How to calculate TDS?

TDS stands for Tax deducted at source. One can calculate the TDS using the TDS software which is available in the markets in India. In India, the Finance Minister places the budget before the Parliament in March of every year which fixes the rates for Taxes and other finances which is revenue for the Government to meet the administrative expenses.

The slabs for applicability of taxes for different classes of persons/ associations are clearly detailed in the Finance Bill. The concept of TDS lies on the premise that the tax be paid at the source itself instead by the person/ company receiving the income. The service provider or the taxpaying authority such as corporate or bank before paying monies to the individual deducts tax and then passes on the net amount to the individual/ company as per the tax slabs applicable to the receiver. The tax so deducted is paid to the Government treasury within the time prescribed under the Income Tax Act, 1961.

The net amount in the hands of the receiver is the gross amount receivable less the Tax deducted at source. The source of income thus is liable to deposit the money so deducted into the account of the Government. If the person so deducting tax but does not pay to the government is liable for prosecution and fine as may be decided by the scrutinizing officers in accordance with the applicable laws.

The TDS is deductible in almost every case where the gross amount of outflow is more than Rs 10,000/-. The slabs for TDS are mentioned as a percentage of the gross amount payable and not as whole numbers. For example, a person who has a deposit of Rs 2,00,000/- in a bank receives an interest of Rs 18000/- per annum @ 9% interest on Fixed deposit. At maturity, the Bank should deduct a 10% from this Rs 18,000/- and pay Rs 17200/- (Rs 18000-Rs1800) to the depositor. Similarly, an employee receiving an annual salary of Rs 3 Lakhs or more falls in the taxpaying brackets. Hence, the employer should deduct tax at source and pay the net amount to the employee. At the end, if there is any excess taxes paid or payable is adjusted and accordingly returns are to be filed. In case of salary income, the gross salary is reduced by Provident fund, Mediclaim policies, House rent Allowance, conveyance allowance, Repayment of House Loan, savings under chapter VIA of the Income Tax Act, 1961 and so on. After such reduction, if the salary payable is above Rs 3.00 Lakhs per annum, taxes are deducted at source and net amount is paid to the employee.

In the globalised era, people have moved on from physical filing of taxes to e-filing of taxes. To synchronise the filing of tax returns with the TDS data, the TDS software are being made available to the public at large. This is enabling a green channel for dissemination of data on TDS and tax returns filed by the tax payers in India.

How TDS benefits the Government?

TDS stands for Tax deducted at Source. The TDS software enables the generation of data fed into the software into information in prescribed format to file the e-TDS returns.

TDS is one of the various methods adopted by the Government to collect taxes from the Citizens. In this mode of collection, a prescribed percentage of tax is deducted at the time of making or crediting the payment (nature of payment also should be of prescribed category) to the person. The amount so deducted should be remitted to the Government account by paying into the designated branches of the Banks. It is also called as “pay tax as you earn”. This scheme is also called as Withholding tax in USA and some other countries. The concept encourages the payment of tax as soon as one earns the monies without any delay. The administrator of taxes, being the Government, decides the percentage of taxes to be deducted at source and the services/ products on which taxes are to be levied.

• ·        The TDS facilitates the sharing of onus of tax collection by and between the tax collector (government) and the tax deductor (corporate and non-corporate entities).
• ·         The TDS ensures that the administrator of taxes has constant inflow of monies into its treasury by way of tax payments/ remittances
• ·         It is a powerful tool to restrict tax evasion and also expands the tax brackets
• ·         Earlier the concept of TDS was based on the premise “pay as you earn” now the concept is widely encompassing
• ·         The tax burden for salaried people reduces, as TDS enables payment of taxes in a phase wise manner. The TDS on salaries are deducted every month as the employee earns every month on installment basis. So the tax burden is not pushed to the end of the year, disturbing the cash flows of the employee.
• ·         Enables collection of taxes from professionals, contractors and other unorganized sectors of the economy.
• ·         Advance tax and TDS ensure that the Government does not have a cash crunch during the year. The funds flow on monthly basis ensures that the Government has sufficient liquid funds throughout the year to run the administration smoothly.
• ·         It restricts the options to evade tax. The TDS, being pay tax as you earn, withholds the taxes before it passes on to the receiver of income, thus forcing him to pay tax, who would otherwise think of evading the tax.
• ·         The thresholds for TDS deduction is wide encompassing to cover every sector of the economy, individuals, corporate, firms and associations and is fixed on par with the prevailing rates of taxes in similar economies across the globe.

