How TDS on salary is calculated

Income tax on salary (TDS under section 192) is deducted every month in payroll. This article explains the method, so employees understand the TDS on their payslip and admins can answer questions.

Before you start

• Your company needs the Tax & TDS module (it works together with Payroll).
• TDS is only correct when PAN, salary and any previous-employer income are on record.

How the monthly TDS is worked out

1. Projected annual salary = taxable salary already paid this financial year + this month + current monthly gross for the remaining months + salary from a previous employer this year.
2. Exemptions and deductions are taken off according to the employee's regime. Under the old regime this includes HRA, LTA, the standard deduction, professional tax and Chapter VI-A deductions such as 80C and 80D. Under the new regime most of these are not allowed, but the standard deduction is.
3. Tax is calculated on the slabs of the chosen regime, with the section 87A rebate and marginal relief, surcharge above ₹50 lakh (capped at 25% under the new regime) and 4% cess.
4. TDS this month = (annual tax − TDS already deducted this year − previous employer's TDS) ÷ months left including this one. It is never negative and is rounded to the rupee.

So if your declarations or salary change during the year, the remaining months' TDS adjusts automatically.

Which declarations count

• Draft declarations are not used. Only submitted declarations count.
• Until the proof window closes, TDS uses the declared amounts.
• After the proof window closes, TDS uses only verified amounts — declarations without accepted proof stop reducing tax.

Read your Income Tax worksheet (employees)

1. Go to My Finances ( open My Finances) and open My Pay → Income Tax.
2. Pick the financial year.
3. The note at the top tells you whether the calculation uses DECLARED or VERIFIED amounts, and which regime.
4. The cards show Net taxable income, Gross income tax, Total surcharge & cess, Net income tax payable, Tax paid till now and Remaining tax to be paid.
5. The sections below show the detail:
   • A · Gross earnings — month by month, marked as previous employer, actual, current month or projected.
   • B · Taxable income from all heads — salary, house property and other income, less exemptions and deductions.
   • P · Tax calculation — tax per slab.
   • Q · Surcharge & cess.
   • T · Net income tax payable and U · Cumulative.
   • V · Month-on-month TDS.
6. Click Print to keep a copy.

Next steps

• Choose the old or new tax regime
• Submit your investment declaration