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1 Minute Read: A Lowdown On TDS For The Newly Employed

Team BankBazaar

As the name suggests, TDS or Tax Deducted Source is deducted at the source of the income. It is collected after a certain limit of earnings has been crossed. Where there is income, there will be income tax which needs to be paid either upfront or while filing taxes. The taxes paid upfront through TDS ensures the government collects taxes on income, dividends, interest income, rental income, purchase and sale of real estate etc.

If you have just begun your career, you will be required to file income tax returns as per applicable slabs. Even if your income is taxable, you can still file your returns for various other benefits. Income tax returns (ITRs) are required for processing visa applications, home loan applications etc. As a newly employed, here is what you need to know:

Your Salary Structure

A standard pay slip reflects your basic salary, which is a fixed amount and may form the biggest part of your Cost To The Company (CTC). Twelve per cent from your salary goes in your provident fund, which is eligible for a tax deduction. If House Rent Allowance is part of your salary component, you can claim tax exemption and lower your tax outgo. However, you do not live in a rented accommodation and HRA is part of your salary component, the entire HRA will be taxable.

TDS Deduction

Your employer will every month deduct Tax Deducted at Source (TDS) based on your income and tax savings done by you every year. You will get a TDS certificate issued, also known as Form 16, which will have all details about tax deducted.

How To Reduce TDS

You are not liable to pay taxes if your income is tax-exempt. Your employer would deduct TDS if income exceeds the exemption limit. To reduce your TDS deduction, try to avail all the eligible deductions as prescribed under I-T Act. For example, Section 80C provides you tax deductions up to Rs. 1.5 lakh. Section 80TTA enables you to get deductions on interest income from savings accounts up to Rs. 10,000 per year.

You can also check if all the TDS deductions are correct by downloading form 26AS from the Income Tax Department website.  In case of any discrepancy, you can report the same to the I-T department and seek a refund in case of excess tax payment.