TDS on Salary Under Section 192 — citizen guide 2026

In FY 2025-26, a salaried person whose taxable income is up to Rs 12 lakh pays zero income tax, because of the rebate under Section 87A. Yet many employers still cut TDS through the year on salaries above the basic limit. Section 192 of the Income-tax Act, 1961 is the rule that makes this happen, and it is the single biggest reason your take-home pay is lower than your CTC.

Short on time? Skim “How your employer works out your TDS” for the maths, then jump to “How to reduce your TDS legally” for the action steps.

TDS stands for tax deducted at source. Under Section 192, anyone who pays a salary must deduct income tax from it before paying you, and deposit that tax with the government. Once a year the employer gives you a Form 16 certificate that shows exactly how much was cut and deposited.

So TDS is not a separate tax. It is your own income tax, collected in small monthly pieces instead of one big bill at year end. Think of it as a forced monthly saving toward your yearly tax. If too much is cut, you get the extra back as a refund after you file your income tax return. If too little is cut, you pay the balance yourself.

This “pay as you earn” system exists for one reason: the government does not want to chase millions of salaried people for tax at the end of the year. It is far easier to collect the tax at the source, straight from the employer, every month.

There is no flat TDS rate on salary. Your employer uses the average rate method set out in Section 192. In plain words, the steps are:

1. Estimate your total salary income for the whole financial year (April to March).
2. Subtract what is allowed, such as the standard deduction.
3. Work out the tax on the balance using the slab rate for your chosen regime.
4. Divide that yearly tax by 12. That single number is your monthly TDS.

A worked example makes it clear. Suppose Anjali earns Rs 15,00,000 gross salary in FY 2025-26 and stays in the default new tax regime.

The key idea is that “average rate” (here 6.5%) is not a tax rate the law sets. It is simply your total tax divided by your total income. The employer applies it evenly across the year. Bonus, joining bonus, leave encashment or a mid-year hike change the estimate, so your TDS can jump in the month they are paid.

One important point: if your estimated taxable income for the year is within Rs 12 lakh, the Section 87A rebate brings your tax to nil. Your employer is expected to apply this rebate while cutting TDS. If it still deducts something, tell your payroll team in writing and show them the slab table below.

Since FY 2023-24, the new tax regime is the default. Most deductions you may be used to (80C, 80D, HRA, home loan interest) are simply not allowed in it. The old regime keeps them but charges higher slab rates. Your choice of regime changes your TDS, so it is the first lever to pull.

The rule of thumb: if your deductions are small, the new regime usually wins because of its lower rates and the big Rs 12 lakh rebate. If you have a large home loan, high metro rent and full 80C investments, the old regime can still save you money. The only honest way to know is to compute both. Many free calculators do this in a minute.

These new tax regime slabs apply to income you earn from 1 April 2025 to 31 March 2026, which you report when you file your return for Assessment Year 2026-27.

On top of the tax, add a 4% health and education cess. High incomes above Rs 50 lakh also attract a surcharge, which we have kept out of this basic table.

Because of the Section 87A rebate, a salaried person with taxable income up to Rs 12 lakh pays no tax at all. Add the Rs 75,000 standard deduction, and that means gross salary up to about Rs 12.75 lakh can attract zero income tax under the new regime.

These steps are all within the law. They simply make sure the employer cuts only the tax you truly owe, not a rupee more.

1. Compare both regimes first. Run the numbers for old and new before you lock your choice. If the old regime is better, tell your employer and file Form 10-IEA when you file your return.
2. Submit Form 12BB on time. This is the form where you declare your investments, rent, home loan interest and insurance to your employer. In the old regime, timely submission means your TDS is cut lower through the year, instead of you waiting for a refund.
3. Use employer NPS in the new regime. In the new regime most deductions are gone, but the employer's contribution to your NPS under Section 80CCD(2) is still allowed, up to 14% of basic + DA. Ask HR to restructure a part of your CTC into employer NPS. It cuts your TDS and builds your retirement corpus.
4. Always give your PAN. Without a PAN, the employer must cut TDS at 20% under Section 206AA, which is usually far higher than your real slab rate.
5. When you change jobs mid-year, file Form 12B. Give your new employer the details of salary and TDS from the old job. Otherwise the new employer starts from zero, under-deducts TDS, and you get a large tax bill plus interest at year end.
6. Check your AIS and Form 26AS mid-year. These show the TDS deposited against your PAN. If the figure is wrong, raise it early, not in March.

Money cut from your salary is supposed to reach the government against your PAN. Two free documents confirm it:

1. Form 26AS is the annual tax statement. It lists every TDS entry made against your PAN, by every deductor, including your employer.
2. AIS (Annual Information Statement) is the fuller, newer statement on the income tax portal. It shows TDS, SFT transactions, interest, dividends and more.

Download both free from your account on incometax.gov.in under “Services”. If the TDS your employer cut matches what shows here, your credit is safe. If there is a gap, the next section is for you. Our guide on fixing an AIS or 26AS mismatch walks through the dispute step by step.

