TDS on Salary: New Tax Regime FY 2025-26

Updated: 3 June 2026 | FY 2025-26 (AY 2026-27) | Income-tax Act 2025

Under the new tax regime (default) for FY 2025-26, employers deduct TDS on salary using revised slabs: nil up to ₹4L, 5% for ₹4-8L, 10% for ₹8-12L, then 15%/20%/25%/30% for higher brackets. Standard deduction: ₹75,000. Zero tax for salary up to ₹12.75 lakh (Section 87A rebate of ₹60,000 for income ≤ ₹12L).

₹0

Tax on salary up to ₹12.75 lakh under new regime
₹75K standard deduction + ₹60K rebate under Section 87A eliminates tax for net income ≤ ₹12L

New Tax Regime Slabs FY 2025-26 (Default)

Income Slab	Tax Rate
Up to ₹4,00,000	NIL
₹4,00,001 – ₹8,00,000	5%
₹8,00,001 – ₹12,00,000	10%
₹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%

Standard Deduction: ₹75,000 (for salaried employees and pensioners under new regime). Section 87A Rebate: ₹60,000 for net taxable income up to ₹12,00,000 — making effective tax NIL. Health & Education Cess: 4% on tax after rebate.

TDS Calculation Examples — Annual Salary (New Regime FY 2025-26)

Gross Salary	Std. Deduction	Net Taxable Income	Tax on Slabs	87A Rebate	Cess (4%)	Annual Tax	Monthly TDS
₹8,00,000	₹75,000	₹7,25,000	₹16,250	₹16,250	₹0	₹0	₹0
₹12,00,000	₹75,000	₹11,25,000	₹52,500	₹52,500	₹0	₹0	₹0
₹12,75,000	₹75,000	₹12,00,000	₹60,000	₹60,000	₹0	₹0	₹0
₹15,00,000	₹75,000	₹14,25,000	₹97,500	Nil (income >₹12L)	₹3,900	₹1,01,400	₹8,450
₹20,00,000	₹75,000	₹19,25,000	₹2,18,750	Nil	₹8,750	₹2,27,500	₹18,958
₹30,00,000	₹75,000	₹29,25,000	₹5,18,750	Nil	₹20,750	₹5,39,500	₹44,958

Note: Tax slab calculations above assume only standard deduction under new regime. No HRA, 80C, 80D, or other deductions are allowed under the new regime except standard deduction, NPS employer contribution (Section 80CCD(2)), and a few others. Surcharge applies for income above ₹50L.

How Employers Compute Monthly TDS

The employer follows this process each month for TDS computation:

Step	Action
1	Collect Form 12BB from employee — note regime choice (new regime = default)
2	Project total gross salary for the full financial year
3	Deduct standard deduction (₹75,000 under new regime)
4	Add any other taxable income declared (rent, capital gains not included — employer handles salary only)
5	Compute tax on projected income using applicable slab rates
6	Apply Section 87A rebate if net income ≤ ₹12,00,000
7	Add 4% Health & Education Cess
8	Subtract TDS already deducted in previous months of the year
9	Divide remaining tax by remaining months = monthly TDS amount

New Regime vs Old Regime: Key Differences for TDS

Feature	New Regime (Default)	Old Regime (Opt-in via Form 12BB)
Standard Deduction	₹75,000	₹50,000
HRA Exemption	Not available	Available (Section 10(13A))
80C deductions	Not available	Up to ₹1.5L
80D (health insurance)	Not available	Up to ₹25,000–₹1L
Home loan interest (Section 24b)	Not available	Up to ₹2L for self-occupied
NPS employer contribution (80CCD(2))	Available	Available
Section 87A Rebate	₹60,000 (income ≤ ₹12L)	₹12,500 (income ≤ ₹5L)
Beneficial for	High earners without large deductions	Those with HRA, home loans, 80C investments

Frequently Asked Questions

How does an employee choose between old and new tax regime for TDS on salary?

Under the Income-tax Act 2025, the new tax regime is the DEFAULT regime. An employee who wants TDS deducted under the old regime must submit a written declaration (Form 12BB or a letter) to the employer at the start of the financial year. Without such declaration, the employer deducts TDS as per new regime slabs. The employee can change the choice at the time of filing their ITR independently of what was declared to the employer.

What is Form 12BB and what should be declared in it?

Form 12BB is the statement of particulars of claims by an employee for deductions and exemptions for the purpose of TDS on salary. Under the old regime, employees declare HRA, LTA, home loan interest (Section 24b), deductions under Chapter VIA (80C, 80D, etc.), and other exemptions. Under the new regime (default), Form 12BB is minimal — only the basic personal information and regime choice need to be submitted. Employers rely on Form 12BB to compute projected tax and deduct accurate monthly TDS.

Can an employee switch between old and new tax regime mid-year?

No. Once an employee declares their regime choice to the employer at the beginning of the financial year, it cannot be changed mid-year for TDS purposes. The employer will continue deducting TDS based on the declared regime throughout the year. However, at the time of filing the Income Tax Return (ITR), the employee (other than those with business income) can choose a different regime. Any excess TDS deducted will be refunded; any shortfall must be paid as self-assessment tax before filing.

How is TDS calculated if an employee has multiple employers during the year?

When an employee joins a new employer mid-year, they must submit Form 12B to the new employer disclosing income and TDS details from the previous employer. The new employer adds the previous income to the current salary for computing total income and deducts TDS accordingly on the remaining salary to cover the annual tax liability. Failure to disclose leads to short deduction. If TDS falls short due to non-disclosure, the employee is responsible for paying the balance as advance tax or self-assessment tax.

What is the penalty if an employer short-deducts TDS on salary?

If an employer fails to deduct TDS or short-deducts TDS on salary, the employer is treated as an "assessee in default" under the Income-tax Act 2025. Consequences include: (1) Interest at 1% per month from the date tax was deductible to the date it is actually deducted, and 1.5% per month from deduction date to payment date. (2) Penalty equal to the amount of TDS not deducted under Section 271C. (3) Prosecution in serious cases. The employee is not penalized if they pay the due tax themselves, but the employer still faces interest and penalty.

New Tax Regime 2025-26 Income Tax Calculator Form 16 Guide Section 87A Rebate Standard Deduction on Salary TDS Return Filing

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