Wednesday, January 26, 2011

Some Ways to Reduce TDS on Salary

Some Ways to Reduce TDS on Salary

In this article, we will consult “ways to deduct less TDS on salary” to avoid hindrances for getting income tax refund from income tax department. It is very confusing for most of the assessees to get refund from income tax refund. I am receiving daily 30 to 40 queries regarding delay of income tax refund in my email. It is not possible to avoid whole of the TDS on salary, but yes we can reduce it by accepting some points. Let’s discuss some of the points to reduce TDS on salary.

At the end of the financial year employer demands documents/proofs of investments from an employee. All documents are very prominent for calculating tax by an employer on behalf an employee. Form 16 will be given by the employer assuming employee’s proof of investments.

The majority of the employer demands confirmations of investments at the end of the financial year. However, it should be demand at the start of the financial year (Where possible to submit on start). By submitting all proof of investments from starting of the financial year avoid hindrance of getting an income tax refund. So, one should start his tax planning from starting the financial year. It is not possible to invest all money on the start so you should submit as you invest during the financial year. So each month TDS to be deducted accordingly. By submitting documents proofs as you invest decrease the chance of deduct TDS more.

This is the employer duty to deduct tax at source (TDS) on an employee salary. If an employee submit all documents and proofs of investments at the end of the financial year then TDS will be deducted more.

It all happens because of employer demand proofs in respect of 80C deduction at the end of the financial year. Employees should give all proof regarding deduction under section 80 C and other deductions. Proof may be like NSC, LIP, Fixed Deposits, Hosing loan repayment, etc. For the more details see deduction u/s 80C. Employee should submit all proof with his/her declaration. There is no specific declaration, but it should be given by the employer as per his needs.

Here is the check-list of investment proof which employer demands and employee should have kept in records.
Rent Receipts/lease deed (May be submit monthly)
LIP Receipt (May be submit monthly, quartely)
NSC (May be submit as you Invest)
PPF Pass book (May be submit as you invest)
Fixed Deposits (May be submit as you invest)
Children School Fees Receipts (May be submit monthly)
Housing loan repayment amortization (difficult to submit monthly)
Housing loan interest certificate (if possible submit monthly)
Donation Receipts us 80G (May be submit as you donate)
Medical Bills (May be submit as you pay)
Same investment if on the name of children and spouse (May be submit as you invest)

All photocopies should be for the current financial year. If an employer asks for original document for any verification, employee should submit it later.After considering all document/proof employers will give from 16 in original to an employee. Employee should have kept in record for any future incompatibility with tax authorities.

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