Hello Seniors,
I need your help in resolving one issue. I am working with a Pvt Ltd firm in Delhi as Asst. Manager HR. One of our employees is getting a 3 Lakh annual salary. My company has the provision to deduct TDS every month since the start to avoid interest charges, etc., at the end of the financial year. The employee had submitted the investment details as rent allowance of 7000/month, PF contribution of approximately 9000, conveyance allowance of 9600, medical allowance of 15000, and projected investment details of approximately 20000.
My question for you is, do we need to consider projected investment details during TDS calculation? Secondly, do we need to deduct TDS of approximately 704 Rs. every month, as that is currently being deducted from the employee's salary as instructed by our C.A.? If yes, how do we calculate the deduction? Third and lastly, do we really need to deduct TDS on a salary of 3 Lakh per annum? Being in HR, can't we adjust his 1 Lakh salary to avoid deducting TDS?
Please send your replies to
.
I look forward to your earliest response.
With Thanks,
Barkha
From India, Jaipur
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I need your help in resolving one issue. I am working with a Pvt Ltd firm in Delhi as Asst. Manager HR. One of our employees is getting a 3 Lakh annual salary. My company has the provision to deduct TDS every month since the start to avoid interest charges, etc., at the end of the financial year. The employee had submitted the investment details as rent allowance of 7000/month, PF contribution of approximately 9000, conveyance allowance of 9600, medical allowance of 15000, and projected investment details of approximately 20000.
My question for you is, do we need to consider projected investment details during TDS calculation? Secondly, do we need to deduct TDS of approximately 704 Rs. every month, as that is currently being deducted from the employee's salary as instructed by our C.A.? If yes, how do we calculate the deduction? Third and lastly, do we really need to deduct TDS on a salary of 3 Lakh per annum? Being in HR, can't we adjust his 1 Lakh salary to avoid deducting TDS?
Please send your replies to
I look forward to your earliest response.
With Thanks,
Barkha
From India, Jaipur
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I think it is better for you to go as per your CA's advice, who has been hired by your company to perform a job in which he is a professional. So, if you need to know how to calculate TDS or how to avoid tax, it's better that you sit with your CA and understand it, as it would be too cumbersome to explain the nitty-gritty of the IT Act in this forum.
Further, being in HR does not give you an unfettered right to tinker with the salary structure of your employees. Please follow the provisions of the IT Act in this regard.
From India, Mumbai
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120Further, being in HR does not give you an unfettered right to tinker with the salary structure of your employees. Please follow the provisions of the IT Act in this regard.
From India, Mumbai
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Dear Barkha,
This man is not liable to pay tax based on the figures you have posted; hence, no TDS deduction is required. Take care to take a declaration from him for the following:
1. House rent 7000/- per month - take rent receipt on record. This is assuming he is being paid HRA as part of salary, which is around the amount of rent he is paying.
2. Medical 15000/- per year.
3. Other investments for 20000/-.
Once he submits the declaration, the onus is on the employee to follow up on his promises. However, in January, do a recheck and see what promises he has kept with documentary evidence and accordingly work out his taxes or make deductions under TDS accordingly.
Hope this helps.
Robin Varghese
HR Consultant, New Delhi
+91-8800747161
robin_vargh@yahoo.com
From India, Delhi
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This man is not liable to pay tax based on the figures you have posted; hence, no TDS deduction is required. Take care to take a declaration from him for the following:
1. House rent 7000/- per month - take rent receipt on record. This is assuming he is being paid HRA as part of salary, which is around the amount of rent he is paying.
2. Medical 15000/- per year.
3. Other investments for 20000/-.
Once he submits the declaration, the onus is on the employee to follow up on his promises. However, in January, do a recheck and see what promises he has kept with documentary evidence and accordingly work out his taxes or make deductions under TDS accordingly.
Hope this helps.
Robin Varghese
HR Consultant, New Delhi
+91-8800747161
robin_vargh@yahoo.com
From India, Delhi
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Yes, but take a declaration from the employee. Anything he gives as a declaration, irrespective of whether he follows up accurately or not, the onus remains with the employee.
Regards,
Robin Varghese
HR Consultant, New Delhi
+91-8800747161
Email: robin_vargh@yahoo.com
Contact us for Recruitment/Payroll Management/HRMS
From India, Delhi
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Regards,
Robin Varghese
HR Consultant, New Delhi
+91-8800747161
Email: robin_vargh@yahoo.com
Contact us for Recruitment/Payroll Management/HRMS
From India, Delhi
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Dear Robin ji,
The queriest said that the employee had submitted the investment details as follows:
- Rent allowance (not HRA) 7000/month
- PF contribution - approx 9000/annum
- Conveyance allowance 9600/annum
- Medical allowance 15000/annum
- Projected investment 20000
The queriest has also not mentioned whether all those allowances are paid to the employee and the quantum.
