Excel is the most widely used tool for dealing with massive datasets. We can perform myriads of tasks of multiple dimensions in Excel. In this article, I will explain how to perform a TDS deduction on salary calculation in Excel format.
Deduction of TDS on Salary Calculation in Excel: 6 Easy Steps
TDS, or Tax Deducted at Source, is an amount deducted when a specific payment is made, such as a wage, commission, lease, interest, professional fees, and so on. The person making the payment deducts tax at the source, whereas the individual receiving the payment/income must pay the tax. It reduces tax fraud because the taxes are collected at the moment of payment.
Here, I will explain the process of TDS deduction on salary calculation in Excel. For simplicity, I have divided the process into 6 easy steps.
Please note that the detailed breakdown of the allowances and deduced amounts are absent here because it varies from country to country.
Step 1: Calculate Yearly Salary
Let’s assume that the monthly salary of a person is Rs 70,000. Now, I will calculate the annual salary.
- To do so, first, go to C8 and write down the following formula
=C7*12
- Then, press ENTER to get the output.
Step 2: Measure Total Taxable Income from Salary
The next step is to calculate the total taxable income from the salary.
Let’s assume that, other taxable income is Rs 10,000, and the deduction is Rs. 2000.
- Now, go to C11 and write down the following formula
=C8+C9-C10
- Then, press ENTER to get the output.
Step 3: Calculate Tax on Taxable Income
The next step is to calculate the tax on the taxable income. The tax is calculated based on different slabs.
To calculate it,
- Go to C12 and write down the following formula
=IF(C6<60,IF(C11>1000000,(((C11-1000000)*0.3)+112500),IF(C11>500000,(((C11-500000)*0.2)+12500),IF(C11>250000,(C11-250000)*0.05,0))),IF(C6>79,IF(C11>1000000,(((C11-1000000)*0.3)+110000),IF(C11>500000,(((C11-500000)*0.2)+0),0)),IF(C11>1000000,(((C11-1000000)*0.3)+110000),IF(C11>500000,(((C11-500000)*0.2)+10000),IF(C11>300000,(C11-300000)*0.05,0)))))
Formula Explanation
- The 1st logical test is C6<60 which is TRUE.
- So the corresponding output is IF(C11>1000000,(((C11-1000000)*0.3)+112500),IF(C11>500000,(((C11-500000)*0.2)+12500),IF(C11>250000,(C11-250000)*0.05,0)))
- The value of this output is 82100.
- Then, press ENTER to get the output.
Step 4: Measure Education Cess
The next step is to measure the education cess. The assumption is that the education cess is 2% of the tax on total taxable income.
To calculate it,
- Go to C13 and write down the following formula
=C12*2%
- Then, press ENTER to get the output.
Step 5: Calculate Tax Liability for Year
The next step is to calculate the yearly tax liability. For this step, I will use the SUM function. To calculate it,
- Go to C14 and write down the formula
=SUM(C12:C13)
- Then, press ENTER to get the output.
Step 6: Measure Monthly TDS
The final step is to calculate the monthly TDS. To calculate it,
- Go to C15 and write down the following formula
=C14/12
- Then, press ENTER to get the output.
Things to Remember
- The tax is calculated based on different slabs.
- The breakdown of the allowances and deductions varies according to the different sections.
Download Practice Workbook
Download this workbook and practice while going through the article.
Conclusion
In this article, I have explained how to perform a TDS deduction on salary calculation in Excel format. I hope it helps everyone. If you have any suggestions, ideas, or feedback, please feel free to comment below.
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Why the amount of 1,12,500/- added in formula
Hello Nivedita,
Thanks for your comment. Here, “112500” represents the tax amount to be added to the calculated TDS when the annual salary income (C11) exceeds 1,000,000 (1 million) and falls within the highest tax slab.
To break it down further:
>> If the annual salary income (C11) is greater than 1,000,000, it means that the individual’s income falls into the highest income tax slab.
>> In this highest tax slab, the formula applies a tax rate of 30% to the portion of income above 1,000,000. It calculates the tax on this portion and adds 112,500 to the result.
Inform us in the comment if you have any more confusion.
Regards,
ExcelDemy Team
This calculation can use for old or new regime for 23/24
Hello, Sachin!
Thank you for your query. Regarding your query, this article was written based on the 2023 regime. But, the TDS calculator basics are the same for every regime. Only the variables, like tax deduction percentage, education cess percentage, etc. can change from year to year which would slightly affect the calculation. But, the basics are the same. So, it’s better if you check your current tax variable percentages for this regime in your region and use our file accordingly.
Hopefully, you will be able to use the file in your calculation properly.
With Regards,
Md. Tanjim Reza Tanim
Team Leader, Exceldemy