This is the painful case, and it is more common than people think. Your salary slip shows TDS cut, but Form 26AS and AIS show nothing. Here is the honest position.

In practice, the income tax system gives you credit only for the TDS that shows up in your AIS and Form 26AS. If your employer deducted the money but never deposited it, that amount will not appear, and the department's processing will treat your tax as still unpaid. You remain liable for the tax, even though the fault was the employer's.

What to do:

1. Pay the tax yourself first. Deposit the shortfall as advance tax or self-assessment tax when you file, so you avoid interest and penalty for late payment. The law does not let you skip tax just because the employer messed up.
2. Complain to the employer in writing. Ask for the challan numbers and deposit dates. Keep the salary slips and Form 16 as proof that the deduction happened.
3. Escalate. The employer faces penalties under Section 201 for deducting but not depositing TDS. You can raise a grievance on the income tax portal, and on CPGRAMS (pgportal.gov.in) against the Income Tax Department for action.
4. Use RTI to confirm the facts. The Income Tax Department is a public authority under the RTI Act. You can file an RTI with the CBDT to ask, on record, whether the TDS deducted from your salary for a given quarter was deposited against your PAN. Draft your application with our AI RTI Drafter, track deadlines with the Timeline Tracker, and work out the fee with the RTI Fee Calculator.

Our full guide on what to do when TDS is not deposited by your employer has the letter templates and escalation ladder.

1. Missing the Form 12BB deadline, so the employer cuts TDS at full rate and you wait months for a refund.
2. Forgetting Form 10-IEA when the old regime would save you money, so you are silently taxed under the default new regime.
3. Not giving your PAN, triggering the flat 20% rate under Section 206AA.
4. Skipping Form 12B at a job change, which leads to under-deduction and a surprise tax bill with interest.
5. Believing “no TDS” means “no tax.” Once taxable income crosses Rs 12 lakh, the 87A rebate stops, and real tax begins even if your employer's software is slow to catch up.

The employer cuts TDS on projected income above the basic exemption. But if your estimated taxable income for the year is within Rs 12 lakh, the Section 87A rebate brings the tax to nil, and the employer should not cut TDS at all. If it still does, send a written request to payroll with the slab table.

No. TDS is your own income tax, collected in advance, month by month. When you file your return, the TDS already cut is simply set off against your final tax. Extra TDS comes back as a refund; shortfall is paid by you.

No. Section 192 uses the average rate method. Your total yearly tax, worked out on the slab rate, is divided by 12 to get the monthly TDS. Two people on the same CTC can have different TDS because of different regime choices and deductions.

In practice you get credit only for TDS that appears in your AIS and 26AS. If it is missing, the department treats your tax as unpaid. Pay the amount yourself as advance or self-assessment tax to avoid interest, then chase the employer and escalate. See our guide on TDS not deposited by the employer.

Under Section 206AA, the employer must cut TDS at 20% if you do not give a PAN. This is usually much higher than your real slab rate. Always share your PAN with payroll.

It depends on your deductions. The new regime (default) has lower rates and a Rs 12 lakh no-tax rebate but almost no deductions. The old regime has higher rates but allows 80C, 80D, HRA and home loan interest. Compute both before choosing.

Your employer must issue Form 16 by 15 June after the financial year ends. Part A has the TDS details from the tax department's records; Part B has your salary breakup and deductions. You need it to file your return.

Only if your estimated income for the year is within the no-tax limit (Rs 12 lakh taxable in the new regime). Otherwise, Section 192 makes monthly TDS a legal duty of the employer, and it cannot be skipped.

Yes, if excess TDS was cut. After you file your income tax return, the extra is refunded to your pre-validated bank account, usually within a few weeks. Read our guide on a delayed income tax refund if it is stuck.

1. Income-tax Act, 1961 — Section 192 (TDS on salary), Section 87A (rebate), Section 115BAC (new regime), Section 206AA (no PAN).
2. Income Tax Department — New tax regime slabs for salaried, AY 2026-27: https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
3. Section 87A rebate for FY 2025-26: https://www.incometaxindia.gov.in/w/what-is-rebate-under-section-87a-for-f.y-2025-26-and-who-can-claim-it-
4. New vs old tax regime — official FAQ (deductions allowed): https://www.incometax.gov.in/iec/foportal/help/new-tax-vs-old-tax-regime-faqs
5. Form 10-IEA — user manual and FAQs: https://www.incometax.gov.in/iec/foportal/help/statutory-forms/popular-form/form-10-IEA-um
6. NPS tax benefits, Section 80CCD(2): https://npstrust.org.in/benefits-of-nps
7. CPGRAMS grievance portal: https://www.pgportal.gov.in

1. TDS not deposited by your employer — 26AS mismatch fix
2. AIS mismatch — how to dispute an error
3. Why your salary is lower this month — hidden deductions
4. Home loan tax benefits under Section 24 and 80C
5. Advance tax — due dates and how to pay
6. Types of income tax notice in India
7. The RTI Playbook