TDS on Salary : How to calculate TDS on salary as per section 192 of Income Tax

tds on salary

Many a times, when person joins job for the very first time, gets confused that in the appointment letter income from salary has been mentioned different and when they get paid, it’s different amount. This is mostly because COST TO COMPANY (CTC) has been mentioned, which includes salary, allowances and perquisites. These are like medical, travel, house rent allowance etc. Also, there are some contributions, deductions available. Employer is bound to deduct tax (TDS) before paying salary under section 192 of Income Tax Act, 1961.

For financial year 2021-22, there are two different slab rates applicable. Every employee shall communicate to the employer which slab he wish to opt at the commencement of financial year and employer is bound to deduct tax at the slab opted by employee. Once opted, employee can’t change the slab rates during the year. Though, he can opt for another slab while filling Income Tax Return.

This article contains calculation of Tax Deducted at source (TDS) on salary with the help of existing Income Tax Rates. Now, let us understand step wise how tax is deducted on salary based on existing income tax rates.

Step 1: Calculate your gross annual salary, means basic salary, perquisites, allowances, etc.

Step 2: Calculate exemptions available under section 10, like HRA, Travelling, standard deduction etc.

Step 3: Subtract exemption calculated in step 2 from salary calculated in step 1 (i.e. Step 1 – Step 2). Now, this is your taxable annual salary.

TDS Rate Chart for FY 2022-23/AY 2023-24 – Income Tax

Step 4: Check whether you have any other source of income like house rent, capital gain etc.

Step 5: Add or less this income in step 4 from taxable annual salary calculated in step 3. (i.e. step 3 + step 4)

Step 6: Now, check whether any investments or payments eligible for deductions under Chapter VI of Income Tax Act, have been made.

New Income Tax Rates & existing Income Tax Rates : Quick comparison

Step 7: Subtract exemptions calculated in step 6 from Income calculated in step 5. (i.e. step 5 – step 6)

Step 8: Calculate tax on the above income as per the suitable tax rate applicable. There are different tax rates for individuals and senior citizens. TDS will be weighted average tax per month.

Step 9: TDS on salary will be Income Tax as per step 8 divided by 12 months or number of months of employment in the financial year.

Penalty for not showing the income in Income Tax Return

Now, let’s understand calculation of TDS on Salary with example

Mr X, a 30 years old resident, got a job with a salary package of Rs 11.40 Lacs per annum (computed). Also, he gets monthly rent of Rs. 15,000 and he deposited Rs 75,000 in PPF.

For Income from house property, there is standard deduction of 30%. After this deduction, taxable income from house property will be Rs. 1.26 Lacs.

Calculation of TDS will be as follows:

ParticularAmount (in Rs)
Gross annual salary11,40,000
Less: Standard Deduction50,000
Income from Salary10,90,000
Income from House Property1,26,000
Gross Total Income12,16,000
Chapter VI-A deductions75,000
Total Income11,41,000
Tax on total Income1,54,800
Cess @4%6,192
Total Tax (Note)1,60,992
Tax Payable (Round Off)1,60,990
Number of months in Job12
TDS on Salary per month13,416

Note : Calculation of Tax on total Income-

Income (in Rs)Tax (in Rs)
0 – 2,50,0000
2,50,000 @ 5%12,500
5,00,000 @ 20%1,00,000
1,41,000 @ 30%42,300

10 Income Tax Saving Tips for AY 2021-22 : Tax Planning

New Income tax slabs for all individuals for FY 2021-22 (AY 2022-23)

Income Tax SlabTax Rate
Up to Rs 2.5 lakhNIL
Rs 2.5 lakh to Rs 5 lakh5%
Rs 5 lakh to Rs 7.5 lakh10%
Rs 7.5 lakh to Rs 10 lakh15%
Rs 10 lakh to Rs 12.5 lakh20%
Rs 12.5 lakh to Rs 15 lakh25%
Rs 15 lakh and above30%

Old Income Tax Slabs for FY 2021-22

1. Income Tax Rates for Individual (Less Than 60 Years Old) and HUF for FY 2021-22

Income Tax Slab (in Rs)Tax
Up to Rs 2,50,000Nil
2,50,001 to 5,00,0005% of total income exceeding 2,50,000
5,00,001 to 10,00,00012,500 + 20% of total income exceeding Rs 5,00,000
Above 10,00,0001,12,500 + 30% of total income exceeding 10,00,000

2. Income Tax Slabs for Senior Citizens (60 Years Old Or More but Less than 80 Years Old) for FY 2021-22

Income Tax SlabsTax Rate
Income up to Rs 3,00,000No tax
Income from Rs 3,00,000 to Rs 5,00,0005%
Income from Rs 5,00,000 to 10,00,00020%
Income more than Rs 10,00,00030%

Post Office Interest Rates April–June 2022 on FDs, PPF, NSC, KVP, MIS, SCSS and SSY Schemes

3. Income Tax Slabs for Super Senior Citizens (80 Years Old Or More) for FY 2021-22

Income Tax SlabsTax Rate for Super Senior Citizens
Income up to Rs 5,00,000No tax
Income from Rs 5,00,000 to 10,00,00020%
Income more than Rs 10,00,00030%

Surcharge applicable to the individuals :

Income limitSurcharge Rate on income tax
Net income exceeds Rs 50 lakh but doesn’t exceed Rs 1 crore10%
Net income above Rs 1 crore but doesn’t exceed Rs 2 crore15%
Net income exceeds Rs 2 crore but doesn’t exceed Rs 5 crore25%
Net income exceeds Rs 5 crore37%

Tax on Interest Income – Saving Account, PPF, Fixed Deposits, bonds, R/D

Important Points

  1. In all above cases, an additional 4% Health & education cess will be applicable on the tax amount calculated.
  2. A tax rebate under section 87A is allowed to individual taxpayers a maximum amount of Rs 12,500 for total income up to Rs 5 lakh for FY 2021-22.

Deductions available under ChapterVI-A of Income Tax

1) Section 80 C : An individual can claim maximum of Rs. 1.50 lakh as exemption under section 80C-

  • Life Insurance Premium
  • Sukanya Samrudhi Yojana
  • Public Provident Fund
  • Equity linked Saving schemes
  • Five year bank deposit
  • National Saving Certificates, etc

National Pension Scheme (NPS) in India

2) Section 80 CCG : Exemption of Rs. 25,000 for subscribing equity saving schemes. Read moreIncome Tax on selling of Shares and Securities

3) Section 80 D : Premium paid for medical Insurance, for self and dependents. Read MoreMediclaim Deduction Tax benefit: Section 80D

For any questions, you may reach us at Discussion Forum


The author of the above article is CA Ankita Gandhi.

Disclaimer:The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon. 
Also, and its members do not accept any liability, obligation or responsibility for author’s article and understanding of user.

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