Complete Guide to TDS on Salary (Section 192) – DisyTax

Tax Deducted at Source (TDS) on salary is one of the most critical aspects of income tax compliance in India. Governed by Section 192 of the Income Tax Act, 1961, it mandates the employer to deduct tax before salary is paid based on the employee's tax slab. This guide by DisyTax Business & Tax Solutions covers everything from calculation to compliance, common errors, and tax regime options.

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What is TDS on Salary?

TDS on salary means a portion of your income is deducted by your employer and deposited with the government as advance tax. It applies to income under the head Income from Salaries.

Applicability of Section 192

• Applicable when there is an employer-employee relationship.
• TDS must be deducted each month based on estimated income.
• Calculation includes exemptions like Section 10 exemptions and deductions under Chapter VI-A.

Step-by-Step TDS Calculation

1. Estimate annual salary (basic, allowances, perquisites).
2. Deduct exemptions (HRA, LTA, etc.).
3. Apply standard deduction of ₹50,000.
4. Reduce professional tax (if any).
5. Subtract deductions under Section 80C, 80D, 80E, etc.
6. Calculate tax based on old or new regime.
7. Deduct rebate under Section 87A (if applicable).
8. Divide the balance tax by remaining months to compute monthly TDS.

Tax Regimes: Old vs New

Taxpayers can choose between the old and new tax regimes. The old regime allows deductions like 80C and HRA, while the new regime offers lower slab rates but no exemptions.

TDS Compliance by Employers

• Deduct TDS each month before salary disbursement.
• Deposit TDS to government by the 7th of next month.
• File TDS return (Form 24Q) quarterly.
• Issue Form 16 to employees by 15th June.

Form 12BB and Employee Declarations

To claim deductions like Section 80C, 80D, HRA, etc., employees must submit Form 12BB with valid proofs.

TDS in Case of Job Change

If an employee switches jobs during the year, they must disclose their previous salary and TDS details to the new employer to avoid under or over deduction.

Consequences of Non-Compliance

• Interest @1%/1.5% under Section 201 for late deduction/payment.
• Penalty under Section 271H for late return filing.
• Salary expense disallowance under Section 40(a)(ia).

Common TDS Errors and How to Avoid Them

• Error: Not collecting Form 12BB → Solution: Collect and verify declaration every April.
• Error: Using incorrect PAN → Solution: Validate PAN via the TRACES portal before TDS.
• Error: Selecting wrong tax regime → Solution: Educate employees to declare regime early in FY.
• Error: Missing past employer data → Solution: Ask for Form 16 or pay slips from earlier employer.
• Error: Incorrect deduction or deposit delay → Solution: Use payroll software or expert-managed solutions like DisyTax.

Let DisyTax Handle Your TDS Compliance

With experts in TDS compliance, DisyTax ensures accurate payroll processing, correct monthly TDS, and on-time filing. Focus on business growth while we handle your statutory responsibilities.