TDS on Salary Under Section 192

Ever wondered what the tax is deducted from your salary in your CTC, or when you receive your earned wages? Section 192 of the Income Tax Act deals with the deduction of Tax Deducted at Source (TDS) on salary income. It requires employers to deduct income tax from employees’ salaries at the time of payment, based on applicable tax slab rates. This system ensures timely collection of tax in India and reduces the burden of lump-sum tax payments for employees.

Section 192 of the Income Tax Act, 1961, provides the legal framework for deducting TDS on salary income. Under this provision, employers are responsible for calculating an employee’s annual taxable salary and deducting tax accordingly at the time of payment. The deduction is made as per prevailing income tax slab rates, after considering eligible exemptions, deductions, and reliefs, thereby ensuring accurate and compliant tax collection.

Under Section 192 of the Income Tax Act, TDS on salary must be deducted at the time of actual payment of salary to the employee and not when the salary becomes due or accrues. This means that whether your salary is paid on time, in advance, or even as arrears, the employer should deduct TDS when the payment is actually made to you.

For monthly salary payments, this generally results in TDS being deducted each month before crediting the net amount to your account. Employers first estimate your annual taxable income (after considering exemptions and deductions) and compute the total tax liability based on applicable slab rates; then, this annual tax is equated into monthly instalments to determine how much TDS to deduct each month.

Under Section 192, every employer (government body, public sector undertaking, private company, or individual) is responsible for deducting TDS on salary paid to employees. The employer is legally required to correctly calculate the employee’s taxable income and deduct tax as per applicable slab rates before making salary payments. Failure to do so may attract penalties under the Income Tax Act.

Here are the latest TDS rates 2026, as per Section 192:

New Tax Regime – Section 115BAC(1A)

Source - Income Tax Department

Key Notes (2026)

1. No fixed % for salary TDS:

Unlike other TDS sections with flat rates, Section 192 uses normal tax slab rates for computing TDS.

2. Calculation approach:

Employers estimate the employee’s annual tax liability using applicable slabs and then deduct TDS monthly at an average rate.

3. Budget 2026: Rebate under Section 87A:

Under the new tax regime, a rebate is available to resident individuals if taxable income does not exceed the prescribed limit under Section 87A.

Employers follow a systematic process to calculate TDS on salary under Section 192 to ensure accurate tax deduction. The key steps are explained below:

Step 1: Estimate Annual Gross Salary

The employer first calculates the employee’s total annual income by adding basic salary, allowances, bonuses, incentives, commissions, and any other taxable benefits.

Step 2: Deduct Exemptions and Allowances

Next, eligible exemptions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and other permissible allowances are reduced from the gross salary, as per income tax rules.

Step 2A: Declaration of Other Income (Section 192(2B))

Employees may declare other income (excluding capital gains) and losses from house property to the employer for accurate TDS calculation.

Step 3: Consider Deductions Under Chapter VI-A (Only for Old Tax Regime)

The employer then allows applicable deductions claimed by the employee under sections like 80C (investments), 80D (health insurance), and other eligible provisions, based on submitted proofs.

Step 4: Arrive at Taxable Income

After reducing exemptions and deductions, the remaining amount becomes the employee’s net taxable income for the financial year.

Step 5: Apply Applicable Income Tax Slab Rates

Use the applicable income tax slab rates to calculate the total tax liability for the year:

• Old tax regime: Basic exemption up to ₹2,50,000, then progressive tax rates up to 30% (higher limits for senior citizens).

• New tax regime: Higher basic exemption (e.g., income up to ₹4,00,000 is nil) with relaxed slab rates and no most exemptions/deductions.

Step 6: Add Health and Education Cess

A Health and Education Cess of 4% is added to the calculated income tax to arrive at the final tax payable.

Step 7: Calculate Monthly TDS

Finally, the total annual tax liability is divided by the number of remaining months in the financial year, and this amount is deducted as TDS from the employee’s monthly salary.

Employer Obligation under Section 192(2C):

Employers must provide a statement showing salary computation and tax deduction details (reflected in Form 16).

This structured approach helps employers deduct the correct amount of tax while ensuring compliance with income tax regulations.

Under Section 192, employers consider certain exemptions and deductions when estimating an employee’s taxable salary for TDS purposes. These allowances reduce the salary chargeable to tax before applying income tax slab rates for TDS calculation.

