Do companies that deduct TDS from their employee’s salary file annually or quarterly?
Each company or organization deducting tax at source for their employees is liable to file quarterly statements for the same in for quarters. The four quarters include quarters ending on 30th June, 30th September, 31st December and 31st March for every Financial Year.
Tax Deducted at Source or TDS is a type of tax that is deducted from an individual’s income on a periodic or occasional basis. TDS can be applicable for income that is regular as well as irregular in nature. Income Tax Act, 1961 regulates TDS in India through Central Board of Direct taxes (CBDT) under the Indian Revenue Services (IRS). TDS rule directs the payee or employer to deduct a certain amount of tax before making full payment to the receiver. TDS is applicable for salary, commission, professional fees, interest, rent, etc.
The process of calculating the TDS involves these steps:
- Estimate the gross salary paid to the employee for the whole year;
- Find out and estimate the exemptions if any from the total salary income;
- Add other income of the employee as disclosed by him like rental income, capital gains etc.
- Consult employee to calculate deductions, if any, from the salary income;
- Arrive at the employee’s net income and calculate tax on the same;
- Deduct the tax equally over 12 months of the year;
- Pay TDS every month and file e-TDS return every quarter; and finally
- Ensure the employee is issued with Form 16 (TDS certificate).
Most companies ask employees to declare their tax investments at the start of the financial year. The proof of investment will have to be submitted by January or February of the next financial year. Most companies deduct TDS every month from employee’s salary. However, there are companies that do it quarterly or annually.
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