My question to you, sir, is if the employee is not paid those allowances or irrespective of the amount paid and spent, is the employee entitled to the declaration/IT exemption?
From India, Mumbai
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The queriest said that the employee had submitted the investment details as follows:
- Rent allowance (not HRA) 7000/month
- PF contribution - approx 9000/annum
- Conveyance allowance 9600/annum
- Medical allowance 15000/annum
- Projected investment 20000
The queriest has also not mentioned whether all those allowances are paid to the employee and the quantum.
My question to you, sir, is if the employee is not paid those allowances or irrespective of the amount paid and spent, is the employee entitled to the declaration/IT exemption?
From India, Mumbai
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Dear Mr. Korgaonkar,
The HR needs to specify details of salary - Basic, HRA, Conveyance, etc. (salary components). This has already been conveyed to the HR in question, and all calculations and advice are based on this assumption. What I gather from HR is the question of whether an employee's intimation to make these investments is enough so as not to deduct IT, or should HR wait for actual proof of investments and meanwhile deduct TDS. Here, it is a well-defined law that a declaration is enough to absolve the employer (deducting authority) from penalties which could otherwise amount to a jail term. Once the declaration is given, the onus falls on the employee to furnish proof of investment, failing which he will stand liable for penalties, etc.
It is taken for granted that an employee will provide a Rent receipt only if he is paid HRA as a component of salary. Likewise, for conveyance, no declaration is needed as an amount of 800 pm is deductible. PF, again, is deducted by the employer, so the amount is known more to the employer than the employee (especially where mid-term increments take effect). Again for Medical - the employee has to provide proof irrespective of whether he gets anything in lieu of this as part of the salary. An employee will make Rs20000 investments only when he has to provide for IT liabilities. So, no employee will do anything on his own without having to allocate for tax liabilities on account of components of the salary which are taxable.
Warm regards,
Robin Varghese
HR Consultant, New Delhi
+91-8800747161
Contact us for your Recruitment/Payroll/HRMS needs.
From India, Delhi
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The HR needs to specify details of salary - Basic, HRA, Conveyance, etc. (salary components). This has already been conveyed to the HR in question, and all calculations and advice are based on this assumption. What I gather from HR is the question of whether an employee's intimation to make these investments is enough so as not to deduct IT, or should HR wait for actual proof of investments and meanwhile deduct TDS. Here, it is a well-defined law that a declaration is enough to absolve the employer (deducting authority) from penalties which could otherwise amount to a jail term. Once the declaration is given, the onus falls on the employee to furnish proof of investment, failing which he will stand liable for penalties, etc.
It is taken for granted that an employee will provide a Rent receipt only if he is paid HRA as a component of salary. Likewise, for conveyance, no declaration is needed as an amount of 800 pm is deductible. PF, again, is deducted by the employer, so the amount is known more to the employer than the employee (especially where mid-term increments take effect). Again for Medical - the employee has to provide proof irrespective of whether he gets anything in lieu of this as part of the salary. An employee will make Rs20000 investments only when he has to provide for IT liabilities. So, no employee will do anything on his own without having to allocate for tax liabilities on account of components of the salary which are taxable.
Warm regards,
Robin Varghese
HR Consultant, New Delhi
+91-8800747161
Contact us for your Recruitment/Payroll/HRMS needs.
From India, Delhi
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Hi Barkha,
Kindly refer to the link given below: [Nithya's Tax Calculator](http://www.ynithya.com/taxcalc/taxcalc.htm). Download the latest Excel format to calculate the TDS amount of any salaried employee for the financial year 2014-15. (Note: Read the instructions carefully before using this format to get accurate results.)
Being an HR professional, I also need to calculate TDS for my eligible employees. I have been using this tool for the last few years, and it has been really useful. You may refer this to your CA to check its authenticity. Please revert for any queries.
Thank you.
From India, Ahmedabad
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Kindly refer to the link given below: [Nithya's Tax Calculator](http://www.ynithya.com/taxcalc/taxcalc.htm). Download the latest Excel format to calculate the TDS amount of any salaried employee for the financial year 2014-15. (Note: Read the instructions carefully before using this format to get accurate results.)