Note on Tax Regimes:

• Old Tax Regime: Allows a broader set of exemptions and deductions (like HRA, 80C, 80D, etc.), which reduce taxable income before computing TDS.

• New Tax Regime (Section 115BAC): Offers simplified slab rates but restricts most deductions and exemptions. Only specified deductions, such as the standard deduction and certain employer contributions (e.g., NPS employer contribution), are permitted.

TDS on salary under Section 192 is calculated differently depending on whether an employee chooses the old tax regime or the new tax regime, as both have distinct slab structures and deduction rules.

1. Difference in Tax Slab Rates

Old Tax Regime: Follows traditional slab rates with higher tax rates but allows multiple exemptions and deductions.

New Tax Regime: Offers lower and more progressive slab rates but removes most exemptions and deductions.

2. Availability of Deductions and Exemptions

• Old Tax Regime: Allows benefits such as HRA, LTA, standard deduction, and deductions under Sections 80C, 80D, 80G, etc., which reduce taxable income.

• New Tax Regime: Restricts most exemptions and deductions. Only limited benefits such as standard deduction and employer’s NPS contribution are allowed.

3. Impact on TDS Calculation

Under the old regime, employers reduced eligible exemptions and deductions before applying slab rates, resulting in lower taxable income and potentially lower TDS.

Under the new regime, TDS is calculated on a higher taxable income (due to fewer deductions) but at lower slab rates.

4. Employee Declaration Requirement

Employees must inform their employer at the beginning of the financial year about their preferred tax regime. Based on this declaration, the employer calculates and deducts TDS accordingly. If no declaration is submitted, TDS is generally deducted as per the default new tax regime.

Default Regime Rule (Section 115BAC(1A))

If the employee does not intimate their tax regime choice, the employer must deduct TDS as per the default new tax regime.

5. Flexibility in Filing Returns

While salaried employees must declare a regime to their employer for TDS purposes, they can still change their choice while filing their income tax return (subject to applicable rules).

In Summary

The old tax regime benefits employees who claim multiple deductions, while the new tax regime suits those who prefer lower rates and simpler compliance. The choice of regime directly affects how TDS is computed and deducted from salary.

For TDS calculation under Section 192, employers consider all taxable components forming part of an employee’s salary before applying exemptions and deductions.

• Basic Salary: Fully taxable and forms the core of the salary structure.

• Dearness Allowance (DA): Fully taxable and considered for retirement benefits if applicable.

• House Rent Allowance (HRA): Partially exempt under the old regime, subject to prescribed conditions.

• Special Allowances: Generally taxable unless specifically exempt under Section 10.

• Bonus and Incentives: Fully taxable and included in annual income.

• Commission: Taxable, whether fixed or performance-based.

• Perquisites: Taxable non-cash benefits such as company car, accommodation, or club membership.

• Leave Encashment: Taxable during service; partial exemption may apply at retirement.

• Employer’s Contribution to PF/NPS/Superannuation: Taxable if it exceeds prescribed limits.

• Gratuity and Pension: Taxable as per applicable exemption rules.

• Standard Deduction: Reduced from gross salary as per applicable rules under both tax regimes.

• Taxability of Perquisites (Section 17(2)): Perquisites are valued as per Rule 3 of the Income Tax Rules.

Below is a practical example showing how TDS is calculated under Section 192 by considering gross salary, eligible deductions under Chapter VI-A, and the final monthly deduction.

Employee Profile (Assumed)

• Annual Gross Salary: ₹10,00,000

• House Rent Allowance (HRA) Exemption: ₹1,00,000 (Old Regime)

• Deduction under Section 80C: ₹1,50,000

• Deduction under Section 80D: ₹25,000

• Standard Deduction (Section 16): ₹75,000

1. TDS Calculation Under Old Tax Regime

Step 1: Compute Taxable Income

Step 2: Apply Old Regime Slab Rates

Step 3: Add Health & Education Cess (4%)

• Cess: ₹1,700

• Total Tax Payable: ₹44,200

Step 4: Calculate Monthly TDS

• ₹44,200 ÷ 12 = ₹3,683 (approx.)

