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TDS Rules for Salaried Individuals as per Budget 2024

The Union Budget 2024 introduced several significant changes in the tax deduction at source (TDS) on salary, specifically under the new tax regime. While the old regime remains unchanged, the new regime has undergone various amendments aimed at providing relief to taxpayers. Below are the key changes and their implications.

 

New Tax Regime

The new tax regime has revised the slab rates for the financial year 2024-25. The updated slabs are as follows:

 

Income Range (₹) Tax Rate (%)
Up to 3,00,000 Nil
3,00,001 to 7,00,000 5%
7,00,001 to 10,00,000 10%
10,00,001 to 12,00,000 15%
12,00,001 to 15,00,000 20%
Above 15,00,000 30%

Increase in Standard Deduction

The standard deduction has been increased from ₹50,000 to ₹75,000 under the new regime.

Increase In Exemption of Family Pension:

The deduction u/s 57 increased from 15000 to 25000 under New Tax Regime

Employer’s Contribution to Pension Fund

The limit for the employer’s contribution to the pension fund under Section 80CCD(2), which is allowed as a deduction under both the old and new regimes, has been increased from 10% to 14% of the salary.

TDS Deduction Based on TCS Collection : Change in section 192

 

A new provision has been introduced where if TCS (Tax Collected at Source) is collected from an employee on any transaction and the employee declares this to the employer, the employer must consider this TCS for TDS deduction on salary. Previously, only TDS deducted was considered by the employer.

Old Tax Regime

For Individuals Below 60 Years

  • Up to ₹2.5 lakh: Nil
  • ₹2,50,001 to ₹5 lakh: 5%
  • ₹5,00,001 to ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

For Senior Citizens (60 to 80 Years)

  • Up to ₹3 lakh: Nil
  • ₹3,00,001 to ₹5 lakh: 5%
  • ₹5,00,001 to ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

For Super Senior Citizens (Above 80 Years)

  • Up to ₹5 lakh: Nil
  • ₹5,00,001 to ₹10 lakh: 20%
  • Above ₹10 lakh: 30%

Rebate u/s 87A:

This is available only to Resident individual, not to non resident individual or any other person.

Rebate is allowed:

Under Old Tax Regime: only if total income is not exceeding Rs.500000, Rebate shall be allowed upto Rs.12500

Under New Tax Regime: only if total income is not exceeding Rs.700000, Rebate shall be allowed upto Rs.25000

Note:

  • Rebate shall not be allowed from LTCG u/s 112A
  • Not Allowed to HUF
  • Not allowed to NR
  • Allowed for LTCG/STCG u/s 111A, Casual Income ex. Lottery – under Old Regime Only

Examples to Illustrate the Changes

Example 1: Standard Deduction and New Slab Rates

Scenario:

  • Annual salary: ₹12,00,000
  • Applicable under the new regime

Calculation:

  1. Gross Salary: ₹12,00,000
  2. Standard Deduction: ₹75,000
  3. Taxable Income: ₹12,00,000 – ₹75,000 = ₹11,25,000

Tax Computation:

  • Up to ₹3,00,000: Nil
  • ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
  • ₹7,00,001 to ₹10,00,000: 10% of ₹3,00,000 = ₹30,000
  • ₹10,00,001 to ₹11,25,000: 15% of ₹1,25,000 = ₹18,750

Total Tax Payable:

  • ₹20,000 + ₹30,000 + ₹18,750 = ₹68,750

So TDS to be deducted in whole year based on this in equal amount.

Example 2: TDS Deduction Considering TCS

Scenario:

  • Annual salary: ₹10,00,000
  • TCS collected: ₹5,000
  • Employee declares TCS to the employer

Calculation:

  1. Gross Salary: ₹10,00,000
  2. Standard Deduction: ₹75,000
  3. Taxable Income: ₹10,00,000 – ₹75,000 = ₹9,25,000

Tax Computation:

  • Up to ₹3,00,000: Nil
  • ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
  • ₹7,00,001 to ₹9,25,000: 10% of ₹2,25,000 = ₹22,500

Total Tax Payable:

  • ₹20,000 + ₹22,500 = ₹42,500

TDS Deduction Adjustment:

  • TCS Declared: ₹5,000
  • Adjusted TDS Deduction: ₹42,500 – ₹5,000 = ₹37,500

So TDS to be deducted in whole year based on this in equal amount.

The Budget 2024 has introduced several changes aimed at providing relief to taxpayers under the new tax regime. The increase in standard deduction, revised tax slab rates, higher deduction limits for employer contributions to pension funds, and adjustments for TCS collection are significant steps towards simplifying tax compliance and providing financial benefits to salaried individuals. Taxpayers should ensure their employers are informed about TCS collections to benefit from accurate TDS deductions on salary.

Understanding TDS: Tax Deducted at Source

Understanding TDS (Tax Deducted at Source)

When it comes to taxes, there are various terms and concepts that can be quite confusing. One such term is TDS, which stands for Tax Deducted at Source. In this article, we will delve into the details of what TDS is, when it is applicable, who is responsible for deducting TDS, and the government rules surrounding TDS.

What is TDS?

TDS is a method of collecting tax at the source of income. It is a way for the government to ensure that taxes are paid in a timely manner by deducting a certain percentage of the payment made to the recipient. The person or entity making the payment is responsible for deducting TDS and depositing it with the government.

When is TDS Applicable?

TDS is applicable in various scenarios, depending on the nature of the payment and the threshold limits set by the government. Some common instances where TDS is applicable include:

  • Salary payments
  • Interest earned on fixed deposits
  • Rent payments
  • Professional fees
  • Commission payments
  • Contract payments

These are just a few examples, and there are many other situations where TDS may be applicable. It is essential to understand the specific rules and rates applicable to each type of payment to ensure compliance with the law.

Who is Responsible for TDS?

The responsibility of deducting TDS lies with the person or entity making the payment. This can be an employer, a bank, a tenant, or any other entity making the payment to a recipient. The entity responsible for deducting TDS is known as the “deductor.”

Once TDS is deducted, the deductor is required to issue a TDS certificate to the recipient, which serves as proof of the tax deducted. The deductor is also responsible for depositing the TDS amount with the government within the specified time frame.

Government Rules about TDS

The government has laid down specific rules and regulations regarding TDS to ensure proper compliance and transparency. Some key rules about TDS include:

  • Threshold Limits: The government has set threshold limits for different types of payments. TDS is applicable only when the payment exceeds the specified threshold.
  • TDS Rates: Each type of payment has its own prescribed TDS rate. These rates may vary based on factors such as the nature of the payment, the recipient’s status, and the amount of the payment.
  • TDS Return Filing: The deductor is required to file TDS returns periodically, providing details of the TDS deducted and deposited. Failure to file these returns within the specified due dates can attract penalties.
  • TDS Certificates: As mentioned earlier, the deductor must issue TDS certificates to the recipients, providing details of the tax deducted. These certificates serve as proof of the TDS and are required for filing income tax returns.
  • TDS Refunds: In cases where the TDS deducted exceeds the actual tax liability of the recipient, they can claim a refund while filing their income tax returns.

It is important for both deductors and recipients to be aware of these rules and comply with them to avoid any legal or financial consequences.

In Conclusion

TDS, or Tax Deducted at Source, is a mechanism through which the government collects taxes at the source of income. It is applicable in various scenarios and is the responsibility of the person or entity making the payment. The government has laid down specific rules and regulations regarding TDS, including threshold limits, TDS rates, return filing requirements, and the issuance of TDS certificates. Understanding and complying with these rules is crucial to ensure proper tax compliance and avoid any penalties or legal issues.