Being an HR professional, I also need to calculate TDS for my eligible employees. I have been using this tool for the last few years, and it has been really useful. You may refer this to your CA to check its authenticity. Please revert for any queries.
Thank you.
From India, Ahmedabad
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Dear Robin ji,
Thank you very much for responding my post.
Dear Barkha ji,
You, being Asst. Manager HR, are expected to know exemptions, deductions and maximum permissible investments under Income Tax.
You said your company has the provision to deduct TDS every month from starting to avoid the interest charges etc at the end of the financial year. It is not your company’s provision but a provision under the Income Tax Law according to which the employer has to deduct the tax at source if the projected income of an employee during the financial year is in tax bracket after considering exemptions, deductions and maximum permissible investments as declared by him.
Exemption means certain allowances / special allowances or salary heads which are exempted from Income Tax subject to certain conditions. House Rent Allowance, Transport Allowance, Education Allowance, Leave Travel Allowance and many more special allowances are exempted from Income Tax but not Medical Allowance.
Generally, any Allowance received by an employee is fully taxable unless specifically exempted. The employee has to claim the exemptions. I repeat, the employee has to earn those allowances and claim the exemptions.
Medical Allowance is taxable fully. However, medical expense reimbursement up to Rs. 15000 is not treated as a taxable perquisite as per Clause (v) of the Proviso to Section 17 (2) of the Income Tax Act.
Deduction means deduction from total income in respect of various investments / expenditures / payments. Under section 80c, 80ccc & 80ccd maximum deduction available is Rs. 1 lac.
Apart maximum limit of Rs. 1 lac under Section 80c, 80ccc & 80ccd, there are other deductions allowed such as mediclaim premium under section 80d and donation under 80g and many more.
If, one go through the Form 16 can gather some information on it.
I am not Finance man or Income Tax expert but any HR person should know some knowledge in this area and therefore I have it. When we recruit the staff at various level and decide their compensation, we must have this much knowledge. If not, the finance department will take over your functions related to employee compensation and taxation. I have seen in many companies those functions are taken over by finance department……
From India, Mumbai
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Thank you very much for responding my post.
Dear Barkha ji,
You, being Asst. Manager HR, are expected to know exemptions, deductions and maximum permissible investments under Income Tax.
You said your company has the provision to deduct TDS every month from starting to avoid the interest charges etc at the end of the financial year. It is not your company’s provision but a provision under the Income Tax Law according to which the employer has to deduct the tax at source if the projected income of an employee during the financial year is in tax bracket after considering exemptions, deductions and maximum permissible investments as declared by him.
Exemption means certain allowances / special allowances or salary heads which are exempted from Income Tax subject to certain conditions. House Rent Allowance, Transport Allowance, Education Allowance, Leave Travel Allowance and many more special allowances are exempted from Income Tax but not Medical Allowance.
Generally, any Allowance received by an employee is fully taxable unless specifically exempted. The employee has to claim the exemptions. I repeat, the employee has to earn those allowances and claim the exemptions.
Medical Allowance is taxable fully. However, medical expense reimbursement up to Rs. 15000 is not treated as a taxable perquisite as per Clause (v) of the Proviso to Section 17 (2) of the Income Tax Act.
Deduction means deduction from total income in respect of various investments / expenditures / payments. Under section 80c, 80ccc & 80ccd maximum deduction available is Rs. 1 lac.
Apart maximum limit of Rs. 1 lac under Section 80c, 80ccc & 80ccd, there are other deductions allowed such as mediclaim premium under section 80d and donation under 80g and many more.
If, one go through the Form 16 can gather some information on it.
I am not Finance man or Income Tax expert but any HR person should know some knowledge in this area and therefore I have it. When we recruit the staff at various level and decide their compensation, we must have this much knowledge. If not, the finance department will take over your functions related to employee compensation and taxation. I have seen in many companies those functions are taken over by finance department……
From India, Mumbai
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I think that it's better for you to consult a Financial Accountant (CA). They will provide you with the best suggestions, as they have been hired by your company to perform their professional duties. If you need assistance with calculating TDS or tax planning, your financial adviser will offer you the best advice on these matters.
From Pakistan, Lahore
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From Pakistan, Lahore
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Hi if you go head with some Pay roll software then Tds calculation will be taken care were investment details every thing can be entered.
From India, Bangalore
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From India, Bangalore
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Yes, the company has to consider the proposed investment plan while calculating TDS. If the investment receipt is not submitted before the date mentioned in the Declaration, the TDS will be recalculated, and the same has to be recovered from the salary of the said employee for the month of March.
From India, Ahmadabad
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From India, Ahmadabad
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