Hi, What is % of tds to be deducted on Incentive ? I find tds being deducted up to 40 % on my salary slip. Kindly let me know if it is legitimate. Regards Vishali
From India, Mumbai
From India, Mumbai
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Dear Vishali,
Incentive has to be treated as salary. The percentage at which they are deducting it is totally dependent on your salary bracket. For example, if your salary is:
- 6 lakhs, it would be deducted at 30.60%
- 5 lakhs, it would be 30.60%
- 4 lakhs, it would be 20.60% and so on.
If you receive the incentive in the middle of the year, you will be deducted at the highest rate, considering the salary bracket you fall into.
Regards,
Jai
From India, Pune
12Incentive has to be treated as salary. The percentage at which they are deducting it is totally dependent on your salary bracket. For example, if your salary is:
- 6 lakhs, it would be deducted at 30.60%
- 5 lakhs, it would be 30.60%
- 4 lakhs, it would be 20.60% and so on.
If you receive the incentive in the middle of the year, you will be deducted at the highest rate, considering the salary bracket you fall into.
Regards,
Jai
From India, Pune
Dear Swathi & Vaishali,
As you are aware, the tax at source for salary gets deducted at the average rate. However, the incentive pertaining to the financial year may be paid during the year based on the performance criterion. Since this incentive is based on performance, it may not have been considered while calculating the average rate of TDS. Hence, once such incentives are paid, two points need to be considered:
1. TDS shall be applied upfront on such incentive.
2. If there is any impact on the average rate of TDS, it needs to be taken into account (e.g., the impact of surcharge).
For example, if the taxable salary of the person is Rs. 3,50,000 for the average rate of TDS, the total yearly tax is Rs. 25,750 (Rs. 25,000 tax plus Education cess & SHE of Rs. 750). This tax will be deducted at the source monthly at an average rate, i.e., around Rs. 2146 per month. Now, if the employee is paid Rs. 1,00,000 incentive in the month of July 2008, TDS on the same will be Rs. 20,600 (Rs. 20,000 Tax plus Education cess & SHE of Rs. 600). This TDS will be in addition to the monthly average.
I hope this has clarified your query.
Regards,
Jai
From India, Pune
As you are aware, the tax at source for salary gets deducted at the average rate. However, the incentive pertaining to the financial year may be paid during the year based on the performance criterion. Since this incentive is based on performance, it may not have been considered while calculating the average rate of TDS. Hence, once such incentives are paid, two points need to be considered:
1. TDS shall be applied upfront on such incentive.
2. If there is any impact on the average rate of TDS, it needs to be taken into account (e.g., the impact of surcharge).
For example, if the taxable salary of the person is Rs. 3,50,000 for the average rate of TDS, the total yearly tax is Rs. 25,750 (Rs. 25,000 tax plus Education cess & SHE of Rs. 750). This tax will be deducted at the source monthly at an average rate, i.e., around Rs. 2146 per month. Now, if the employee is paid Rs. 1,00,000 incentive in the month of July 2008, TDS on the same will be Rs. 20,600 (Rs. 20,000 Tax plus Education cess & SHE of Rs. 600). This TDS will be in addition to the monthly average.
I hope this has clarified your query.
Regards,
Jai
From India, Pune
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