Hello,
I have recently joined a company in India and got my first payslip.This is the first time i am earning income in India and the total tax on my income was around 23 % .This is high because according to the slab i should be still in the 10% bracket as i have earned only that much money . is getting a Tax refund the only way to recover in case the company taxes me 23% every month . I hear it is a laborious process to get a refund.any advice on how to mitigate this will be helpful.
Rgds
SAPR2I
Tax refund ( first month tax very high)
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direstraits88
- Posts: 746
- Joined: Sun Feb 18, 2007 2:10 am
Tax refund ( first month tax very high)
Tax is deducted monthly based on your expected income for the year.. Not on how much is paid to you till date. So unless your salary is below 5 Lacs per year the 10% slab does not apply to you. Just because it's your first month salary, it doesn't mean they won't deduct any tax.
Take your Annual Gross. Subtract PF deduction, HRA (assuming you've submitted rent receipt) , Medical , LTA and any 80c contribution. That's your net pay. I'm assuming your net salary is above 8 Lacs, then your tax for the year will be 1 Lakh (approx) +30% of anything over 8 Lakhs (net). If your net pay is 15 Lakhs, then your tax will be (1+2.1)=3.1 Lacs which is around 20% of net pay double your assumption of 10%. If your net is 20 Lacs, then expect to pay around (1+4) 5 lakhs in tax which is 25% of your income.
Take your Annual Gross. Subtract PF deduction, HRA (assuming you've submitted rent receipt) , Medical , LTA and any 80c contribution. That's your net pay. I'm assuming your net salary is above 8 Lacs, then your tax for the year will be 1 Lakh (approx) +30% of anything over 8 Lakhs (net). If your net pay is 15 Lakhs, then your tax will be (1+2.1)=3.1 Lacs which is around 20% of net pay double your assumption of 10%. If your net is 20 Lacs, then expect to pay around (1+4) 5 lakhs in tax which is 25% of your income.
Tax refund ( first month tax very high)
Also, your company payroll dept should have sent you a form for your expected house interest payments, HRA, 80C deductions etc. Please make sure that you get it across to them in time. I did not send it across in my first month here and got hit fairly heavily. I had all the paperwork done by the 2nd month so they taxed me a much lower amount averaging the two out. Since then, the numbers have been a constant middle ground. Get with a CA you trust and prepare a plan. Ours is a small company so it was easy to get with the payroll team one on one.