TDS On Salary – Section 192

TDS on salary is a mechanism through which an employer withholds a part of an employee’s taxable earnings each month. It is then paid to the government on the employee’s behalf. This process is regulated by Section 192 of the Income Tax Act. The amount of TDS depends on the employee’s overall income, the tax regime they select, and the deductions and exemptions they are entitled to claim.

The calculation for TDS on salary is done by reducing the amount of exemption from the total annual salaried income of the employee. The Income Tax Department specifies the exemption limit. At the time of calculating TDS on salary; the employer needs to obtain proof and declaration from the employee before approving the exemption amount.

TDS under Section 192 must be deducted by whoever is liable to pay salaries, using the applicable average tax rate based on the employee’s estimated total income.

For various categories of employers, the persons authorised to handle salary payments and ensure the TDS is deducted from salary are listed below:

Salaries TDS calculation is applicable when it is actually paid. In other words, tax is deducted at the point of payment, whether the salary is issued in advance, on schedule, or after a delay.

If an employee’s estimated annual salary remains within the basic exemption threshold of ₹2.5 lakh under the old regime or ₹3 lakh under the new regime, no income tax is payable, and therefore no TDS is required.

For employees whose earnings exceed these exemption limits, TDS calculation on salary is done as per their relevant income tax slab rates. The following table sets out the basic exemption levels and slab rates under the old tax regime.

For income earned during FY 2025-26 (AY 2026-27), the new tax regime, which is now the default system, will apply the following slab rates.

Employers must submit the salary TDS return through Form 24Q, which is filed every quarter. It contains details of the salary paid to employees, along with the deduction of TDS on salary for that period. Form 24Q is divided into two parts.

Annexure I is required for all four quarters of the financial year. Meanwhile, Annexures II & III, which are the estimated/actual particulars for the whole financial year, are optional when filing returns for the 1st, 2nd and 3rd quarters.

However, it is mandatory to file Annexure II & III in the final quarter when declaring the actual particulars for the entire financial year.

As per Section 203, the employer must issue a TDS certificate to the employee for the tax deducted at source on salary. Once the TDS return has been filed, Form 16 is generated in the prescribed format and can be downloaded through the TRACES portal. Form 16 is divided into Part A and Part B.

Part A sets out the quarterly TDS deducted and deposited, along with the employer’s PAN and TAN details and other relevant information.

Part B serves as an annexure to Part A and is prepared by the employer for each employee. It outlines the salary components, applicable exemptions, deductions under Chapter VI-A and the final tax liability.

Yes, TDS on salary is deducted every month. As per Section 192, the employer will deduct TDS on salary at the time of making the payment to the employee. Since the employee gets a salary every month, the employer will make a deduction for TDS on salary every month. In case, the employer fails to deduct the same, he will be liable to pay the penalty and interest.

Yes, the deduction for TDS on salary is mandatory under Section 192 of the Income Tax Act . Every employer who pays a salaried income to his employees needs to deduct TDS on salary if the income amount is over the basic exemption limit.

There is no form or specific process to claim TDS refunds. The deductee needs to file the income tax returns usually only. However, if there is any excess of TDS on salary charged, what the employee is supposed to pay in the given year, then the refund amount will be due and will need to be shown in the returns filed.

An employee can only be exempt from deduction of TDS on salary in case his/her estimated salary falls below the basic exemption limit. Otherwise, TDS on salary is a mandatory deduction for every employer. This rule shall also apply to employees who do not have a PAN.

TDS on salary is refundable when the amount deducted is higher than what the employee’s actual tax liability is. Many times, the investment details declared at the start of the financial year do not seem to match with the actual investments made at the year-end. In case of such a mismatch, TDS on salary will be refundable w.r.t excess paid.

Upon filing the TDS return, if you identify any error, such as PAN not provided or incorrect challan details, the Form 16/ Form 16A/ Form 26AS will not show the correct tax amount credited with the government. To ensure that the exact tax amount is credited and reflected in all the Forms, a revised TDS return needs to be filed.

Here are the different types of revisions that you can make to submit an error-free TDS return:

The employee can minimize TDS on salary by investing in specific tax saving instruments. The deduction benefits on TDS on salary can be enjoyed under the provisions of different sections. However, these tax deduction benefits is available only if the tax payer has opted for the old tax regime. Here are a few important ones below:

Under Section 234E, a taxpayer must pay a late fee of ₹200 per day for failing to submit the TDS return required under Section 192. This charge cannot exceed the total amount of tax deducted at source on salary that should have been reported.

If TDS on salary is not deducted when the payment is made, interest at 1% per month is levied from the date the tax became deductible until the date it is actually deducted.

Further, if the deducted TDS on salary is not deposited by the due date, that is, the 7th of the following month, interest at 1.5% per month applies from the date of deduction until the date the payment is made.