Income Tax Deduction from Salary

Income tax deduction from salary is a crucial aspect of tax compliance for salaried individuals in India. Governed by Section 192 of the Income Tax Act, the deduction ensures that tax is withheld at source (TDS) based on applicable income tax slabs, surcharges, and exemptions. Key factors influencing the deduction include taxable salary components, relief on arrears under Section 89, deductions for house property loans, and compliance with TDS deposit deadlines. While the Ministry of Finance issues periodic circulars to provide procedural clarity, the fundamental principles of salary tax deduction remain essential. In this article, we'll discuss Circular No.1/2019, notified by the Ministry of Finance (MoF), to get a general sense of the income deduction from salary, including TDS rates, calculating income tax deductions, deduction from gross salary and more.

Rates of Tax

Normal Rates of Tax for Income Tax Deduction from Salary

The following are the normal rates for income tax deduction from salary, 

S.No.	Total Income	Rate of Tax
1	Total income maximum of Rs.2,50,000	Nil
2	Total income above Rs.2,50,000 but less than Rs.5,00,000	Five per cent on the amount exceeding above Rs.2,50,000
3	Total income above Rs.5,00,000 but less than Rs.10,00,000	20 per cent on the amount exceeding above Rs.5,00,000 and Rs.12,500
4	Total income above Rs.10,00,000	30 per cent on the amount exceeding above Rs.10,00,000 and Rs.1,12,500

Tax Rate for Individual and Resident of India (Age 60 years or more but less than 80 during the FY)

Here is the rate chart of income tax deduction from salary for individuals and Indian residents aged 60 years or more but less than 80 during the applicable Financial year. 

S.No.	Total Income	Rate of Tax
1	Total income maximum of Rs.3,00,000	Nil
2	Total income above Rs.3,00,000 less than Rs.5,00,000	5 per cent on the amount exceeding above Rs.3,00,000
3	Total income above Rs.5,00,000 but less than Rs.10,00,000	20 per cent on the amount exceeding above Rs.5,00,000 and Rs.10,000
4	Total income above Rs.10,00,000	30 per cent on the amount exceeding above Rs.10,00,000 and Rs.1,10,000

Tax Rate for Individual and Resident of India (Age 30 years or more during the FY)

Here is the tax rate chart of income tax deduction from salary for individuals and indian residents aged 30 years or more during the applicable financial year.

S.No.	Total Income	Rate of Tax
1	Total income maximum of Rs.5,00,000	Nil
2	Total income above Rs.5,00,000 but less than Rs.10,00,000	20 per cent on the amount exceeding above Rs.5,00,000
3	Total income above Rs.10,00,000	30 per cent on the amount exceeding above Rs.10,00,000 and Rs.1,00,000

Surcharge on Income Tax

Income Tax for every Individual, Hindu undivided family or association of persons or body of individuals as per Section 111A, Section 112, or Section 112A

S.No.	Total Income	Percentage of Tax
1	Total income above Rs.50 lakh but less than Rs.1 crore	10 per cent
2	Total income above Rs.1 crore but less than Rs.2 crore	15 per cent
3	Total income above Rs.2 crore but less than Rs.5 crore	25 per cent
4	Total income above Rs.5 crore	37 per cent
5	Total income above Rs.2 crore but not covered under clause (c) and clause (d) of Section 111A and Section 112	15 per cent

The following person's surcharge under Section 111A and Section 112A shall not exceed 15 per cent if the income exceeding:

S.No.	Total Income
1	Total income above Rs.50 lakh but less than Rs.1 crore
2	Total income above Rs.1 crore but less than Rs.2 crore
3	Total income above Rs.2 crore but less than Rs.5 crore
4	Total income above Rs.5 crore

These are the complete tax rate charts for different levels of taxpayers regarding the income tax deduction from salary.

Tax Relief When Salary Paid in Arrear or Advance

To avail of tax relief under Section 89, the following assessee shall furnish the details in Form 10E. It means the income tax deduction from salary is not applicable in those cases of people. The following are the assessee to avail tax relief as per Section 192(2A):

• Government employee
• An employee in a company,
• Co-operative society employee,
• Local authority employee,
• A University employee,
• An employee in an Institution or
• An employee in an association or body

However, the assessee shall not be eligible for tax relief or income tax deduction from salary under the following circumstances:

• Voluntary retirement or termination of service
• Related with any scheme or schemes of voluntary retirement
• As per Section 10(10C)(i) of a public sector company
• Associated with any scheme of voluntary separation
• If any amount received
• Claimed by the assessee as per Section 10(10C)

Income from House Property

On account of including the loss from house property by the employee, the required details shall be sent to the DDO. The following information shall be attached along with Form No.12BB as per Rule 26C of Section 192(2D):

• Total annual rent or value
• Municipal Taxes receipt
• Deduction claimed for the interest paid if required
• Any other deductions claimed
• Address of the property

Conditions to Deduct Interest on Borrowed Capital for Income from House Property

As per Section 24(b) the interest can be deducted from the income from houses. The following are the conditions to claim the deduction on borrowed capital:

• The deduction shall be permitted if the employee owns the house property
• The following are the maximum deduction allowed:

