Computation of Deduction of Tax at Source

Computation of Deduction of Tax at Source

Computation of Deduction of Tax at Source Example : Mr. X is a employee in a private organization and he received rupees 50,000... 8:57 PM

Computation of Deduction of Tax at Source

Example : Mr. X is a employee in a private organization and he received rupees 50,000 per month as a basic pay and 10% as a Dearness allowance (40% D. A. include for retiring benefit) 15% H. R. A. , employee is living in own house and bonus is 15,000. Employee and his employer contribution 14% in Recognized Provident Fund. He denoted rupees 1,00000 to Prime Minister National Relief Fund and interest due but not paid by the employee on loan taken for self occupied house 66,000. Calculate amount of Monthly Installment of T.D.S.

                         Computation of Deduction of Tax at Source

     Transaction                                                                      Amount

     Basic pay    (25000*12)                                                      3,00,000

     Dearness allowance                                                           30,000

     House rent allowance                                                        45,000

     Bonus                                                                                   15,000

     Contribute in R. P. F. (2% of salary)                                  6,240

     Gross income                                                                       3,96,240     

     (-) loss from house property                                             66,000

     Gross total Income                                                             3,30,240   

     (-) 80C to 80U Deduction : 
     (1)  80C -employee contribution in R. P. F.                          43,680 
     (14% of salary) 
     (2)  80G- Donation to P. M. National Relief Fund             1,00,000 
     Total income                                                                         1,86,560

Here Mr. X has no liability therefore TDS amount is not calculated.

Working Note:

1)    Dearness allowance:      10% of basic pay 

                        3,00,000 *10/100 = 30,000

2)    House rent allowance is fully taxable because employee is living in his own self occupied house.

3)    Contribution to R.P.F. :  Up to 12% of contribution amount is exempt under section 80C and remaining 2% is taxable.

                          2% of salary = 6,240

Here, salary includes Basic pay and dearness allowance (40% under the terms of retiring benefit)

So, 30,000*40/100= 12,000

Salary + D.A.= 3,12,000

And 3,12,000*2/100= 6,240

4)    Contribution in Prime Minister National Relief Fund is 100% exempt.

5)    Interest on loan taken for self occupied house. In self occupied house there is no income therefore due to interest amount it is comes under loss and this loss is compensate with the salary. We assume that employee is reported to his employee about this loss.