Understanding TDS: You Earn after Losing
The most exciting part of taking a job is Salary, isn’t it true? Absolutely it is, but have you wondered looking at the components of your salary? Any student taking up his/her first job might not know about the salary components or deductions but keep the curiosity alive and you will learn at a great pace. The usual question is what will be the in hand amount or the take-home salary. The take home comes out after certain deductions in the form TDS or PF amount etc.
TDS stands for Tax deducted at a source that is an indirect method of collecting tax from the employed professionals. There is usually a certain amount that is deducted stating it as TDS. TDS is applicable on many sources commissions, interest earned, royalty payments, etc. It is under the purview of Income tax of India and is regulated by the central board of Direct taxes(CBDT). Individuals falling under the income slab of 2,50,000 are not liable for TDS deductions.
Why TDS? Know why
The TDS deductions are a respite to taxpayers and government for various reasons. Here are some of them.
- It shields you from paying a huge amount at one go.
- It is a revenue source for government.
- It reduces the chances of tax evasion as the tax gets collected at the source.
- It makes more people to pay tax in some of the other way.
- Tax calculations are made easy for individuals.
Know about your tax slab and wherever applicable
Depending on your income, the government has defined tax slab bracket that ranges up to 30%.
5% tax for individuals having income up to 5 lakhs.
20% tax for individuals having income between 5 lakhs-10 lakhs.
30% tax for individuals having income above 10 lakhs.
Interest earned on investments is also eligible for tax payment. The interest earned on FD above 10,000 is taxable 10 percent or more, property owned above 50 lakhs is also taxable, interest earned on securities and national saving schemes are also taxable.
Know More: Top 5 Tax Saver Schemes
Important to know!
Despite your deductions, it’s your responsibility to file tax returns since the excess deductions that an individual is not to liable pay shall be claimed.
When you can claim a TDS refund?
- In case the tax deducted at source is more than what you are eligible to pay, you can claim the TDS refund.
- You can file a tax refund when your tax slab is low yet the tax deducted is quite high or you fall under the minimum taxable slab.
Be smart to know your duties and rights. Starting job for the first time comes with great learning and income tax returns, filing returns, showing investments is an ongoing process and lifelong learning that will get better with every time you experience. Wishing you a happy and smooth tax journey.