TDS on Salary Calculator India — Monthly TDS Estimate FY 2026-27
Your employer calculates TDS monthly using a simple formula: estimate full-year income → apply relevant deductions you have declared → compute annual tax under the chosen regime → divide by 12. Under Section 192 of the Income Tax Act, this monthly deduction is mandatory. At ₹1L/month gross salary (₹12L annual), under the new regime with ₹75,000 standard deduction, taxable income is ₹11.25L. Annual tax is ₹52,500 — but Section 87A rebate applies since income ≤ ₹12L, making tax = ₹0. Monthly TDS = ₹0, full ₹1L arrives in-hand (before PF and other deductions). At ₹1.5L/month (₹18L annual), taxable after SD = ₹17.25L. New regime tax ≈ ₹1,50,800 (including 4% cess). Monthly TDS ≈ ₹12,567. The difference between the two: ₹6L more income, ₹12,567 more TDS per month.
The most common reason salary TDS comes out wrong is the mismatch between what you declared in April and what you actually invested by March. If you declared ₹1.5L in 80C investments in April but invest only ₹80,000 by February, your employer will recalculate in the last 2–3 months and deduct a larger amount to make up the shortfall — sometimes ₹20,000–₹40,000 extra in a single month. Submit Form 12BB to your employer with accurate investment estimates by April, then update it mid-year if circumstances change. If you switch to the old regime to claim HRA, home loan interest, or NPS, declare this choice to your employer before the financial year begins — employers default to the new regime if no declaration is received. Compare what each regime costs you using the New vs Old Regime Calculator before deciding, then use the Section 80C Calculator to maximise your declared deductions.
How Employers Calculate Monthly TDS on Salary — the Section 192 Formula
Under Section 192, your employer must deduct TDS from your salary. The calculation is done in four steps at the start of each financial year:
- Estimate full-year gross income: Monthly salary × 12 + expected variable pay/bonuses + all taxable allowances.
- Apply regime-specific deductions: New regime (default) → subtract ₹75,000 standard deduction only. Old regime (if declared via Form 12BB) → subtract ₹50,000 SD + all declared investments and exemptions (80C, HRA, home loan interest, 80D, NPS).
- Compute annual tax: Apply FY 2026-27 slabs to taxable income. Apply Section 87A rebate if income ≤ ₹12L (new regime) or net taxable income ≤ ₹5L (old regime). Add 4% cess.
- Divide by 12: Monthly TDS = Annual tax ÷ 12. Deducted each month and deposited with the government by the 7th of the following month.
The employer recalculates whenever inputs change: mid-year bonus paid, Form 12BB updated, or regime switch declared. A large December bonus causes the employer to recalculate annual income with the bonus included — all remaining tax for the year is divided across January, February, and March, producing a visible spike in TDS in the last quarter.
New regime is default from FY 2024-25: If you submit no Form 12BB or regime declaration, your employer defaults to the new regime. If you want old regime TDS (to factor in HRA, home loan, 80C), you must explicitly opt in by submitting Form 12BB with investment declarations before the first payroll run of the financial year.
What salary TDS does NOT cover: Freelance/consulting income, rental income, capital gains, FD interest. If you have any of these, the resulting tax must be paid as advance tax quarterly — salary TDS from your employer does not cover non-salary income.
Three Salary TDS Scenarios — Zero-Tax Employee, Mid-Year Bonus Spike, and Rental Income Gap
Scenario 1: Anjali, ₹1L/month salary, new regime — zero TDS all year
Anjali earns ₹1,00,000/month gross. No other income. New regime: annual income = ₹12L. Standard deduction: ₹75,000. Taxable income = ₹11,25,000. Tax: ₹20,000 (5% on ₹4–8L) + ₹32,500 (10% on ₹8–11.25L) = ₹52,500. Section 87A rebate: income ≤ ₹12L → rebate ₹60,000 > tax. Annual tax = ₹0. Monthly TDS = ₹0. Anjali receives her full ₹1L each month (before PF and other deductions). The 87A rebate in practice: at ₹12L income, zero income tax and zero TDS.
Scenario 2: Kartik, ₹1.5L/month + ₹3L December bonus — the TDS spike
Kartik's monthly salary: ₹1,50,000. Annual estimate (April): ₹18L. New regime. Taxable = ₹18L − ₹75K = ₹17.25L. Annual tax: ₹20K + ₹40K + ₹60K + 20% on ₹1.25L = ₹25K = ₹1,45,000. Cess: ₹5,800. Annual tax: ₹1,50,800. Monthly TDS (April–November): ₹12,567.
