TDS on salary: what employers must do

The method

1. Estimate yearly taxable salary. Gross salary minus exemptions and deductions the employee is eligible for.
2. Apply the employee's regime. The new regime is the default. If the employee picks the old regime, they must tell you in writing.
3. Work out yearly tax, including rebate, surcharge and 4% cess.
4. Divide by the months left and deduct each month.
5. Adjust in later months if salary or declarations change.

Under the new regime

• Standard deduction: ₹75,000.
• Rebate makes tax nil up to ₹12 lakh of taxable income. With the standard deduction, that means salary up to ₹12.75 lakh has no TDS.

Proofs

Under the old regime, collect proof of rent (HRA), investments (old 80C, now section 123), health insurance and home loan interest before the final months of the year. If there is no proof, deduct on the full salary.

Returns and certificate

• Deposit by the 7th of the next month.
• File Form 138 (earlier 24Q) every quarter. The Q4 return carries the full-year salary details.
• Issue Form 130 (earlier Form 16) by 15 June.

Common mistakes

• Deducting nothing all year and a big amount in March. Interest applies for the missed months.
• Ignoring salary from a previous employer that the new employee declares.

Sources

• Income-tax Act, 2025