S.No.	Purpose of Borrowing Capital	Date of Borrowing Capital	Max. Deduction Allowed
1	Repair, renewal, reconstruction of the house	Any time	Rs.30,000
2	Purchase or construction of the house	Before 01/04/1999	Rs.30,000
3	Purchase or construction of the house	On or after 01/04/1999	Rs.1,50,000 (up to AY 2014-15)
			Rs.2,00,000 (from 2015-16)

Note: The total deduction of S.No.1 and 3 of the table should not exceed Rs.2,00,000 from the FY 2019-20. Condition to claim the deduction for Serial No.3 on the above table

• The purchase or the construction of the house should have been completed within 5 years.
• The DDO should have the 'completion certificate' of the property for which the deduction is being claimed
• If any interest for the previous period from the applied FYs to the current FY shall be allowed to deduct in equal instalments
• The employee seeking for deduction shall acquire the 'completion certificate' with the details on borrowed capital. If in the case of a new loan has been obtained to repay the previous loan, the certificate shall have the details of the loan availed.
• The following documents should be provided:

• • Paid Interest and remaining interest to be paid
  • Name and Address of the lender
  • PAN or Aadhaar number of the lender

Due Dates for TDS

The following tables describe the payment or deposit of TDS to the credit of the Central Government:

For Office Other than the Office of Government

S.No.	Description	Depositing Time
1	Tax deducted in March	30th April next FY
2	Tax deducted apart from March	On the 7th Day of the next month
3	Tax on perquisites opted to be deposited by the employer	On the 7th Day of the next month

If following are the dates for quarterly payments of TDS if the DDO applies to Additional or Joint Commissioner of Income Tax:

S.No.	Description	Depositing Time
1	30th June	7th July
2	30th September	7th October
3	31st December	7th January
4	31st March	30th April next Financial Year

Learn more: Interest and Penalty for TDS

Certificate for Tax Deducted

As per Section 203, the DDO or the bank shall provide the details of the tax deducted in Form 16. The following are the details furnished in Form 16:

• • PAN or Aadhaar number
  • Tax deduction and Collection account number (TAN)
  • Book Identification Number (BIN)
  • Challan Identification Number (CIN)
  • Receipts of all quarterly statements
• If in the case the DDO fails to issue the certificate, the DDO shall be fined with Rs.100 every day.
• The certificate shall be generated if the PAN or the AAdhaar number is valid
• The status of Form 16 should match with Form 24G or OLTAS.
• The employer should provide the total amount of the salary, including the exemption under Section 10.
• The employer should provide the total amount of salary, excluding Section 10 in column 333 of Form 24Q.
• The details of TDS on loss from House Property can be detailed in column 350.

Also read: Perquisites under the Income Tax Act

Due Dates of filing Quarterly Statements in Form 24Q

S.No.	Ending date of the quarter of FY	Due Date
1	30th June	31st July of the FY
2	30th September	31st October of the FY
3	31st December	31st January of the FY
4	31st March	31st May of the FY (immediately following the FY in which the deduction is made)

Scroll down to know more on income tax deduction from salary 2019-2020.

FAQs on Income Tax Deduction from Salary

1. What is the deduction of tax from salary?

The deduction of tax from salary refers to the process where employers withhold tax (TDS) from an employee’s salary based on income tax slabs and deposit it with the government as per Section 192 of the Income Tax Act.

2. How are income tax deductions for salaried employees calculated?

Income tax deductions for salaried employees are calculated based on exemptions, deductions under various sections like 80C, 80D, and 80E, and applicable tax slabs after deducting eligible benefits such as HRA and home loan interest.

3. What factors influence the deduction of TDS on salary?

The TDS deduction on salary depends on taxable salary components, applicable deductions, relief under Section 89, house property loans, and government notifications issued periodically.

4. Which sections provide income tax deductions for salaried employees?

Key sections providing tax deductions for salaried employees include 80C (investments), 80D (medical insurance), 80E (education loan interest), and Section 24(b) (home loan interest deduction).

5. How is the deduction of tax from salary calculated for different age groups?

The tax deduction from salary varies based on age groups: individuals below 60, senior citizens (60-80 years), and super senior citizens (80+ years), with different exemption limits and slab rates.

6. What are the rules for deductions from gross salary for house property loans?

Deductions from gross salary for house property loans include up to ₹2,00,000 on interest paid for self-occupied property under Section 24(b), provided the loan was taken after April 1, 1999, and the construction is completed within five years.

7. What is the process for calculating income tax deductions on arrears or advance salary?

Calculating income tax deductions on arrears or advance salary involves tax relief under Section 89, where employees must submit Form 10E to claim a reduction in tax burden due to irregular salary payments.

8. What are the due dates for depositing TDS deducted from salary?

Employers must deposit TDS deducted from salary by the 7th of the next month, except for March, which has an extended deadline of April 30. Quarterly payments apply for specific cases.

9. How does the deduction of TDS on salary apply to perquisites?

The deduction of TDS on salary for perquisites, such as rent-free accommodation and medical benefits, follows valuation rules specified in the Income Tax Act, and employers must include these while computing taxable income.

10. What documents are required to claim tax deductions for salaried employees?

To claim tax deductions for salaried employees, documents like Form 16, rent receipts for HRA, medical insurance premium receipts, loan certificates, and Form 12BB for investment declarations must be submitted.

About the Author

PETER ABURVAN A
Post By IndiaFilings.

Updated on: February 10th, 2025