TDS on Salary — New Tax Regime

There is no TDS on salary up to ₹12.75 lakh under the new regime. The ₹75,000 standard deduction brings ₹12.75 lakh salary down to ₹12 lakh taxable income, and the Section 87A rebate of ₹60,000 wipes out the tax on income up to ₹12 lakh — so the annual tax, and therefore the monthly TDS, is nil.

The standard deduction under the new tax regime is ₹75,000 for salaried employees and pensioners in FY 2025-26 (against ₹50,000 in the old regime). The employer subtracts it from projected gross salary before computing tax and TDS. No separate claim or proof is needed.

Under the new regime, Section 87A gives a rebate of up to ₹60,000, available when taxable income does not exceed ₹12,00,000. It fully offsets the tax computed on the slabs, so tax is nil up to that level. Above ₹12 lakh taxable income the rebate is not available and tax is charged on the slabs, with marginal relief applying just past the threshold.

Yes. A health & education cess of 4% is added on the income tax after the Section 87A rebate. Where the rebate makes the tax nil (income up to ₹12 lakh taxable), there is no tax to add cess to, so the cess is also nil. Surcharge applies for total income above ₹50 lakh.

Yes. For FY 2025-26 the new regime is the default. If an employee does not tell the employer otherwise, the employer deducts TDS on salary under the new regime slabs. An employee who wants TDS under the old regime must submit a written declaration (typically via Form 12BB) at the start of the financial year.

The employee declares the choice to the employer at the start of the year, usually through Form 12BB. Without a declaration, the new regime (default) is used. The declaration fixes only how TDS is deducted through the year; a salaried employee can still choose the other regime when filing the ITR.

No. Once you declare a regime to your employer at the start of the year, it cannot be changed mid-year for TDS purposes — the employer deducts on that basis throughout. However, when filing your ITR you (if you have no business income) may pick the other regime; excess TDS is refunded and any shortfall is paid as self-assessment tax.

Under the new regime the employer can consider the ₹75,000 standard deduction and the employer’s contribution to NPS under Section 80CCD(2). HRA, LTA, 80C investments, 80D health insurance and home-loan interest under Section 24(b) are not available and cannot reduce TDS in the new regime.

The employer projects the full-year gross salary, subtracts the ₹75,000 standard deduction, applies the new regime slabs, gives the Section 87A rebate if taxable income is up to ₹12 lakh, adds 4% cess, subtracts TDS already deducted in earlier months, and divides the balance by the remaining months of the year. The estimate is revised each month as salary or declarations change.

Form 12BB is the employee’s statement of the deductions and exemptions claimed for TDS purposes, and it is where the regime choice is recorded. Under the new regime it is minimal — mainly the regime declaration — because most old-regime exemptions (HRA, 80C, 80D) are not allowed. Employers rely on it to compute accurate monthly TDS.

Give the new employer Form 12B disclosing salary earned and TDS deducted by the previous employer. The new employer adds that to your current salary to compute total income and deducts TDS on the balance to cover the annual liability. If you do not disclose it, TDS is under-deducted and you must pay the shortfall as advance or self-assessment tax.

Salary TDS deducted in a month must be deposited by the 7th of the following month (for March, by 30 April). The employer files the quarterly salary TDS return in Form 24Q and issues Form 16 (Parts A and B) to employees by 15 June after the year-end. Late deposit attracts interest under Section 201 and late filing a fee of ₹200/day under Section 234E.

An employer that fails to deduct or short-deducts salary TDS is treated as an assessee-in-default: interest at 1% per month from when tax was deductible to deduction and 1.5% per month from deduction to payment under Section 201, plus a penalty equal to the tax under Section 271C. The employee is not penalised if they pay the due tax, but should reconcile Form 16 with Form 26AS/AIS before filing.

The Income-tax Act, 2025 (applicable from AY 2026-27) continues the new regime as the default and retains employer TDS on salary with the same mechanism — monthly deduction, quarterly Form 24Q and Form 16. Section numbers are re-cast under the new Act, but the ₹75,000 standard deduction, the slabs and the ₹60,000 rebate for FY 2025-26 are unchanged.