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TDS on Salary? Research Team | Posted On Tuesday, December 30,2014, 05:55 PM

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TDS on Salary?



You earn a hefty salary each month. This salary is given to you for the services you render when you fulfill the terms and conditions of your contract of employment by your employer. There is a tax on everything these days including your salary.So learn TDS on salary.

What is tax deducted at source on your salary?

Your employer deducts tax directly from your salary before paying it to you. Your employer estimates your tax liabilities after taking into account the tax allowances and deductions you can avail under various Sections of the income tax act. This amount is deducted directly from your salary and paid as your income tax to the Government.

How to calculate TDS on salary?

Your salary is divided into two parts


  • Actual salary
  • Perquisites


The actual salary is your basic salary, dearness allowance and other allowances, your bonus and so on. Perquisites colloquially known as “Perks” might be a rent free accommodation, a car and a driver, servants, watchmen, guards, as well as furniture, fridge or a television set provided by the employer.




You have your monthly salary
The main components of your salary

  • Basic salary
  • Dearness allowance
  • House rent allowance
  • Transport allowance
  • Medical reimbursement
  • Leave travel concession
  • Hostel allowance
  • Children’s education allowance
  • Bonus
  • Food coupons and gift vouchers




You get exemptions/allowances on your salary. You do not have to pay tax on the portion which is exempt.
All allowances calculated on a monthly basis

House Rent Allowances :

  • The HRA (House Rent Allowance) given to you by your Company.....condition 1
  • The actual rent you pay - 10% *(Basic salary + Dearness allowance). ..... condition 2
  • 50% of (Basic Salary + Dearness allowance) in case you reside in a Metro City and 40% of (Basic Salary + Dearness allowance) if you reside in any other city ....condition 3


You have to pay tax on the actual HRA received from your employer minus the amount which is the least among the above three conditions.

Transport allowance
You are given a transport allowance as part of your salary. You do not have to pay tax on this amount as long as the travel allowance given to you is up to INR 9600 a year. (INR 800 a month).

Medical reimbursement
Medical reimbursement is exempt up to INR 15000 a year (INR 1250 a month) which is a perquisite not an allowance.

Hostel allowance
You are exempted to tax up to INR 300 per month per child. (Maximum of 2 children).

Children's education allowance
You are exempted to tax up to INR 100 per month per child. (Maximum of 2 children).




What is the taxable amount on your gross monthly salary?
You have to pay tax on the remaining amounts (Amounts not exempted) which is your gross monthly salary minus the allowable exemptions (within their limit).

This amount (Gross monthly salary – allowable exemptions) needs to be multiplied by 12 in order to get the yearly projections of your TDS. (Your projected salary).

You have to project your income for the year as you have not yet received this salary. You have to assume that your salary does not change in the year.




You avail deductions under Chapter V1 A which gives your total taxable income. These are deductions from Section 80 C to Section 80 U.




Calculate net taxable salary based on the tax slabs you fall under.

If you are below 60 years of age you pay income taxes depending on the income you earn. You pay income taxes at the rate specified below.

Individual Tax Payers up to the age of 60 years: (Male/Female) :


Annual Income (INR)

Tax Rate

0 - 2,50,000



10 %


20 %

Above 10,00,000

30 %


You have to pay a total education cess of 3%

( Education cess at 2% + Secondary and higher education cess at 1% )

This article helps you get an idea of how TDS is calculated on your salary. No longer does tax seem so complicated.

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