March arrives. Tax panic begins. People buy random policies. Open fixed deposits last minute. All to cut TDS.
Most don’t know how TDS on salary actually works. Or how Section 80C helps reduce it.
Let’s fix that.
TDS Basics
TDS means Tax Deducted at Source. Your company cuts taxes before giving you a salary.
Simple process. They know your annual income. Calculate tax on it. Deduct monthly. Send to the government.
You get the remaining money. Tax already paid.
Why? The government collects throughout the year. Doesn’t wait twelve months. Stops people from dodging tax.
How Companies Calculate Your TDS
Once you get clarity on TDS on salary, it’s important to understand how companies calculate the TDS.
Take the total salary. Remove the Rs. 50,000 standard deduction that everyone gets. Subtract HRA exemption if applicable. Remove Section 80C investments you declared.
What’s left? That’s taxable income.
Apply tax slabs on it. Old regime or new regime rates. The total comes to the yearly tax.
Section 80C Explained Simply
Section 80C lets you reduce taxable income by Rs. 1.5 lakh maximum.
What counts:
- EPF contributions
- PPF deposits
- Life insurance premiums
- ELSS mutual funds
- Tax-saver fixed deposits
- NSC investments
- Home loan principal amount
- Kids’ tuition fees
- Sukanya Samriddhi deposits
Put money in these? Your taxable income drops. Lower income means lower tax. Lower tax means lower TDS.
Real Numbers Make It Clear
Salary Rs. 10 lakh yearly. Standard deduction Rs. 50,000. No Section 80C investments.
Taxable income: Rs. 9.5 lakh
Tax (old regime):
- First Rs. 2.5 lakh: Zero
- Next Rs. 2.5 lakh: Rs. 12,500
- Remaining Rs. 4.5 lakh: Rs. 90,000
- Total: Rs. 1,02,500
- With cess: Rs. 1,06,600
Monthly TDS: Rs. 8,883
Now add Section 80C investments of Rs. 1.5 lakh.
Taxable income drops to Rs. 8 lakh.
Tax recalculation:
- First Rs. 2.5 lakh: Zero
- Next Rs. 2.5 lakh: Rs. 12,500
- Remaining Rs. 3 lakh: Rs. 60,000
- Total: Rs. 72,500
- With cess: Rs. 75,400
Monthly TDS: Rs. 6,283
Difference? Rs. 31,200 saved yearly. Rs. 2,600 less TDS every month.
Just by investing Rs. 1.5 lakh in 80C options you’d invest anyway.
Getting Lower TDS Monthly
The company needs to know your investments. Can’t read your mind.
April Declaration: Companies ask for investment plans early in the financial year. You tell them what you’ll invest.
Planning Rs. 50,000 in PPF? Rs. 70,000 in ELSS? Rs. 30,000 insurance premium? Declare all.
EPF is is already known. Gets added automatically.
Based on the declaration, the company reduces your TDS from April itself. More money in hand every month.
Proof Submission: Declaration is just a promise. Come January-February, show proof.
Insurance receipts. PPF passbook copy. ELSS statements. Home loan certificate. Whatever applies.
No proof? The company deducts full TDS in the remaining months. Your Feb-March salary drops badly. They recover what should’ve been deducted earlier.
Mid-Year Changes: Started PPF in August? Bought insurance in October? Tell HR immediately.
Mistakes That Cost Money
Declaring More Than Actually Invested
Said you’d invest Rs. 1.5 lakh. Only invested Rs. 80,000 actually.
The company calculated lower TDS all year. Trusted your word. Year-end? You owe tax. Gets deducted from salary or paid during return filing. Plus interest is possible.
Declare what you’ll genuinely invest. Not wishful thinking.
Forgetting Proof Submission
Invested properly. Just forgot telling company.
They assume you didn’t invest. Full TDS gets deducted. Money goes to the government. You get it back only after filing returns months later.
Your money is stuck unnecessarily.
Not Using Full Limit
EPF takes Rs. 60,000. Insurance Rs. 25,000. Total Rs. 85,000.
The limit is Rs. 1.5 lakh. Rs. 65,000 still available. Could save Rs. 20,000 more in tax.
People ignore this. Leave free money on the table.
Wrong Tax Regime
The new regime has lower rates but no deductions allowed. The old regime allows Section 80C but higher base rates.
Already investing Rs. 1.5 lakh? The old regime saves more. Minimal investments? The new regime is better.
Calculate both. Many pick the wrong one. Pay extra tax for years.
Smart Section 80C Planning
Don’t rush in March. Plan properly.
EPF Goes First: Happens automatically. 12% of basic salary. No effort needed. Already eating a chunk of Rs. 1.5 lakh limit.
Term Insurance Makes Sense: Need family protection anyway. Premium qualifies for 80C. Serves two purposes.
ELSS Beats Tax-Saver FD: Both give 80C benefit. But ELSS locks for 3 years only. Tax FD locks for 5 years. Plus, ELSS can give 12-14% returns. FD gives maybe 6%.
PPF for Safety Lovers: Guaranteed returns. Government-backed. Good if you avoid market risk.
Home Loan Bonus Repaying home loan? Principal portion counts under 80C. EMI is going out anyway. Get a tax benefit on it.
This approach works better than panic buying in March.
When You Get a TDS Refund
Sometimes the company deducts too much TDS.
Maybe you declared late. Changed jobs mid-year. Had additional investments not declared.
Extra TDS cut? File income tax returns. The government returns excess within a few months.
But why let them hold your money? Plan better. Reduce TDS accurately from start.
Bottom Line
TDS on salary happens automatically. Can’t stop it if you’re earning above the limit.
But Section 80C reduces it legally. Invest Rs. 1.5 lakh in eligible options. Tax drops. TDS drops. Take-home salary increases.
Real money. Not small change. Rs. 30,000 to Rs. 45,000 is saved yearly for most people.
Yet employees skip this. Don’t declare. Don’t submit proofs. Pay extra TDS unnecessarily. Wait for refunds later.
Makes no sense.
Declare investments in April. Submit proofs by January. Use full Rs. 1.5 lakh limit. Watch your monthly salary increase without a raise.
It’s your money. Your choice to keep it or give it away needlessly.
