Who is responsible for deducting TDS on salary?

As per the Income Tax Act of 1961, the responsibility of deducting TDS on salary lies with the employer.

What is the rate at which TDS on salary is deducted?

The rate of TDS on salary is not fixed. Instead, it can range anywhere from 5% to 30% per annum, depending on your total taxable income and the tax regime you choose (Old vs. New). For instance, the New Tax Regime slabs (the default as of 2026) are: Up to ₹4 lakh: Nil ₹4 lakh to ₹8 lakh: 5% ₹8 lakh to ₹12 lakh: 10% ₹12 lakh to ₹16 lakh: 15% ₹16 lakh to ₹20 lakh: 20% Above ₹20 lakh: 30%

What to do if my employer deducts excess TDS?

If your employer deducts excess TDS, you can claim the excess amount as a refund by filing an income tax return (ITR) within the stipulated due date.

Will I get any proof from my employer regarding TDS deductions from my salary?

Yes. Your employer is required to provide Form 16, which is essentially a TDS certificate outlining the details of tax deducted and deposited with the government on your behalf.

You can cut down TDS on salary by giving investment evidence and exemption statements to your employer. Some of the most common ones include deductions as required in Section 80C, medical insurance, and house rent allowance. The selection of an appropriate tax regime is also important. Due planning in the whole year helps in balancing deductions and consequently reduces the monthly TDS on salary without having to wait to receive the refunds later.

Is TDS Deducted Every Month from Salary?

Yes, TDS on salary is usually deducted monthly. The employers divide the estimated amount payable as taxes in the remaining months of the financial year. This makes it a consistent deduction as opposed to a lump sum. It could vary depending on the revision of income or declarations. Salary deductions in terms of monthly TDS allow the management of tax compliance.

Is TDS Deduction On Salary Mandatory?

Yes, TDS on salary will be required when income exceeds the basic exemption threshold. The employers have the legal obligation of deducting and remitting the tax to the government. The inability to deduct may result in fines.

How to Calculate TDS on Salary? Tax Slab, Eligibility

The remuneration plans appear easy until the time taxes are deducted. To the majority of employees, there is a need to learn the formula for computing tax on salary when the bonus exceeds the exemption amount. Employers deduct tax every month based on the estimated annual income and slab.

This deduction is reflected under TDS on your salary slips. Having a deduction that many employees perceive but do not understand how it is calculated or adjusted. Understanding how to calculate TDS on salary will enable employees to make arrangements in advance of declarations, prevent unnecessary deductions, and read payslips more clearly throughout the financial year.

Key Takeaways

TDS on salary is deducted monthly by employers based on estimated annual tax liability, not a fixed rate.

Knowing how TDS is calculated helps employees track deductions and avoid excess tax withholding.

Tax regime choice, exemptions, and deductions directly affect monthly TDS amounts.

Reviewing Form 16 and payslips helps confirm accuracy and plan refunds or adjustments

What is TDS on Salary?

TDS is an acronym for the tax deducted at source. In the context of TDS on salary, the term refers to the amount of tax that an employer deducts from an employee’s salary before it is paid to the recipient. The employer then deposits the tax deducted with the Income Tax Department.

To better understand how to calculate the TDS on salary under Section 192 of the Income Tax Act, you need to first understand how the TDS rate is determined for each employee. Contrary to the popular misconception, the TDS rate is not fixed. Instead, it depends on each employee’s total tax liability and their total income.

How to Calculate TDS on Salary?

The onus of deducting and depositing tax on salary lies with the employer. Nevertheless, it helps if employees also know the process of how to calculate the TDS on salary. Let us take a closer look at the key steps involved in determining the amount of tax to be deducted from your salary.

Step 1: Calculate the Net Salary Income

The first step is to determine your net salary. To do this, add your employer's various allowances to your basic salary. Then deduct eligible exemptions from the total amount to arrive at the gross salary.

The deductions allowed depend on the tax regime you choose. In the old tax regime, House Rent Allowance (HRA), Leave Travel Allowance (LTA), entertainment allowance, etc., are allowed as deductions either partly or fully. In the new tax regime, they are not deductible.

Once you have the gross salary, subtract the standard deduction (₹50,000 for the old tax regime and ₹75,000 for the new tax regime) and the professional tax (only allowed in the old tax regime) to find the net salary income.

Step 2: Calculate Income Under Other Heads

If you have any other income like interest from deposits or savings accounts, rental income, capital gains or the like, calculate the taxable income under each head or category.

Step 3: Find the Total Income

Add the taxable income under the five heads of income to find your total income.

Step 4: Find the Total Taxable Income

From your total taxable income, subtract the eligible deductions under Chapter VI-A of the Income Tax Act to find your total taxable income.

The deductions allowed in this case also depend on your choice of tax regime. For instance, if you choose the old tax regime, all the deductions under sections 80C, 80D, 80 G, etc., will be available to you. However, in the new tax regime, only select deductions (such as u/s 80CCD) are allowed.

Step 5: Estimate the Total Tax Liability

Once you have your total taxable income for the financial year, the relevant income tax slab rate is applied to the income to arrive at your total tax liability. You also need to add cess at 4% to find the total amount of taxes due.

