Tax
TDS on salary (Section 192) — how your employer calculates monthly deduction
Section 192 mandates monthly TDS on estimated annual salary income. Learn how the employer projects your tax, why January-February deductions spike, and how to control the math.
6 May 2026 · 2 min read
Quick frame: Section 192 of the Income-tax Act requires every employer to deduct tax from salary every month — based on the estimated annual tax divided by 12. This is why the year-end shock happens: when you submit investment proofs in January, the system recomputes liability and the remaining months absorb the gap.
How the employer calculates monthly TDS
- Estimate annual gross salary (basic + HRA + special + bonus + perquisites)
- Subtract standard deduction (₹75,000 new regime, ₹50,000 old)
- Subtract HRA / Section 80C / 80D / NPS based on declared investments (old regime only)
- Apply slab rates to get annual tax + cess (4%)
- Divide by 12 → monthly TDS
If you declare ₹1.5 lakh of 80C in April but invest only ₹50k, the employer recomputes in January and back-loads the unpaid TDS into Feb-March. That "why is my March take-home so low" moment.
Old vs New regime — your choice each year
From FY 2023-24, the new regime is default. Tell your employer in writing every April if you want old regime. Once submitted, you cannot switch within the year for TDS purposes (you can still switch when you file the ITR).
Under the new regime (FY 2025-26):
- Up to ₹4 lakh — nil
- ₹4-8 lakh — 5%
- ₹8-12 lakh — 10%
- ₹12-16 lakh — 15%
- ₹16-20 lakh — 20%
- ₹20-24 lakh — 25%
- Above ₹24 lakh — 30%
Plus Section 87A rebate up to ₹60,000 if total income ≤ ₹12 lakh — most under-12L earners pay zero tax.
Use the TDS on Salary Tool — it projects monthly deduction under both regimes.
What if TDS is too high?
You will get a refund — but only after filing ITR. To avoid lock-up: declare HRA, 80C, 80D upfront in April with your employer; submit Form 12BB.
What if TDS is too low?
You owe self-assessment tax + interest under Section 234B/234C if total tax due > ₹10,000 was unpaid by year-end.
FAQ
Q: Can I claim HRA via TDS or only at ITR? A: Both. Submit rent receipts + landlord PAN to employer for monthly TDS reduction. If missed, claim while filing ITR.
Q: Why does my Form 16 show different gross than Form 26AS? A: Form 16 is from your employer; Form 26AS shows all TDS across deductors. Mismatch usually means another deductor (bank, freelance client) reported TDS — both are legitimate.
Q: Standard deduction under new regime? A: ₹75,000 from FY 2024-25 onwards (₹50,000 till FY 2023-24). Family pensioners get ₹25,000 standard deduction.