TDS on Salary: Employer's Guide Under the New Income-tax Act
Publishing Date: 7 October, 2026
Every employer paying salary must deduct income tax at source (TDS) from it, based on the employee's estimated tax for the year. From 1 April 2026, this is governed by section 392 of the Income-tax Act, 2025, which replaced the old section 192. The method is largely the same, but forms have new numbers.
Note: the Income-tax Act, 2025 has replaced the Income-tax Act, 1961 from 1 April 2026. Section and form numbers have changed, but the concepts explained here continue. Always check the provisions that apply to your tax year.
How salary TDS works
- Estimate the employee's total salary for the tax year.
- Apply the tax regime the employee has chosen (new regime is default).
- Allow eligible exemptions and deductions based on the employee's declaration.
- Compute tax for the year, including surcharge and cess, less any rebate.
- Divide by the remaining months and deduct that amount each month.
Under the new regime, the standard deduction for salaried employees is Rs 75,000, and the rebate makes income up to Rs 12 lakh effectively tax-free for residents.
Employee declarations
- Tax regime choice at the start of the year
- Investment and expense declarations if the old regime is chosen (HRA, insurance, PPF, home loan interest)
- Income from previous employer, if they joined mid-year
- Other income they want considered, and TDS on it
Proofs are collected before the year end, and TDS is adjusted for any shortfall.
Employer obligations at a glance
| Task | Timing |
|---|---|
| Deposit TDS | By the 7th of the following month (30 April for March) |
| Quarterly salary TDS return (Form 143, earlier 24Q) | By 31 July, 31 October, 31 January and 31 May |
| Salary TDS certificate (Form 130, earlier Form 16) | By 15 June after the tax year |
Penalties for default
- Interest for not deducting or late deposit
- Late filing fee per day for the TDS return
- Disallowance of the salary expense in the employer's own tax computation in some cases
Tips for small employers
- Get a TAN before paying the first taxable salary.
- Collect regime choice and declarations in April itself.
- Reconcile the TDS deposited with the return before filing to avoid notices.
Use our income tax calculator to estimate an employee's tax, or let us manage payroll TDS through our TDS on salary service.
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Frequently Asked Questions
Q1. Which section covers TDS on salary now?
From 1 April 2026, TDS on salary is covered by section 392 of the Income-tax Act, 2025, which replaced section 192 of the old Act.
Q2. Is TDS deducted if salary is below the taxable limit?
No. If the employee's estimated tax for the year is nil after rebate, no TDS is needed.
Q3. Which regime does the employer apply?
The new tax regime is the default. The employee can tell the employer if they want the old regime for TDS purposes.
Q4. What replaced Form 16?
Form 16 has been replaced by Form 130 for salary TDS certificates from tax year 2026-27, and the quarterly salary TDS return 24Q is now Form 143.
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Mukul Tomar writes Vaidam Consultancy’s guides on company registration, GST, income tax and ROC compliance. An experienced blog writer on Indian tax and business law, his articles have also been published on TaxGuru. He turns complex rules into clear, practical steps that business owners can act on.
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