Monthly TDS (Old Regime): ₹3,683

2. TDS Calculation Under New Tax Regime

(Most deductions under Chapter VI-A and HRA are not allowed)

Step 1: Compute Taxable Income

Step 2: Apply New Regime Slab Rates (Section 115BAC)

Step 3: Add Health & Education Cess (4%)

• Cess: ₹1,950

• Total Tax Payable: ₹50,700

Step 4: Calculate Monthly TDS

• ₹50,700 ÷ 12 = ₹4,225 (approx.)

Monthly TDS (New Regime): ₹4,225

Summary Comparison

Key Takeaway

• Under the old regime, multiple deductions under Chapter VI-A can significantly reduce taxable income and TDS.

• Under the new regime, fewer deductions are allowed, which may result in higher taxable income despite lower slab rates.

• Employers divide the final annual tax liability into monthly instalments and deduct it as TDS from salary payments.

When an employee works for more than one employer during the same financial year, TDS under Section 192 is calculated separately by each employer based on the salary paid by them. To ensure correct tax deduction and avoid shortfall or excess TDS, the employee must disclose details of previous salary and TDS to the current employer through Form 12B. Based on this information, the new employer recalculates the total annual income and deducts TDS accordingly.

Under Section 192, employers are allowed to adjust excess or short TDS deductions during the financial year to ensure accurate tax compliance.

If an employee submits revised investment proofs, declares additional deductions, or experiences a change in salary structure (such as bonuses, increments, or arrears), the employer can recalculate the total annual tax liability. Based on this revised calculation, excess TDS already deducted can be adjusted in future months, or additional tax can be recovered through higher deductions.

Employers can also factor in relief under Section 89(1) for salary received in arrears or advance, provided the employee submits Form 10E. Once the relief is computed, the employer adjusts the TDS accordingly in subsequent salary payments.

Under Section 192, TDS on salary is calculated based on actual payments made during the financial year. In certain situations, employers must follow specific rules to ensure correct tax deduction.

• Arrears of Salary:

When salary is paid for previous periods, TDS is deducted in the year of payment. Employees may claim relief under Section 89(1) by submitting Form 10E, and the employer can adjust TDS accordingly.

• Advance Salary:

If salary is paid in advance, TDS is deducted at the time of payment, even though the salary relates to future months.

• Resignation During the Year:

When an employee resigns mid-year, the employer recalculates total taxable income based on actual earnings and revises TDS to avoid short or excess deduction.

• Multiple Employers:

If an employee works for more than one employer in the same financial year, each employer deducts TDS separately. To ensure correct overall deduction, the employee must disclose previous salary and TDS details to the current employer using Form 12B.

Once TDS is deducted from an employee’s salary under Section 192, the employer must deposit the amount with the Central Government within the prescribed time limits.

Monthly Deposit Due Dates

• For April to February: TDS must be deposited on or before the 7th of the following month.

• For March: TDS must be deposited on or before 30th April of the next financial year.

For example, TDS deducted in July must be deposited by 7th August, while TDS deducted in March must be deposited by 30th April.

Quarterly TDS Return Filing (Form 24Q)

In addition to monthly deposits, employers must file quarterly TDS returns in Form 24Q within the following timelines:

• April–June: 31st July

• July–September: 31st October

• October–December: 31st January

• January–March: 31st May

Late Filing Fee – Section 234E: ₹200 per day for delay in filing TDS return (subject to TDS amount).

Penalty – Section 271H: Penalty ranging from ₹10,000 to ₹1,00,000 for incorrect or delayed TDS return filing.

TDS statements are periodic returns filed by employers to report details of tax deducted from employees’ salaries and deposited with the government. These statements contain information such as the employee’s PAN, salary paid, tax deducted, and challan details of TDS payment.

Under Section 192, employers are required to file quarterly TDS returns in Form 24Q, which helps the Income Tax Department track tax compliance and credit the deducted tax to the employee’s account. The data reported in these statements is reflected in the employee’s Form 26AS and Annual Information Statement (AIS), enabling smooth income tax return filing.

Form 16 is the TDS certificate issued by employers to employees as proof of tax deducted on salary under Section 192. It is provided annually after the end of the financial year and contains complete details of salary paid and TDS deposited with the government.

• Part A of Form 16 includes employer and employee details, PAN and TAN, period of employment, and challan information of TDS deposited.