To run the Government smoothly, every person should pay taxes. But, it is even easier for administrative purposes, if taxes are collected in advance by way of TDS and remitted to the Government at regular intervals (on periodical basis). The TDS software ensures that the taxes so deducted and remitted are matching with each other and there is no gap in the tax calculations.

Advantages of using TDS software

The uses of software need not be mentioned separately. The advent of technology has zoomed all the industries to a large extent. There are very few organizations which do not use software in one form or other. Every industry, organization and individual comes across some software or other in one form or another. The TDS software, though in nascent stages of development has gained prominence among the Tax payers and people who fall under the Tax brackets.

The TDS software is relatively new as compared to the rest of the world. The implementation of TDS percentages for various products/ services/ items as per classification in Finance Bill for various departments in Government offices and private offices started relatively in recent years.

The customized TDS solutions and other IT based solutions to reach out to the employers operating in any industry are the order of the day. The various modules provided encompass every aspect of the Taxes with a pinch of IT, thus relieving the Managers/ staff to concentrate on the business rather on wasting their time on mediocre day-to-day processing activities.

The TDS software helps the Accounts & Finance department to monitor the TDS data and generate the TDS certificates on periodical basis and maintain a database of all taxes with the click of a mouse. Before buying a complete version of any TDS software for the organization, one has to go for a demo for the product and a trial version may also be asked, if required. The complete version of the software should be scrutinized for price and smooth functioning and also competitive rates should be found out from the market. Many of the TDS software are designed to be user friendly and all the user has to do is feed in the data and the software generates the reports.

Advantages of TDS software

Choosing the right type of TDS software is equally important as choosing the right IT solution for your organization.  Appropriate, customized TDS software relieve the executives from the work load of cross checking the data entered manually. A wrong TDS software module will not only increase the cost of implementation but also increases frustration of the users with wrong output. A flawless expiry tracking of delayed TDS payments, excess TDS or shortfall in TDS, calculation of salaries with a formula, integrated solution are some of the many salient features offered by competent TDS software.

Customer Support

A proper Customer support enables the businessmen to relieve themselves of maintenance costs at a later stage. The technical team at backend office is effective and fast in responding to crucial customer needs. Nothing is left to chance when it comes to TDS, as a precautionary measure, the buyers of customized TDS software are usually offered training for the employees. Also, fresher’s who are exposed, IT solutions are also provided through extensive training, so that their on job work is made simpler and accurate. The training provided apart from giving exposure to beginners also enhances the skills and technical knowledge of experienced personnel in the hierarchy of Accounts & Finance department.

What is payroll software? – An Introduction

There has been a proliferation of the number of companies in the recent times that have increased their business to mammoth proportions. There are many employees working in such companies and it is a real pain when you are the head and you need to manage the salary structure of each employee.

There are many solutions in the market but the most reliable is the payroll software that makes the process of calculation of salary a breeze. The next few lines would give an overview of the Payroll system. The dawn of computer revolution has changed the way business is conducted in different sectors of the economy. The conventional office has transformed itself into the paperless mode. As a result the management of the organization is able to automatically create salaries based on the taxes and the deductions.

It is very important to know the important attributes of the payroll system. For start it provides comprehensive information about the employees. There are different fields like the employee name age and date of joining. It is very important to know the third options because based on that the salary is calculated.

It uses programming language to design the user interface and the database to store the important data about the employees. It is imperative that you enter the required information about the employees in an accurate manner because any discrepancy in entering the data may lead to incorrect assignment of the salaries. The modern payroll system also counts the number of days for which the employees took leave in a month. Many companies follow different policies in calculating the net salaries.

Some organizations provide a day off in the month and for the next subsequent days they deduct from the basic pay on a pro rata basis. The salary of an employee has many components but the most important of them are the basic pay Home rent allowance and the transport allowance. The incentives are offered as a reward on the performance and they are included in the calculation of the gross salary. The payroll software helps in preparing the virtual copy of the salary slip and also helps in the printing of the same.

When the employee takes loan it is also registered with the software and the employee gets a rebate on the total taxes. The insurance schemes feature as well in to the overall scheme of things. The software follows the latest TDS principle that helps you to evaluate the exact amount of taxes. It takes into account the interest provided by the bank and others. 

The government charges 10% on the interest. The gift taxes are only 2% that are also managed by the virtual application. The payroll software is customized according to the requirements of different organizations because their requirements and issues are also varied.  In event of the non existence of permanent account number the rate of taxes become double which is taken into consideration when creating the software. It is therefore advisable to apply for the number if you do not have it.