TDS Configuration

Under Section 192 of the Income Tax Act, every employer who is paying a salary income to his employee is required to deduct TDS from the salary income if it exceeds the basic exemption limit.

However this configuration can be incorporated in the system so that the TDS for those employees who's salary income exceeds the basic exemption limit is deducted from their gross salary.

Roles

Finance Admin

Path

Finance Admin >> Salary Configuration >> Tax Structure

Functionality

1. Tax Slab

• Under the Income Tax Act, 1961 – the percentage of income that is payable as tax to the Government is based on the amount of income that a person has earned during a year.
• Hence for any given financial year the Tax slabs can be configured in the system. The tax slabs can be created individually for Male / Female, Senior Citizen Male / Female, Super Senior Citizen Male / Female employees.
• The system provides the functionality to deduct the TDS (Tax Deduction at Source) on monthly basis. Its is the responsibility of the employee to deposit this amount to the government as TDS for whom the TDS amount has been deducted.

2. Tax Exemptions

• Under this section we can configure multiple parameters through which the Tax Exemptions are defined under the Income Tax Act, 1961.
• There are a number of great ways to save taxes. You need to make use of the tax-saving instruments wisely, in order to minimize your tax payments.
• There are several income tax exemptions available under the income tax act and here we will discuss all of the same.

Allowances exempted under Section 10 as per Income Tax Act.

• HRA (House Rent Allowance)

A minimum of the following is the income tax exemption that one gets from HRA: Total HRA received from the employer If rent is less than 10% of the income (Basic salary +Daily Allowance) 40% of the income (Basic + Daily Allowance) and 50% of income (Basic + DA) in metropolitan cities. In such cases, the salary is equal to the basic sum inclusive of the dearness allowance (Basic + DA)

• Allowance on Transportation

The expenditure done in order to commute from your home to work place is unavoidable. However the Government declares a certain amount annually which is exempted under Section 10 of Income Tax Act.

• Children Education Allowance

Children Education is another expenditure which falls under which Tax Exemption is applicable. This benefit can be given by the employers to the employees in order to get Income Tax exemptions. However the limit of this plan is ₹100 per month only for two children.

Exemptions under Section 80 as per Income Tax Act.

1.    Section 80D: Medical Insurance Deduction.

2.    Section 80DD: Income Tax Exemption for maintenance of Disable Dependent.

3.    Section 80DDB: Serious Ailment Deduction

4.    Section 80E: Deduction on Loan for Higher Studies.

5.    Section 80G: Deductions for donations / charity.

6.    Section 80GG: Deduction on House Rent Paid.

7.    Section 80TTA: Saving Account Interest Deduction.

8.    Section 80U: Deduction for Disabled.

However there are various other Sections and sub-sections under Income Tax Act through which the tax can be exempted.

The system provides the functionality to define each section individually and the configuration for the same will reduce the amount for the TDS deduction from the employee’s salary.

3. Tax Additional Configuration