For Salaried Employees,We do not deduct TDS at Flat Rate of 10%/1% etc
We first calculate Annual Tax as per Income tax slab rate and divide it by 12
Following Steps are Involved
- Take Monthly Salary of Employee
- Calculate Annual Salary by Multiplying by 12
- Reducing Standard Deduction
- Calculating Income from Salary(After Standard Deduction)
- Calculate Tax,Rebate and Net Tax
- Calculate Cess
- Tax+Cess
- Divide it by 12 to get Monthly TDS
STANDARD DEDUCTION FOR SALARIED EMPLOYEES
FY 2017-18
No Standard Deduction was available
FY 2018-19
Employees get a Standard Deduction of 40000 per annum, Hence,their Income will be reduced by 40000 while calculating tax
FY 2019-20
Now all Employees will get a Standard Deduction of 50000 per annum, Hence,their Income will be reduced by 50000 while calculating tax
Example
PARTICULARS FY 2017-18 FY 2018-19 FY 2019-20 MONTHLY SALARY 30000 30000 30000 ANNUAL SALARY 360000 360000 360000 STANDARD DEDUCTION 0 40000 50000 INCOME FROM SALARY 360000 320000 310000
Slab Rate for F.Y 2019-20
INCOME | TAX |
UPTO 250000 | Nil |
250000-500000 | 5% of Income Greater than 250000 |
500000-1000000 | 20% of Income Greater than 500000+12500 |
>1000000 | 30% of Income Greater than 1000000+112500 |
There is Rebate of 12500 if Income between 250000-500000
Standard Deduction of 50000 p.a is available to salaried Person.
Lets study this step by step
Calcualtion of Tax
Calculation of Rebate
FY 2019-20
If Income between 250000-500000,Then 12500 Rebate is now available
Rebate cannot be more than tax
(Earlier,if income was between 25000-350000,there was 2500 Rebate)
Example 1
Suppose an Employee gets a Salary of 15000 per month.
What is Income Tax Payable by him?
View AnswerMonthly Salary = 15,000
Annual Salary = 1,80,000
Since Salary is less than 250000, no income tax is payable
Example 2
Suppose an Employee gets a Salary of 35000 per month.
What is Income Tax Payable by him?
View AnswerMonthly Salary=35000
Annual Salary=35000*12=420000
Less: Standard Deduction 50000
Net Annual Salary 370000
Income Tax
= 5%*(370000-250000)
=5%* 120000
=6000
Rebate=6000 (As Income is less than 500000)
Net Tax=0
Cess = 4%*0 = 0
Tax + Cess = 0
Example 2 Continue
What is monthly TDS to be deducted in this case?
View AnswerTax + Cess = 0
TDS=Net Tax/12 = 0
Net Salary=Monthly Salary-Monthly TDS= 0
Example 3
Suppose an Employee gets a Salary of 75000 per month.
What is Income Tax Payable by him?
View Answer
Monthly Salary=75000
Annual Salary=75000*12=900000
less : Standard Deduction=50000
Net Annual Salary =850000
Income Tax
=20%*(850000-500000)+12500
=20%* 350000+12500
=70000+12500
=82500
Rebate=0 (As Income is more than 500000)
Net Tax=82500
Cess = 4%*82500 = 3300
Tax + Cess = 85800
Example 3 Continued
What is monthly tax to be deducted in this case?
View AnswerNet Tax=85800
TDS=Net Tax/12 = 85800/12 = 7150
Net Salary=Monthly Salary-Monthly TDS=75000-7150=Rs 67850
Assignment
Complete the following table in Excel
Particular | Case 1 | Case 2 | Case 3 | Case 4 | Case 5 | Case 6 | Case 7 |
MONTHLY SALARY | 10000 | 25000 | 30000 | 40000 | 50000 | 100000 | 22000 |
ANNUAL SALARY | |||||||
LESS STANDARD DEDUCTION | |||||||
NET ANNUAL SALARY | |||||||
TAX | |||||||
REBATE | |||||||
NET TAX | |||||||
CESS 4% | |||||||
TAX+ CESS | |||||||
MONTHLY TDS | |||||||
NET SALARY |
DOWNLOAD AND TRY
View AnswerParticular | Case 1 | Case 2 | Case 3 | Case 4 | Case 5 | Case 6 | Case 7 |
MONTHLY SALARY | 10000 | 25000 | 30000 | 40000 | 50000 | 100000 | 22000 |
ANNUAL SALARY | 120000 | 300000 | 360000 | 480000 | 600000 | 1200000 | 264000 |
LESS STANDARD DEDUCTION | 50000 | 50000 | 50000 | 50000 | 50000 | 50000 | 50000 |
NET ANNUAL SALARY | 70000 | 250000 | 310000 | 430000 | 550000 | 1150000 | 214000 |
TAX | 0 | 0 | 3000 | 9000 | 22500 | 157500 | 0 |
REBATE | 0 | 0 | 3000 | 9000 | 0 | 0 | 0 |
NET TAX | 0 | 0 | 0 | 0 |
22500 |
157500 | 0 |
CESS 4% | 0 | 0 | 0 | 0 | 900 | 6300 | 0 |
TAX+ CESS | 0 | 0 | 0 | 0 | 23400 | 163800 | 0 |
MONTHLY TDS | 0 | 0 | 0 | 0 | 1950 | 13650 | 0 |
NET SALARY | 10000 | 25000 | 30000 | 40000 | 48050 | 86350 | 22000 |