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TDS on Salary in India: How Section 192 Works and What Your Form 16 Shows
Your employer deducts tax from your salary under Section 192 of the Income Tax Act 2025. The TDS rate depends on your total income for the year, not a fixed percentage. Understanding how Section 192 works helps you know why your in-hand salary is what it is and what you can do to reduce the deduction.
How Section 192 calculates your TDS
Your employer calculates TDS in two steps:
Step 1 — Compute estimated annual income
Your employer estimates your total income for the full financial year based on:
- Your monthly salary and allowances
- Any previous employment income you disclose
- Any other income you have told your current employer about (interest, rental, freelance income)
Step 2 — Apply the slab rates
The estimated annual income is reduced by:
- Standard deduction (₹75,000 under the new regime)
- Eligible deductions under Section 80C, 80D, 80CCD(1B), 80DD, 80DDB, 80E, 80G, 80TTA, 80U (if proof has been submitted)
- Rebate under Section 87A (full rebate for total income up to ₹7 lakh under the new regime)
The resulting taxable income is then computed at the applicable slab rates for the new regime:
| Income slab | Tax rate |
|---|---|
| Up to ₹4 lakh | Nil |
| ₹4,00,001 — ₹8,00,000 | 5% |
| ₹8,00,001 — ₹12,00,000 | 10% |
| ₹12,00,001 — ₹16,00,000 | 15% |
| ₹16,00,001 — ₹20,00,000 | 20% |
| ₹20,00,001 — ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
An cess of 4% is added to the tax amount.
Step 3 — Divide by 12 and deduct monthly
The annual tax is divided by 12 and deducted in equal instalments each month.
Example — how TDS is calculated:
You have a monthly salary of ₹85,000 including ₹15,000 as HRA and ₹5,000 as transport allowance.
- Annual salary: ₹85,000 × 12 = ₹10,20,000
- Less: Standard deduction (new regime): ₹75,000
- Less: Section 80C (life insurance + PPF + ELSS): ₹1,50,000
- Less: Section 80D (self and family health insurance): ₹25,000
- Taxable income: ₹10,20,000 − ₹75,000 − ₹1,50,000 − ₹25,000 = ₹7,70,000
Tax on ₹7,70,000 under new regime slabs:
- Nil on first ₹4,00,000 = ₹0
- 5% on ₹3,70,000 (₹4,00,001 to ₹7,70,000) = ₹18,500
- Cess at 4% = ₹740
- Total annual tax: ₹19,240
- Monthly TDS: ₹19,240 ÷ 12 = ₹1,603 per month
What income counts as “salary” for TDS
Your employer calculates TDS on your gross salary, which includes:
- Basic salary
- Dearness allowance (DA)
- House Rent Allowance (HRA)
- Transport allowance
- Medical allowance
- Bonus and commissions
- Leave encashment
- Any other regular allowances paid by the employer
What does not count as salary for Section 192:
- Reimbursements for actual expenses (travel, phone, books)
- Uniform allowance (if used exclusively for the uniform purpose)
- Statutory contributions like PF and NPS (these are deducted from income, not part of it)
What your employer can deduct from taxable income
Your employer applies deductions based on proof submitted by you before the end of the financial year (typically by 28 February of the relevant year).
Common deductions your employer can consider:
| Section | Deduction | Maximum |
|---|---|---|
| 80C | Life insurance, PPF, ELSS, EPF, home loan principal, NSC, children’s tuition fees | ₹1,50,000 |
| 80CCD(1B) | NPS contribution (in addition to 80C) | ₹50,000 |
| 80D | Health insurance premium (self, spouse, children) | ₹25,000 (₹50,000 for senior citizens) |
| 80DD | Maintenance of dependent with disability | ₹75,000–₹1,25,000 |
| 80DDB | Medical expenditure on specified diseases | ₹40,000–₹1,00,000 |
| 80E | Interest on education loan | No limit |
| 80G | Donations to approved charities | 50% or 100% of donated amount |
| 80TTA | Interest from savings accounts | Up to ₹10,000 |
| Standard deduction | All salaried employees | ₹75,000 |
If you do not submit proof, your employer deducts TDS at the highest slab rate (30%) without any deductions — resulting in a larger deduction than necessary.
Section 192A — TDS on accumulated provident fund
If you withdraw your accumulated provident fund (EPF) balance after leaving a job and the service period is less than 5 years, TDS is deducted at 10% on the withdrawal amount (if the withdrawal exceeds ₹50,000). This is a separate TDS provision from Section 192.
Form 16 — what it shows
Form 16 is the TDS certificate your employer issues at the end of the financial year (by 15 June of the following Assessment Year). It has two parts:
Part A — TDS details:
- Employer’s name, address, and TAN (Tax Deduction and Collection Account Number)
- Your name, PAN, and residential status
- Summary of salary paid and TDS deducted each quarter
- PAN of the employee and deductor
- Certificate number from the TRACES portal
Part A is downloaded by the employer from the TRACES portal (tdscpc.gov.in) — it cannot be manually created.
Part B — Tax computation:
- Gross salary (annual)
- Less: exemptions and deductions
- Less: standard deduction
- Less: Section 80C, 80D, etc.
- = Taxable income
- Tax computed at applicable slab rates
- Less: rebate under Section 87A (if applicable)
- Add: cess
- = Total tax liability
- Less: TDS deducted and deposited
Part B must match the figures shown in your ITR.
What to do if your employer deducts too much TDS
If your employer deducts more than your actual tax liability (because you submitted incomplete proof or had other income not accounted for), you can:
-
Adjust in the same year: If you submit additional proof to your employer before 31 March, they can recalculate and reduce future deductions.
-
Claim refund when filing ITR: File your ITR before the due date (31 July for most individuals). The excess TDS will automatically become a refund, which the Income Tax Department will deposit to your bank account within 4–6 weeks of processing.
-
Form 13 — reduce TDS rate: If you expect your total income to be below the taxable threshold (because of investments, home loan interest, or other deductions), you can apply to the Assessing Officer for a lower TDS certificate (Form 13). Your employer will then deduct tax at the lower rate specified.
Multiple employer situations
If you changed jobs during the financial year, each employer deducts TDS based on the income they can see. The second employer does not know about income from the first employer.
To avoid under-TDS at the second employer:
- Tell your second employer about your first salary
- Submit Form 12B (salary details from previous employer) to the new employer
- Alternatively, estimate your total income and ask your new employer to deduct TDS at a higher rate
If both employers deduct TDS without knowing the full income, you may end up paying more tax than actually due — claim the excess when you file your ITR.
Sources
- Income Tax Act 2025, Section 192 — TDS on salaries (verified 2026-10-08)
- Income Tax Act 2025, Section 87A — Rebate (verified 2026-10-08)
- TRACES portal — Form 16 download (verified 2026-10-08)
- CBDT circular on Section 192 TDS computation (verified 2026-10-08)