In December, Kartik receives ₹3L performance bonus. New annual income: ₹21L. Taxable = ₹21L − ₹75K = ₹20.25L. Tax: ₹20K + ₹40K + ₹60K + ₹80K + 25% on ₹25K = ₹6,250 = ₹2,06,250. Cess: ₹8,250. New annual tax: ₹2,14,500. TDS deducted April–November (8 months): ₹12,567 × 8 = ₹1,00,536. Remaining: ₹2,14,500 − ₹1,00,536 = ₹1,13,964. Monthly TDS for December–March (4 months, with bonus paid in December): ≈ ₹28,491. Kartik sees monthly TDS roughly double after the bonus — this is correct, not an error.
Scenario 3: Meghna, ₹1.2L/month salary + ₹30,000/month rental income
Meghna earns ₹1.2L/month (₹14.4L annual) + ₹30,000/month rental income (₹3.6L annual). New regime. Salary TDS: taxable from salary = ₹14.4L − ₹75K = ₹13.65L. Annual salary tax: ₹20K + ₹40K + 15% on ₹1.65L = ₹24,750 = ₹84,750. Cess: ₹3,390. Monthly TDS on salary: ₹7,345. Her employer deducts this amount.
But rental income (₹3.6L) is also taxable. Total taxable income: ₹13.65L (salary) + ₹3.6L (rent) = ₹17.25L. Additional tax on rental portion: tax at 20% on ₹1.25L bracket (₹16–17.25L) = ₹25,000. Cess: ₹1,000. Rental tax ≈ ₹26,000. This must be paid via advance tax — 15% by 15 June, 45% cumulative by 15 September, etc. If Meghna ignores advance tax, Section 234B interest accrues at 1% per month from April 1 of the assessment year.
Form 12BB, Proof of Investment, and Section 192 Regime Declaration Rules
Form 12BB — the employee's declaration document: Salaried employees submit Form 12BB to their employer to claim exemptions and deductions for TDS purposes. Sections: HRA claim (landlord PAN required if annual rent exceeds ₹1L); LTA; home loan interest under Section 24(b); Chapter VI-A deductions (80C, 80D, NPS 80CCD(1B), 80E, 80G). The employer uses these declarations to reduce monthly TDS. Important: Form 12BB is a declaration, not verified proof. Over-declaring (claiming deductions you will not make) leads to under-deducted TDS — you will pay the shortfall with interest at ITR time.
Proof of investment requirement: Most employers require submission of actual investment proof by January–February. Documents: PPF passbook, ELSS purchase statement, LIC premium receipt, home loan interest certificate, rent receipts. If proofs are not submitted, employers reverse the declared deduction for the remaining months and deduct extra TDS in the last 2 months — causing a visible spike that many employees mistake for an error.
Regime choice and its consequences: New regime is default. To opt for old regime: submit a written declaration or Form 12BB to HR before April payroll. You can change this at ITR filing time — your employer declaration does not bind your ITR choice. If you switch to old regime at ITR after employer deducted TDS at new regime, you will claim a refund (old-regime deductions reduce tax below TDS deducted). Switching from old regime to new at ITR filing also works — but you lose old-regime deductions entirely.
Multiple employers in a year: When joining a new employer mid-year, the new employer calculates TDS only on their own payments. They do not know about previous employer salary unless you inform them via Form 12B. If combined income pushes you to a higher slab, the new employer's TDS is insufficient. Submit Form 12B (with previous salary and TDS details) to the new employer to enable correct computation.
Section 192A — EPF premature withdrawal TDS: TDS at 10% applies on EPF withdrawals before 5 years of continuous service if amount exceeds ₹50,000 (verify current threshold at incometax.gov.in). Without PAN: 20% TDS. Withdrawals after 5 years of continuous service are fully exempt.
Common Salary TDS Mistakes — Over-Declaration, Job-Change Traps, and Unplanned Bonuses
Declaring investments in April that are never made. If you declare ₹1.5L in 80C to reduce TDS but invest only ₹60,000 by March, your TDS is under-deducted by roughly ₹13,500–₹18,000 (30% slab on ₹90,000 gap). Your employer will catch this during proof collection (January–February) and deduct the shortfall from remaining months — or you will pay it at ITR filing with Section 234B/234C interest. Only declare what you will actually invest.
Not informing the second employer of income from the first in a job-change year. The new employer calculates TDS only on the salary they pay you. If combined income from both employers (say, ₹8L from Employer A + ₹10L from Employer B = ₹18L) is taxed at a higher slab than each employer assumes individually, the new employer's TDS is insufficient. Submit Form 12B with previous employer's salary and TDS when you join the new company. Otherwise, face a large demand at ITR time.
Treating TDS as final tax settlement and skipping ITR. TDS from salary is an advance tax credit — not a receipt for settled tax. You must still file an ITR to: claim any refund, carry forward capital losses, declare income from other sources, and comply with mandatory filing requirements (income above basic exemption limit). Many salaried employees skip ITR assuming TDS handled everything — this can mean missing refunds or attracting late filing fees.
