New Delhi, June 12: Tax calculation for salaried individuals can be quite complex. Often, incorrect tax calculations lead employers to deduct excessive TDS (Tax Deducted at Source) from your salary by the end of the financial year. This may also result in receiving a demand notice from the income tax department.
To avoid these inconveniences, effective tax planning in the first quarter of the financial year is crucial.
First, it is essential to understand the Income Tax Rules of 2026, specifically Rule 204 regarding Form 122 and Rule 205 concerning Form 124.
Form 122 assists employers in accurately assessing employees’ TDS. Through this form, employees provide their employers with details about income or salary from previous or multiple employers, other taxable income, and TDS deducted on any remittance or payment.
On the other hand, Form 124 allows employees to share information about House Rent Allowance (HRA) exemptions, Leave Travel Concession (LTC), interest on housing loans, and other valid deductions with their employers. This ensures that exemptions are removed from the taxable income for TDS calculation.
Salaried individuals should regularly update their employers with the components listed in Form 122. This enables new employers to calculate TDS accurately, as it includes income from other sources. By doing so, unexpected tax liabilities in the future can be avoided.
Additionally, it is vital for salaried employees to provide accurate information regarding the components in Form 124 to their employers. Ensure that you have sufficient documentation for any claims related to investments (like small savings schemes) or payments (such as interest on home loans or HRA exemptions). Otherwise, you may face significant TDS deductions from your salary in the last quarter of the financial year.
Before the advance tax deadline, salaried employees should review their tax payments. Utilizing Form 26AS and the Annual Information Statement (AIS) can be beneficial.
This proactive approach helps avoid sudden tax shocks and interest on underpayment. Moreover, it facilitates timely refunds.
Leave a Comment