# TDS on salary (Tax deducted at source on salary)

> TDS on salary is the income tax an employer deducts from each month's salary and deposits with the government, based on the employee's estimated tax for the year. It is reported in quarterly returns and certified to the employee after the year.

In EaseDesk (coming soon, not available yet): TDS on salary is coming to EaseDesk with payroll, worked out each month from the salary structure and the employee's declarations. TDS on vendor bills and payments is already in EaseDesk.

## Why it matters to your business

As an employer you are responsible for deducting the right tax from salaries and depositing it on
time. If you deduct too little, you pay the shortfall with interest; if you deposit late, interest
and late fees follow. Your employees rely on your quarterly returns: tax you deposit shows up in
their annual tax statement, and errors hold up their refunds.

## How it works

As of September 2026, the Income-tax Act, 2025 applies from 01-04-2026. It uses a single "tax year"
in place of the earlier previous year and assessment year, and keeps both regimes.

1. At the start of the year, or on joining, the employee chooses a regime and declares rent,
   investments and other claims (see [Form 12BB](/glossary/form-12bb), now Form 124).
2. The employer estimates the year's taxable salary and tax, and deducts it evenly over the remaining
   months, adjusting as pay or declarations change.
3. TDS is deposited by the 7th of the next month (30 April for March).
4. Quarterly returns report each employee's salary and TDS.
5. After the year, the employer issues the salary TDS certificate
   ([Form 16](/glossary/form-16), now Form 130).

**New regime slabs for tax year 2026-27:**

| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |

A rebate makes the tax nil for resident individuals with taxable income up to ₹12,00,000, and a 4%
health and education cess applies on the tax. The standard deduction for salary is ₹75,000 under
the new regime and ₹50,000 under the old one.

## Common mistakes

- Using the old regime for an employee who has not chosen it.
- Ignoring [HRA](/glossary/hra) and other claims under the old regime until the last quarter, then
  deducting a large amount from a few salaries.
- Depositing on time but filing the quarterly return late, which attracts a fee for each day.

## Questions

### Which tax regime does the employer use for TDS?

The new tax regime, unless the employee tells the employer they choose the old regime. Under the new regime, a salaried resident with income up to ₹12,75,000 (₹12,00,000 plus the ₹75,000 standard deduction) usually pays no tax because of the rebate.

### When must the employer deposit TDS on salary?

By the 7th of the following month. Tax deducted in March is due by 30 April.

### Which return reports TDS on salary?

A quarterly TDS statement. From tax year 2026-27, under the Income-tax Act, 2025, it is Form 138, which replaced Form 24Q.

### What if an employee has two employers in a year?

The employee can give the new employer details of salary and TDS from the previous one, so the new employer deducts tax on the combined income. Otherwise the employee pays any shortfall when filing the return.

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Source: https://www.easedesk.com/glossary/tds-salary · Updated 2026-09-28 · EaseDesk