Tax Deducted at Source (TDS) is a mechanism where tax is collected at the point of certain payments and deposited with the government on the recipient's behalf. Section 192 of the Income-tax Act governs TDS on salary.
This guide sets out the TDS rate under Section 192, the threshold that triggers deduction, who must deduct, and the deposit and return-filing compliance that follows.
What is Section 192?
TDS on salary is deducted by every employer from the monthly salary paid to an employee, based on the employee's estimated annual income and chosen tax regime.
Rate, threshold and who deducts
| Nature of payment | Salary |
|---|---|
| TDS rate | At the applicable income-tax slab rates on estimated annual salary |
| Threshold | When estimated salary exceeds the basic exemption limit |
| Who deducts (deductor) | Employer |
| Whose income (deductee) | Employee |
| Time of deduction | At the time of payment of salary |
Key points
- The employee can declare the chosen regime and eligible deductions to the employer to arrive at the correct TDS.
- TDS deducted is reflected in Form 16 and Form 26AS.
Compliance for the deductor
- Deduct at the right time. Deduct TDS on salary at the time of payment of salary.
- Deposit to the government. Pay the deducted tax by the 7th of the following month (special dates apply for March and for Form 26QB).
- File the TDS return. Report the deduction in the quarterly TDS return (Form 24Q/26Q/27Q as applicable) on the TRACES/e-filing system.
- Issue the TDS certificate. Give the deductee Form 16/16A so they can claim credit in their return.
How the deductee claims credit
TDS deducted under Section 192 appears in the deductee's Form 26AS and Annual Information Statement (AIS). It is adjusted against the final tax liability when the deductee files their income tax return, and any excess is refunded.
Frequently asked questions
Can I ask my employer to consider my deductions?
Yes — submit investment proofs and a regime declaration so the employer deducts the right amount.
What happens if TDS is not deducted?
The payer can face disallowance of the expense, interest at 1%–1.5% per month, and penalties. It is important to deduct and deposit on time.
By when must TDS be deposited?
Generally by the 7th of the month following deduction (30 April for amounts deducted in March), with separate rules for property-related challans.