Is TDS too tedious? - FAQs on Salary TDS [Part 1]

Last Saturday, I walked into CCD to meet my friend over a cup of coffee. While we were sipping the coffee and discussing on each other’s lives, my friend expressed his disbelief that there was sudden decrease in his take home salary from the month of January onwards due to Tax Deducted at Source (TDS). He wanted me to help him on his various queries on the jargon called “TDS”

Since TDS is a very hot topic now, I am compiling few frequently asked questions on “TDS on salary” and my responses to the same. So, here I am with few ‘common man’ questions on Section 192 of the Income Tax Act, 1961 covering “Tax deducted at source on Salaries”

Why are employers deducting tax from my income ?

As per the provisions of the Income Tax Act, employers are required to deduct some amount of your income at the time of making your payment of salaries. They are responsible to deduct the same and deposit it with the Government against your PAN

I am filing my Income Tax return in the month of July and paying tax then as well, Am I paying tax twice?

No, you are not paying tax twice. It will be deposited with the Government by your employer – which will be reflected in your 26AS (connected via your PAN). When you are paying your final tax liability in the month of July next year, you will reduce this amount of TDS made and deposited by your employer and pay only balance tax.

I will be paying my tax in the next year voluntarily, why do they have to deduct tax at the time of receipt of salary ?

Generally, the income tax is paid in the subsequent year of earning or receiving the salary. The year in which you are receiving the salary is called the ‘Previous year’ and the year in which you file your tax is called the ‘Assessment year’ – this is the year in which your income is assessed to tax.

While the general rule is that the income of the previous year is assessed to tax in the Assessment year, the Government adopts some methods whereby, certain portion of tax is collected at the time of earning the income itself, i.e. , in the Previous year itself. Such methods include Tax deducted at source(TDS), Tax collection at source(TCS), Advance tax etc

What happens is, when your pay is determined, your tax is paid by the employer from your salary to the Government, on your behalf. It is as though you are paying tax on your salary income you have earned, however, you are asking your employer to deposit the same, to the Government Account.

I don’t want my salary to be deducted – I will pay it on my own in the Assessment year – can I ask my employer to not deduct TDS?

No. If your salary falls above the Basic exemption limit (Rs 2.5 Lakhs for PY 2017-18 or AY 18-19), they are compulsorily required to deduct TDS, hence, requesting your employer not to deduct your TDS from salary is not possible.

(to be continued…)