Lower TDS for Salaried Employees: Net TDS/TCS Benefits to Be Included in Statements from January 2025
Starting January 2025, salaried employees will benefit from lower and more accurate TDS deductions, factoring in taxes already paid on non-salary income.
Lower TDS – Salaried Employees – Net TDS- TCS – Statements – TAXSCAN
Lower TDS – Salaried Employees – Net TDS- TCS – Statements – TAXSCAN
From January 1, 2025, salaried employees will experience a huge improvement in the way their Tax Deducted at Source (TDS) is calculated. The new system will ensure that the tax deducted on salaries takes into account the taxes already paid (TDS/TCS) on other types of income, such as interest, dividends, or rental income. Now, the tax deduction on your salary will be more accurate and fair.
This update is part of the government’s effort to simplify tax compliance, reduce financial stress for employees, and minimize the instances where employees have to claim refunds because of the over-deduction of TDS. The necessary technical infrastructure and tools, such as updated utilities for preparing and validating TDS statements have been implemented.
Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here
What’s Changing for Employees?
Under the current system, employers calculate TDS on an employee’s total income, including salary and other sources of income, without considering taxes that may already have been deducted on the additional income. This often leads to excess TDS being deducted from salaries.
From January 2025, employers will adjust TDS on salaries by factoring in taxes already paid on other sources of income. Here’s how the change will work:
- For example, if an employee earns Rs. 8 lakh as salary and Rs. 3 lakh from other sources, like interest, with tax, already deducted on the Rs. 3 lakh, the employer will calculate tax on the total Rs. 11 lakh but will only deduct the remaining tax after adjusting for the tax already paid. This prevents over-deduction and ensures that employees pay only what is due.
Benefits for Employees
The new system offers many advantages for salaried employees:
- The employers will now adjust for taxes already paid and the overall TDS deducted from salaries will decrease. This means employees will take home more money each month.
- The system reduces the chances of over-deduction, so employees won’t have to wait for a refund after filing their income tax returns.
- Employees will have more liquidity throughout the year, helping them manage their finances better and avoid unnecessary cash flow constraints.
New Tools to Support the Change
Protean e-Gov Technologies has released upgraded versions of the tools used for preparing and validating TDS statements. These tools will ensure compliance with the new structure:
- RPU Version 5.4: This updated utility will help employers prepare quarterly e-TDS/TCS statements for financial years starting from 2007-08 onwards.
- FVU Version 8.9: This updated utility will be used to validate quarterly e-TDS/TCS statements for financial years starting from 2010-11 onwards.
These tools are now mandatory for employers to use, ensuring the accuracy of TDS calculations and compliance with the latest tax regulations.
Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here
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