Ways of Reducing TDS
The process of TDS on salary is very confusing for many people having knowledge about Income Tax return.
There are some procedures to reduce TDS deduction on salary and to claim the deducted amount during filing income tax return.
Tax Deducted at Source:
The Indian tax system can be broadly classified into two types – the first one is tax paid voluntarily on self assessment. The second type is Tax Deducted at Source. This is also known as TDS.
Importance of TDS:
This type is introduced to simplify the taxation system for the government.
TDS â€” where applicable:
Tax Deducted at Source is applicable for earnings from a number of financial instruments such as income from bank, post office against FDs, payment received for services, etc. TDS is applicable in case of rent / lease/ sale of property.
Rate for TDS deduction:
There is particular uniform rate of TDS deduction. It largely depends upon the source of income. It varies from 1% for sale proceeds to 30% at times. The rate is different in different cases.
Tax deducted from salary:
In India It is mandatory according to Indian Income Tax rules it is compulsory for companies as well as working professionals who earn from salary and commissions to deduct tax at source.
Ways of deducting TDS:
Employers require employees to fill an investment declaration form for the purpose of deducting TDS. The employer issues a TDS certificate which is also referred as Form No.16 (a) by the end of the financial year It can be produced during filing income tax return for obtaining the credit of the TDS in case of personal income tax assessment.
Ways of Reducing TDS:
TDS deduction can be reduced by investing in several tax saving instruments under Sections 80C, 80D, etc. of the Income Tax Act. If in spite of investments, the salary is still above the exemption limit, TDS has to be deducted monthly.
If you have an income below the tax limit, but the interest earned on deposits is above Rs 10,000, one way of reducing tax is to request your bank for avoiding tax deduction by submitting form 15 G and 15 Another method is to go for multiple smaller fixed deposits in many banks.
Remember you need carry your PAN card for all fixed deposits over Rs.5000. In case of absence of PAN number banks may deduct 20% TDS. The same is non reversible.