Set the deductions, exemptions, and rates used to calculate income tax on salaries and contract payments.
TDS (Tax Deducted at Source) is the income tax deducted from employees’ salaries each month and paid to the government on their behalf. The TDS tab holds the deductions, exemption limits, and HRA rules PrimeHR uses to work out each employee’s tax, along with default TDS rates for contract workers. Once set up, PrimeHR calculates TDS automatically during payroll.
How to Access TDS Settings
Log in to the Admin Panel.
Go to Settings → Organization Settings → Statutory Compliance.
Open the TDS tab.
To turn TDS on or off, use the Enable TDS toggle at the top right.
How TDS Is Calculated
Annual salary is worked out from the employee’s current CTC and projected earnings for the year.
The standard deduction is applied automatically.
HRA exemption is calculated using the HRA rules below.
The employee’s tax declarations, such as investments under Section 80C and health insurance under Section 80D, are taken into account.
The annual tax is worked out and divided into monthly TDS deductions.
Deductions and Limits
The values below are examples - check the values shown in your account.
Standard Deduction (e.g., ₹50,000) - a fixed amount deducted from annual taxable salary
Transport Allowance (e.g., ₹1,600 per month) - the monthly exemption limit for transport allowance
Medical Allowance Limit (e.g., ₹15,000 per year, or ₹1,250 per month, pro-rated) - the maximum exemption for medical allowance
HRA Exemption Rules
Current Rule (e.g., Metro Cities) - the city category used for HRA exemption
Metro HRA (e.g., 50%) - for employees in metro cities, up to 50% of basic salary can be exempt
Non-Metro HRA (e.g., 40%) - for employees in other cities, up to 40% of basic salary can be exempt
Rent Exemption (e.g., 10%) - rent paid above 10% of basic salary is considered for exemption
Contract Worker TDS
Set default TDS rates for contract staff. Use the Enable Contract TDS toggle to turn it on or off, and click Edit Settings to change the values.
Default Taxation Mode (e.g., 194C Individual) - the TDS section applied to all contract workers by default
194C (IND) (e.g., 1%) - the rate for individual contractors
194C (OTH) (e.g., 2%) - the rate for other contractors, such as firms or companies
194J (PROF) (e.g., 10%) - the rate for professional services
No PAN Rate (e.g., 20%) - the rate applied when a contractor hasn’t provided their PAN
Apply No-PAN Penalty Rate (e.g., On) - when on, the No PAN Rate is applied automatically if a contractor’s PAN is missing
For contract workers under 194J (Professional), PF, PT, and ESIC deductions are switched off automatically, since these don’t apply to professional service providers.
Why it helps
TDS is calculated and deducted automatically every payroll run
Employee tax declarations are factored in, so monthly deductions are accurate
Contract workers are taxed at the right rate, with missing PAN handled automatically
Fewer tax errors and compliance issues