About TDS on salary (Section 192)
TDS, Tax Deducted at Source, is the mechanism by which Indian income tax is collected as income is earned rather than only at year end. For salaried employees it is governed by Section 192 of the Income Tax Act: your employer estimates your tax for the full financial year and deducts it from your salary in roughly equal monthly amounts, depositing it with the government against your PAN. At year end the employer issues Form 16, your proof of salary paid and tax deducted.
This calculator estimates that monthly TDS from your annual gross salary and your chosen tax regime. Under the new regime for FY 2025-26 a standard deduction of Rs 75,000 applies and no further deductions are allowed, while the old regime gives a Rs 50,000 standard deduction plus the deductions you declare (80C, 80D, home-loan interest, HRA, and so on). The result is divided across the year to show what your employer will withhold each month.
How it works
The employer follows a fixed sequence under Section 192. The annual tax, including the 4 percent health and education cess, is spread across the remaining months of the year:
Taxable salary = gross - standard deduction - declared deductions
Annual tax = slab tax on taxable salary (new or old regime)
- 87A rebate (if eligible) + 4% cess
Monthly TDS = annual tax / months remaining in the financial year
- Regime choice matters: the new regime has lower rates but few deductions; the old regime rewards heavy investors in 80C and similar.
- Declarations drive the estimate: what you submit in Form 12BB at the start of the year sets the monthly figure.
- March reconciliation: the employer trues up the deduction against your actual proofs in the final quarter.
Worked example
An employee earns Rs 15,00,000 gross for FY 2025-26 and chooses the new regime.
- Standard deduction: Rs 15,00,000 - Rs 75,000 = Rs 14,25,000 taxable.
- Slab tax (new regime): roughly Rs 1,05,000 on Rs 14,25,000 after applying the slab bands.
- Add 4% cess: about Rs 1,09,200 total annual tax.
- Monthly TDS: Rs 1,09,200 / 12 = about Rs 9,100 per month if spread evenly across a full year.
- Effective rate: roughly 7.3 percent of gross salary.
Common TDS sections in India
Salary is only one of many payments subject to TDS. The major sections, with typical rates and thresholds for resident payees, are below. Rates shown assume a valid PAN is furnished; a missing or inoperative PAN attracts a higher rate, and non-filers can be charged still more under Section 206AB. Thresholds are per financial year unless noted.
| Section | Payment | Typical rate | Threshold |
|---|---|---|---|
| 192 | Salary | Slab rate | Basic exemption |
| 194A | Interest (banks, deposits) | 10% | Rs 40,000 (Rs 50,000 seniors) |
| 194C | Contractor payments | 1% / 2% | Rs 30,000 single / Rs 1,00,000 yearly |
| 194J | Professional / technical fees | 10% / 2% | Rs 30,000 |
| 194I | Rent | 10% / 2% | Rs 2,40,000 |
| 194H | Commission / brokerage | 5% | Rs 15,000 |
Common pitfalls
- Over-declaring deductions. Claiming 80C or HRA you do not finally invest in triggers a large March TDS catch-up.
- Picking the wrong regime. The old regime only beats the new one if your deductions clear the break-even point, so compare both.
- Forgetting other income. Bank interest and freelance income face their own TDS sections; salary TDS does not cover them.
- Not linking PAN. Without a valid PAN, TDS is deducted at a higher rate (often 20 percent) and credit is harder to claim.
- Ignoring Form 26AS and AIS. Always reconcile deducted TDS against these statements before filing your return.
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Frequently asked questions
What is TDS and which section covers salary?
TDS (Tax Deducted at Source) is income tax that the payer withholds and deposits with the government on the recipient's behalf. For salary it is governed by Section 192 of the Income Tax Act, which requires your employer to estimate your annual tax and deduct it in roughly equal monthly instalments from your pay, then issue Form 16 at year end.
How does my employer calculate monthly TDS on salary?
Under Section 192 the employer estimates your taxable salary for the full financial year, applies the slab rates for your chosen regime (new or old), subtracts the standard deduction and any declared deductions, computes the annual tax including cess, and divides it across the remaining months. That is why the deduction can change mid-year if you update your declarations in Form 12BB.
Why is my actual TDS different from the estimate?
Employers project TDS from the inputs you give at the start of the year. In the final quarter, usually around March, they reconcile against your actual investment and rent proofs. If you declared deductions you did not ultimately make, the year-end TDS spikes to recover the shortfall; if you invested more, it eases.
What are the main TDS sections besides salary?
Beyond Section 192 for salary, common ones include 194A on interest from banks and deposits, 194C on contractor payments, 194J on professional and technical fees, 194I on rent, 194H on commission and brokerage, and 194Q on purchase of goods. Each has its own rate and threshold, and 206AB applies a higher rate to those who have not filed returns.
Can I claim a TDS refund?
Yes. If the tax deducted during the year exceeds your actual liability, for example because you had deductions like 80D or a home-loan interest claim your employer did not account for, you recover the excess by filing your income tax return (ITR). The refund is typically credited within a few weeks of processing.