Which incomes are TDS deducted from?
Any earning person is liable to pay tax to the Central government. Tax-filing starts at the beginning of the financial year in early January and continues till April. Persons earning income from the following modes are liable to pay TDS. These include income earned from:
- LIC policy
- Bank interest
- Rent payment
- Insurance commission
- Contractor payments
- Transfer of immovable property
- Professional/ consultation fees
- And specific others specified under the Income Tax Act, 1961.
How does TDS work?
The payment of TDS works in a pre-determined manner. The Income Tax Department decides how much a person is liable to pay and what category of taxpayer they fall under. It does this by categorizing them under various tax slab rates. These rates are generally fixed but can be changed or revised per the discretion of the Income Tax Department. The current tax slab specifies that individuals and Hindu Undivided Families (HUFs) below the age of 60 years earning less than ₹2,50,000 in a year do not have to pay tax.
The same goes for senior citizens up to 80 years of age and super senior citizens above 81 years if their income doesn’t exceed the set limit. As per age and earning capacity, tax rates are fixed between 5% and up to 30% for individuals and HUFs, senior citizens, and super senior citizens. Once the individual finds what tax slab it falls under, the payable tax gets automatically deducted by the authorized deducting source like an employer or company.
How does TDS affect you, and how canyou go about tax-saving?
The collection of TDS affects you in a net positive manner. You carry out your duty to the government and reduce any chances of tax evasion or fraud. Moreover, you do not have to face the hassle of filing tax returns yourself, as your tax gets deducted most of the time automatically by the person who hires you unless it is in a freelance capacity. Even though TDS works as a steady source of revenue for the government, the government always encourages taxpayers to find tax-saving plans and solutions.
For instance, investing in instruments and financial plans, like term insurance plans or life insurance online or offline, can help you save a considerable amount of tax. Investments like term insurance plans return the amount paid towards premiums, which otherwise would have gone into paying tax. Under both life and term insurance, you can save up to ₹1,50,000 in a financial year as per section 80C of the Income Tax Act, 1961.
The benefit amount received under life insurance online or offline is also exempt from tax deduction as per section 10(10)D of the Income Tax Act, 1961. Or else, if you know that your total income in a financial year will be below the set exemption limit, you can request for exemption by submitting the relevant forms (form 15G/15H).
To sum it up:
Paying taxes is a mandate according to the laws of the Indian land. By carrying out this duty, you do your bit towards maintaining this country’s charm. However, the government also encourages tax-saving wherever possible. Investments, in particular, tax-saver plans and instruments, can help you save tax and create more wealth in the long run. To know more about term plan, long term savings visit PNB MetLife website.
The income tax is levied on all earning individuals who fall under a taxable income bracket. The income tax is paid to the Government of India and is charged annually. However, there are several tax deductions and exemptions that you can claim to lower your tax liability. The Income Tax Calculator helps you ascertain your tax output for a financial year based on your taxable income. This can help you plan well and save tax using the tax-saving deductions and exemptions, if possible.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
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