• Part B contains a detailed breakdown of salary, exemptions, deductions, taxable income, and total tax liability.

Failure to deduct or deposit TDS under Section 192 can lead to the following consequences under the Income Tax Act:

• Interest Liability (Section 201(1A)):

1% per month is charged for failure to deduct TDS, and 1.5% per month for failure to deposit deducted TDS, calculated from the due date until payment.

• Penalty Under Section 271C:

A penalty equal to the amount of TDS not deducted or not deposited may be imposed.

• Penalty Under Section 221:

Additional penalties may be levied for continued default in TDS compliance.

• Disallowance of Expenses:

In certain cases, related salary expenses may be disallowed while computing taxable income.

• Prosecution Under Section 276B:

Serious or repeated defaults may lead to imprisonment and monetary fines.

• Loss of Credibility:

Non-compliance can affect the employer’s reputation and invite frequent scrutiny from tax authorities.

• Higher TDS Without PAN – Section 206AA:

If PAN is not furnished, TDS must be deducted at the higher of prescribed rate or 20%.

• Disallowance Under Section 40(a)(ia):

Certain expenses may be disallowed if TDS compliance is not met (relevant for business employers).

References

Below are the key sections, rules, and forms related to TDS on Salary under Section 192, along with their purpose and official sources:

1. Section 192 – TDS on Salary
   Governs the deduction of tax at source on salary income by employers.
   https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx
2. Section 192(2B) – Declaration of Other Income
   Allows employees to declare other income and house property loss to employers for TDS calculation.
   https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090607.htm
3. Section 192(2C) – Salary Statement
   Requires employers to provide salary and tax computation details (Form 16 basis).
   https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090608.htm
4. Section 115BAC – New Tax Regime
   Prescribes concessional slab rates and limits on deductions under the new regime.
   https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090441.htm
5. Section 87A – Rebate
   Provides tax rebate to eligible resident individuals.
   https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090446.htm
6. Section 16(ia) – Standard Deduction
   Allows standard deduction from salary income.
   https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090357.htm
7. Section 10 – Exemptions on Salary Allowances
   Covers exemptions such as HRA, LTA, gratuity, and allowances.
   https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx
8. Chapter VI-A (Sections 80C, 80D, 80CCD, etc.) – Deductions
   Provides deductions for investments, insurance, NPS, and other eligible expenses.
   https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx
9. Section 89(1) – Relief on Arrears/Advance Salary
   Grants tax relief on salary received in arrears or advance (via Form 10E).
   https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090438.htm
10. Form 10E – Claim for Section 89 Relief
    Used to claim relief on arrears or advance salary.
    https://www.incometax.gov.in/iec/foportal/help/how-to-file-form-10e
11. Section 206AA – Higher TDS Without PAN
    Mandates higher TDS if PAN is not furnished.
    https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090679.htm
12. Section 201(1A) – Interest on TDS Default
    Prescribes interest for late deduction or deposit of TDS.
    https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090610.htm
13. Section 234E – Late Fee for TDS Returns
    Imposes late fee for delayed filing of TDS returns.
    https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090721.htm
14. Section 271H – Penalty for Incorrect/Delayed Returns
    Provides penalty for wrong or delayed TDS statements.
    https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090743.htm
15. Section 276B – Prosecution for Non-Payment of TDS
    Provides for prosecution in case of serious TDS defaults.
    https://incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2024/102120000000090778.htm
16. Form 16 – TDS Certificate (Rule 31)
    Certificate issued to employees for TDS on salary.
    https://www.incometaxindia.gov.in/forms/income-tax%20rules/103120000000007546.htm
17. Form 24Q – Quarterly TDS Return (Salary)
    Quarterly statement for reporting salary TDS.
    https://www.protean-tinpan.com/services/etds-etcs/etds-rpu.html
18. Form 12B – Previous Employment Details
    Used to declare salary and TDS from a previous employer.
    https://www.incometaxindia.gov.in/forms/income-tax%20rules/103120000000007541.htm
19. Section 17(2) & Rule 3 – Perquisites and Valuation
    Defines and prescribes valuation of taxable perquisites.
    https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx
20. Income Tax Slab Rates (Official Portal)
    Provides current slab rates for individuals.
    https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1