Not accounting for the annual bonus in TDS planning. If your employer typically pays a performance bonus in January, plan for increased TDS from February–March. Check your December pay slip carefully — if the bonus calculation is recalibrated, you may owe a large TDS adjustment in the last 2 months. Better to save the equivalent amount proactively than to be caught short when the bonus payment increases your apparent income.
Frequently Asked Questions
How is TDS on salary calculated for FY 2026-27?
Section 192 TDS calculation: (1) Estimate annual gross income. (2) Apply regime: new regime → deduct ₹75,000 standard deduction only; old regime → deduct ₹50,000 SD + Form 12BB declared amounts (80C ₹1.5L, HRA, home loan interest, 80D etc.). (3) Compute annual tax under FY 2026-27 slabs. New regime: ₹4–8L 5%; ₹8–12L 10%; ₹12–16L 15%; ₹16–20L 20%; ₹20–24L 25%; above ₹24L 30%. Section 87A rebate: income ≤ ₹12L → zero tax. (4) Add 4% cess. (5) Monthly TDS = annual tax ÷ 12. Employer recalculates when bonus is paid or declarations change.
Can I change my tax regime after salary TDS has been deducted?
Yes. Even if your employer deducted TDS under the new regime (the default), you can choose the old regime when filing your ITR. Enter old-regime deductions (80C, HRA, 80D, home loan interest) in the ITR; if old-regime tax is lower than TDS already deducted, claim the excess as a refund. The employer declaration does not bind your ITR choice for salaried employees. Important exception: self-employed individuals with business income who chose new regime cannot revert to old regime after opting in — the one-way restriction applies only to taxpayers with business income.
What is Form 12BB and why does it matter?
Form 12BB is the employee's declaration to the employer for TDS purposes. It covers: HRA exemption (landlord details, PAN if annual rent above ₹1L); LTA; home loan interest under Section 24(b); Chapter VI-A deductions (80C up to ₹1.5L, 80D, NPS 80CCD(1B), 80E, 80G). Without Form 12BB, the employer deducts TDS on full salary minus only ₹75,000 standard deduction (new regime). Submit at the start of the financial year (April); update mid-year if circumstances change; submit investment proofs by February.
What is Form 16 and how do I use it for ITR filing?
Form 16 is the TDS certificate from your employer, issued by 15 June each year. Part A: employer/employee details, total salary paid, total TDS deducted. Part B: salary breakup, deductions claimed under Chapter VI-A, taxable income. Use Form 16 to: verify employer TDS matches your payslips and Form 26AS; pre-fill your ITR. Multiple employers in a year = multiple Form 16s — combine all income and recompute tax on total income in ITR. The individual Form 16 computation may be wrong if the employer did not account for other-employer income.
Why did my TDS spike in January or February?
Three common reasons: (1) Investment proof deadline — if you declared 80C/other investments in April but did not submit proofs by January, your employer reverses the deduction. Shortfall TDS is divided over remaining months. (2) Performance bonus in December/January — employer recalculates annual income including the bonus and spreads remaining tax across the last few months. (3) Mid-year salary revision — backdated increment raises the annual income estimate. All of these are correct; the employer is ensuring the annual tax is fully covered by March 31.
Is TDS deducted when I have no tax liability at ₹12L salary?
No. At ₹12L annual income under the new regime, standard deduction reduces taxable income to ₹11.25L. Tax computed = ₹52,500. Section 87A rebate applies (income ≤ ₹12L): rebate of ₹60,000 exceeds the tax. Final tax = ₹0. Monthly TDS = ₹0. Your employer automatically applies this rebate in the TDS computation — no action required. You receive your full monthly salary (before PF and other statutory deductions) without any income tax deduction.
What should I do if TDS deducted is more than my actual tax liability?
File your ITR and claim a refund. The ITR calculation: actual tax payable minus total TDS credit = net refund. The excess TDS is credited to your pre-validated bank account (linked to PAN on the income tax portal). Refunds typically arrive 30–60 days after ITR processing. Track at the income tax portal under 'Refund Status.' Refunds are not automatic — you must file the ITR to claim them. Filing early (before July 31, the ITR deadline) results in faster refund processing.
How is TDS calculated when I have a bonus mid-year?
When a bonus is paid, the employer recalculates annual tax: (old monthly salary × 12) + bonus = revised annual income. New annual tax is computed on this revised income. TDS already deducted in prior months is subtracted. The balance is divided across the remaining months of the financial year. Example: ₹1.5L/month salary (₹18L annual, monthly TDS ₹12,567). ₹3L bonus in December. New annual income = ₹21L. New annual tax = ₹2,14,500. TDS already deducted (8 months × ₹12,567 = ₹1,00,536). Remaining: ₹1,13,964 divided over 4 months = ₹28,491/month. The December–March TDS roughly doubles. This is expected and correct.