TDS on Salary
Tax Deducted at Source (TDS) on salary is the tax an employer deducts each month from an employee's salary under Section 192 of the Income Tax Act, based on the employee's estimated total taxable income for the financial year and the tax regime they choose. The employer deposits this deducted amount with the government on the employee's behalf.
Employers estimate the annual tax liability at the start of the year (adjusted for actual salary changes, bonuses, and investment declarations), divide it across remaining months, and deduct proportionately. Employees must declare tax-saving investments or opt for the new/old regime so the employer can compute TDS accurately and avoid under- or over-deduction.
Key points
- ✓ Deducted monthly by the employer under Section 192 based on estimated annual tax liability
- ✓ Depends on the tax regime (old vs new) chosen and declared by the employee
- ✓ Investment/exemption proofs submitted by employees adjust the TDS calculation
- ✓ TDS deducted is reflected in Form 26AS, Form 16, and the employer's Form 24Q filing
- ✓ Under-deduction due to false declarations makes the employee liable for interest and penalty
Example
An employee under the new tax regime with an estimated annual taxable salary of ₹9,00,000 (after the ₹75,000 standard deduction) would have an approximate annual tax liability computed and divided across the remaining months of the financial year, deducted proportionately each payroll cycle.
Frequently asked questions
Can I choose between the old and new tax regime for TDS?
What happens if too much TDS is deducted?
How can I estimate my monthly TDS?
Related terms
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