Under Section 192, your employer estimates your annual taxable salary, applies the income-tax slab rates of your chosen regime, adds 4% health & education cess, and divides the result by 12 to arrive at the monthly TDS deducted from your pay. From FY 2023-24 the new regime is the default — you must opt for the old regime in writing. There is no flat rate: TDS on salary is simply your estimated annual tax spread across the year.
How Employers Calculate TDS on Salary
Unlike section-specific TDS (such as rent under 194I), salary TDS has no fixed percentage. The employer runs a full mini income-tax computation for each employee and recovers the resulting tax in equal monthly instalments. The five core steps are:
- Estimate annual salary income — basic pay, HRA, special allowance, bonus and perquisites for the full year.
- Apply exemptions & deductions — standard deduction, and (old regime) HRA, 80C, 80D, home-loan interest declared in Form 12BB.
- Compute tax on net income — apply the slab rates of the chosen regime, then Section 87A rebate, then add 4% cess.
- Divide by remaining months — the annual tax is spread evenly; it is re-estimated each time your declaration or salary changes.
If you do not submit a written declaration, your employer deducts TDS under the new regime. Under the new regime HRA, 80C, 80D and most Chapter VI-A deductions are not available — only the ₹75,000 standard deduction and employer NPS (80CCD(2)). Choose your regime at the start of the year to avoid a large TDS swing later.
New Regime Slab Rates & Rebate
These are the default new-regime slabs for FY 2025-26 after Budget 2025. With the Section 87A rebate of up to ₹60,000, a resident with taxable income up to ₹12 lakh pays nil tax — so employers deduct zero TDS in that band. See the full TDS rate chart 2025-26 and income-tax slabs.
| Taxable income (new regime) | Slab rate | Notes |
|---|---|---|
| Up to ₹4,00,000 | Nil | Basic exemption |
| ₹4,00,001 – ₹8,00,000 | 5% | — |
| ₹8,00,001 – ₹12,00,000 | 10% | Nil net tax up to ₹12L via 87A |
| ₹12,00,001 – ₹16,00,000 | 15% | — |
| ₹16,00,001 – ₹20,00,000 | 20% | — |
| ₹20,00,001 – ₹24,00,000 | 25% | — |
| Above ₹24,00,000 | 30% | + surcharge if applicable |
Standard deduction ₹75,000 (new regime). Add 4% health & education cess on tax. Section 87A rebate makes income up to ₹12,00,000 tax-free under the new regime for FY 2025-26.
Worked example — ₹12 lakh CTC, old regime
An employee with ₹12,00,000 gross salary who opts for the old regime and declares HRA and 80C in Form 12BB. Figures are illustrative for FY 2025-26.
Old regime — net taxable income
Old regime — annual tax & monthly TDS
The identical ₹12L salary under the new regime gets ₹75,000 standard deduction but no HRA/80C, giving ₹11,25,000 taxable — still within the ₹12 lakh 87A rebate ceiling, so tax and TDS are nil. Whether old or new saves more depends on your deductions — compare with our old vs new regime guide.
Not sure which regime gives lower TDS on your salary? Model both in seconds.
Open Income Tax Calculator →New Regime vs Old Regime for TDS
Your regime choice drives the TDS your employer deducts each month. Tell payroll early — you can still switch when filing your ITR, but the monthly deduction follows what you declare to the employer.
New Regime (default)
- ₹75,000 standard deduction
- No HRA, 80C, 80D, home-loan interest
- Nil tax up to ₹12L taxable (87A rebate ₹60,000)
- Best when you have few investments / deductions
- No written declaration needed — it is the default
Old Regime (opt-out)
- ₹50,000 standard deduction
- HRA, 80C (₹1.5L), 80D, 24(b) home-loan interest allowed
- Nil tax up to ₹5L taxable (87A rebate ₹12,500)
- Best with high HRA + 80C/80D investments
- Must be opted in writing to the employer
Old regime likely lowers your TDS if
- You claim significant HRA (metro rent)
- You invest the full ₹1.5 lakh under 80C
- You pay home-loan interest (up to ₹2L)
- You have 80D health-insurance premiums
New regime is usually better if
- You have few or no investments to declare
- You do not pay rent / claim HRA
- Your taxable income is at or below ₹12 lakh
- You prefer no proof-submission at year end
Employers re-estimate tax in Jan–Mar using your actual investment proofs. If you over-declared 80C/HRA earlier and cannot produce proof, the shortfall TDS is recovered from your last one or two salaries — often a sharp drop in take-home. Submit real proofs on time via Form 12BB.
Employer TDS Compliance on Salary
The employer is the deductor under Section 192 and must deposit and report the salary TDS. Employees should track it in Form 26AS / AIS and reconcile against Form 16 before filing their return.
- Obtain TAN before deducting
- Deduct monthly at credit or payment, whichever is earlier
- Deposit challan by the 7th of the next month (March: 30 April)
- File quarterly Form 24Q
- Issue Form 16 to employees by 15 June
- Reconcile TDS in Form 26AS / AIS
Section 206AB (higher TDS for non-filers of returns) was omitted with effect from 1 April 2025, so employers no longer run a filing-status check. But if an employee does not furnish a valid PAN, Section 206AA still forces TDS at the higher of the slab rate or 20% — so always collect PAN.
| Compliance item | Salary TDS (192) | Return / form |
|---|---|---|
| Deposit due date | 7th of next month | Challan-cum-statement |
| Quarterly return | Yes | Form 24Q |
| TDS certificate | Annual, by 15 June | Form 16 |
| Missing PAN (s.206AA) | Higher of slab or 20% | — |
Late deposit attracts 1.5% per month interest under Section 201; late filing attracts ₹200/day under Section 234E.
Under the Income-tax Act, 2025 (applicable from AY 2026-27), TDS on salary is renumbered as Section 392. The mechanism — estimate income, apply slabs, add cess, deduct monthly — is unchanged. For FY 2025-26 filings, Form 16 and returns continue to reference Section 192.
TDS on Salary — Frequently Asked Questions
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