Note that under the new regime, a rebate under Section 87A makes income up to ₹12 lakh tax-free (effectively ₹12.75 lakh for salaried individuals with the standard deduction). Additionally, the rebate is applicable only on the normal rate, not on special rates like LTCG.

Step 6: Find the TDS per Month

Divide the total amount of tax liability by 12 to arrive at the tax to be deducted from your salary per month. This concludes the basic guide to calculating TDS on salary.

Also Read: Income Tax Allowances and Deductions for Salaried Individuals

How to Calculate the TDS on Salary: An Example

The New Tax Regime now features a ₹75,000 Standard Deduction and a Section 87A rebate that makes income up to ₹12 lakh (effectively ₹12.75 lakh for salaried individuals) tax-free.

Particulars	Old Tax Regime	New Tax Regime
Basic salary (A)	₹7,00,000	₹7,00,000
Add: Allowances like LTA, HRA, etc. (B)	₹2,00,000	₹2,00,000
Exempted allowances (C)	₹80,000	NA
Gross salary (D = A + B - C)	₹8,20,000	₹9,00,000
Standard deduction (E)	₹50,000	₹75,000
Net salary (F = D - E)	₹7,70,000	₹8,25,000
Income from other sources (G)	₹2,00,000	₹2,00,000
Total income (H = F + G)	₹9,70,000	₹10,25,000
Deductions under Chapter VI-A (I)	₹1,00,000	NA
Total taxable income (J = H - I)	₹8,70,000	₹10,25,000
Estimated tax liability (K)	₹86,500	₹0 (Due to Rebate)
Cess at 4% in tax liability (L)	₹3,460	₹0
Total tax liability (M = K + L)	₹89,960	₹0
TDS to be deducted each month (M ÷ 12)	₹7,497	₹0

Disclaimer: The above figures are just for illustrative purposes only. Actual tax liability and figures can vary.

Calculating the Average Rate of Tax for TDS Deduction

The average rate of tax for TDS deduction is calculated by dividing the total annual tax liability by the total annual income. So, you should use the following formula:

Average rate of tax = (Total annual tax liability ÷ Total annual income) x 100

Using the above formula, we get the following average rate of tax deduction for the above example under the old and new regimes:

Particulars	Old Tax Regime	New Tax Regime
Total tax liability	₹89,960	₹0
Total annual income	₹9,70,000	₹10,25,000
Average rate of tax	09.27%	0.00%

Who Is Liable to Deduct TDS On Salary?

It is upon the employer to deduct TDS on salary. Any employer who remits salary income is expected to estimate their taxable annual income and pay taxes on the amount. This is regarding individual businesses, government organisations, and joint ventures.

TDS on salary is required once the income surpasses the basic exemption threshold. Deduction is done on the basis of declared exemptions and deductions by the employer. Employees have no duty to deduct, but provide the correct details on investments to prevent a surplus or a deficit in tax deducted.

Things to Know About TDS on Salary

Knowing how you can calculate the TDS on your salary is undoubtedly important. However, you also need to know the following aspects about salary, taxation and TDS deduction.

Default Tax Regime

The default tax regime from FY 2023-24 will be the new tax regime. Employers now typically allow you to explicitly select your preferred regime (old or new) at the start of the financial year for accurate TDS calculation. If no choice is made, the new regime is used by default.

Salary from Multiple Employers

If you switch jobs during a financial year, you will have to provide your income details to both employers during your employment with them. They will each deduct taxes based on the TDS already deducted and the remaining amount due as per the income level. It is recommended to submit your salary details and Form 16 from your previous employer to your current employer using Form 12B to ensure correct cumulative tax calculation and prevent underpayment.

Depositing TDS u/s 192

Employers must also know when and how to deduct TDS from salary. Government employers must deposit the TDS on the same day as the deduction. For the TDS deducted by non-government employers in months other than March, the tax must be deposited by the 7th of the next month. For March, it must be deposited by April 30th.

How to Claim Revised TDS Return?

A revised return is used when the wrong TDS on salary information has been reported. In case of excess or incorrect tax deduction, employers can submit a revised TDS form to correct the mistake in PAN, income amounts, or deductions. You can file revised returns for up to 6 years from the end of the financial year they were due.

After revision, updated information will appear in Form 26AS. The advantage for employees is that an amended TDS on salary returns will facilitate the reconciliation of actual income with deductions and eliminate delays in refunds or notifications during assessment.

How to Check if You are Eligible for a TDS Refund?

Eligibility for a refund arises when the total TDS on salary exceeds the actual tax liability. This usually happens when deductions or exemptions were not fully declared during the year. To check eligibility, review Form 26AS and compare the deducted tax with the final tax payable after filing returns.

If excess is detected, a refund is automatically generated after processing. Filing returns correctly and reconciling figures helps recover excess amounts. While employers deduct tax, the final adjustment happens only after you file the TDS return and submit your income details to the tax department.

Conclusion

This sums up how to calculate the TDS on salary. Although you may not have to do the computations yourself as an employee, it helps if you know how you can calculate the TDS on your salary. This way, you can confirm if adequate or excess tax is being deducted from your salary and plan your finances to meet your surplus tax liabilities, if any. On a related note, ensure that you keep the documents related to TDS on salary handy, particularly Form 16, as it is a valid proof of income for various verification purposes.

How to Calculate TDS on Salary with Example?