering to compliance deadlines, employers can ensure smooth TDS management and avoid penalties.

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