Short answer
Your employer works out your yearly taxable salary, applies the slabs and deducts a share every month (TDS). From 2083/84 the first Rs 10 lakh a year is taxed at 1%, the next Rs 5 lakh at 10%, then 20% up to Rs 25 lakh, 27% up to Rs 40 lakh and 29% above that. Contributors to the Social Security Fund don't pay the 1%. Retirement contributions, life and health insurance premiums reduce your taxable income. If too much was deducted, you can file a return and claim a refund.
The details
Slabs for salary from Shrawan 2083
| Yearly taxable income | Rate |
|---|---|
| Up to Rs 10 lakh | 1% (social security tax) |
| Rs 10 lakh to Rs 15 lakh | 10% |
| Rs 15 lakh to Rs 25 lakh | 20% |
| Rs 25 lakh to Rs 40 lakh | 27% |
| Above Rs 40 lakh | 29% |
Each rate applies only to the part of your income inside that band. On a taxable salary of Rs 12 lakh, for example, you'd pay 1% on the first Rs 10 lakh (Rs 10,000) and 10% on the next Rs 2 lakh (Rs 20,000), Rs 30,000 in total, or Rs 20,000 if you contribute to SSF.
Common problems
My employer deducted more tax than it should.
Ask payroll to show the calculation first. If it was over-deducted, file an income tax return for that year and claim the refund. From 2083/84 you have five years to claim a refund, up from two.
What reduces my taxable salary?
Contributions to provident fund, the Citizen Investment Trust or SSF up to a third of your income or Rs 5 lakh, whichever is lower, plus life insurance premiums up to Rs 40,000 and health insurance up to Rs 20,000. Insurance on your own home is deductible up to Rs 10,000 from 2083/84.
I have two jobs.
Each employer deducts tax as if it's your only income, so you may owe more. You'll need to file a return.
Which slabs apply to the return I file this Ashoj?
The return filed in Ashoj 2083 covers 2082/83 income and uses the older slabs. The new slabs apply to salary from Shrawan 2083. See the income tax return page for both tables.
Real experiences
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