What Is TDS on Salary (Section 192)?
TDS on salary refers to Tax Deducted at Source under Section 192 of the Income Tax Act, 1961. Every employer who pays salary to an employee is required to estimate the employee's total annual income, compute the applicable income tax, and deduct one-twelfth of it from the monthly salary. This deducted amount is deposited with the government on the employee's behalf.
Unlike TDS on bank interest or rent — where a flat percentage (e.g., 10%) is applied — Section 192 TDS is slab-based. The employer computes your estimated annual tax and spreads it evenly across 12 months. If your CTC changes mid-year (bonus, increment, joining), the employer recalculates and adjusts TDS for the remaining months.
New Regime vs Old Regime — Tax Slabs FY 2025-26
The Finance Act 2025 (Budget 2025) revised the new regime slabs and enhanced the Section 87A rebate limit to ₹12 lakh. Here are the applicable slabs for FY 2025-26 (AY 2026-27):
| Income Slab | New Regime Rate | Old Regime Rate |
|---|---|---|
| Up to ₹2,50,000 | 0% | 0% |
| ₹2,50,001 – ₹4,00,000 | 0% | 5% |
| ₹4,00,001 – ₹5,00,000 | 5% | 5% |
| ₹5,00,001 – ₹8,00,000 | 5% | 20% |
| ₹8,00,001 – ₹10,00,000 | 10% | 20% |
| ₹10,00,001 – ₹12,00,000 | 10% | 30% |
| ₹12,00,001 – ₹16,00,000 | 15% | 30% |
| ₹16,00,001 – ₹20,00,000 | 20% | 30% |
| ₹20,00,001 – ₹24,00,000 | 25% | 30% |
| Above ₹24,00,000 | 30% | 30% |
Section 87A Rebate: New regime — full tax rebate if taxable income ≤ ₹12,00,000. Old regime — full rebate if taxable income ≤ ₹5,00,000. Surcharge applies for incomes above ₹50 lakh. 4% Health and Education Cess applies on all tax (including surcharge).
How Monthly TDS Is Calculated by Your Employer
- Estimate annual income: Employer considers your CTC, perquisites, allowances, and any bonus or arrears expected in the year.
- Apply standard deduction: ₹75,000 (new regime) or ₹50,000 (old regime) is deducted. For old regime, 80C, HRA, 80D and other declared deductions are also applied.
- Compute taxable income after all deductions.
- Apply slab rates to arrive at income tax. Check for 87A rebate. Add surcharge if applicable. Add 4% cess.
- Divide annual tax by 12 to get monthly TDS. This is deducted from your salary every month.
If you join mid-year, the employer calculates the remaining months. If your salary changes (increment, bonus), the employer recomputes TDS for balance months. Form 16 issued by June 15 shows the complete annual TDS computation.
Important TDS Deadlines
- Monthly TDS deposit: 7th of the following month (e.g., April TDS by May 7th). March TDS by April 30th.
- Quarterly TDS returns (Form 24Q): Q1 (Apr–Jun): July 31 | Q2 (Jul–Sep): October 31 | Q3 (Oct–Dec): January 31 | Q4 (Jan–Mar): May 31
- Form 16 issuance to employee: By June 15 of the following financial year.
- ITR filing deadline: July 31 for salaried employees (without audit requirement).
Frequently Asked Questions
What is TDS on salary under Section 192?
TDS under Section 192 is tax deducted by your employer from your monthly salary, based on your estimated annual income and applicable tax slabs. Unlike other TDS provisions with flat rates, salary TDS is slab-based and considers your declared investments and exemptions. The employer deposits this with the government on your behalf, and it reflects in Form 26AS and your AIS.
How do I declare my tax regime to my employer?
At the start of the financial year, submit a tax declaration form to your HR/payroll team specifying your chosen regime. For the old regime, submit proof of investments (PPF, ELSS, LIC, etc.) and HRA receipts. If you don't declare, your employer defaults to the new regime. You can switch the regime during the year (typically once). At ITR filing time, you can independently choose the more beneficial regime regardless of the employer declaration.
What happens if employer deducts excess TDS?
If excess TDS is deducted — for instance because you forgot to declare your 80C investments — you can claim a full refund by filing your ITR. The excess shows as TDS credit in Form 26AS. When your ITR is processed, the Income Tax Department issues a refund directly to your bank account. File your ITR on time (by July 31) to expedite the refund.
Is TDS the same as final income tax liability?
No. TDS is an advance deduction based on your employer's estimate. Your actual tax liability is determined when you file your ITR, accounting for all income sources (salary, interest, rental, capital gains), all deductions, and the correct regime. If your actual liability is higher (e.g., due to freelance income), you pay the balance as advance tax or self-assessment tax. If lower, you get a refund.
When should I switch from new to old tax regime?
Switch to the old regime when your total deductions are substantial. The old regime becomes beneficial when 80C (up to ₹1.5L) + HRA exemption + home loan interest (Section 24b, up to ₹2L) + 80D (health insurance) + NPS (80CCD) together exceed approximately ₹3.75 lakh. Compare both regimes using our Income Tax Calculator before deciding.
Also useful: Income Tax Calculator | HRA Exemption Calculator | Salary Take-Home Calculator