Section 192 – TDS on Salary: Calculation, Exemptions & Employer Obligations (FY 2025–26 Guide)

For salaried employees in India, Tax Deducted at Source (TDS) on salary is governed by Section 192 of the Income Tax Act. It is one of the most common yet most misunderstood TDS provisions.

Every employer paying salary is responsible for:

• Computing taxable salary

• Considering exemptions & deductions

• Deducting TDS accurately every month

• Issuing Form 16

This WonderTax guide explains Section 192 in detail, with examples, tax-saving insights, and compliance responsibilities for both employers and employees.

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What Is Section 192 of the Income Tax Act?

Section 192 mandates deduction of TDS on salary income at the time of payment.

Key Points:

• TDS is deducted only if salary is taxable

• Deduction is based on estimated annual income

• No fixed TDS rate — applied as per income tax slab

• Applicable only to employer–employee relationship

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Who Is Required to Deduct TDS Under Section 192?

There is no minimum turnover limit for deducting TDS on salary.

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When Is TDS Under Section 192 Deducted?

• At the time of salary payment

• Deducted monthly, spread across the year

• Adjustments allowed in later months if income changes

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How Is TDS on Salary Calculated? (Step-by-Step)

Step 1: Compute Gross Salary

Includes:

• Basic salary

• DA

• HRA

• Bonus

• Allowances

• Perquisites (car, ESOPs, rent-free accommodation)

Step 2: Reduce Exemptions

• HRA exemption

• LTA (if applicable)

• Standard deduction (₹50,000)

Step 3: Reduce Deductions

• Chapter VI-A deductions (80C, 80D, 80CCD, etc.)

Step 4: Apply Income Tax Slab

As per old or new tax regime chosen by employee

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Example: TDS Calculation Under Section 192

Employee Details (Old Tax Regime)

Tax Calculation

• Tax ≈ ₹97,500

• Add cess @4%

• Annual TDS ≈ ₹1,01,400

• Monthly TDS ≈ ₹8,450

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Old vs New Tax Regime Impact on TDS

👉 Employers must deduct TDS based on the regime chosen by the employee.

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Employer Obligations Under Section 192

Employers must:

✔ Collect investment declarations
✔ Compute tax correctly
✔ Deduct TDS every month
✔ Deposit TDS by 7th of next month
✔ File Form 24Q (Quarterly TDS Return)
✔ Issue Form 16 by 15 June

Failure can attract interest, penalty & notices.

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Form 16: Why It Is Important

Form 16 contains:

• Salary breakup

• TDS deducted

• PAN & TAN details

• Deductions considered

Employees must match Form 16 with AIS & Form 26AS before filing ITR.

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Common Mistakes in Section 192 TDS

• Ignoring perquisites (ESOPs, rent-free accommodation)

• Not updating tax regime choice

• Missing mid-year salary revisions

• Not adjusting excess / shortfall TDS

• Incorrect PAN leading to higher TDS

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What If Excess or Short TDS Is Deducted?

• Employer can adjust in later months

• Excess TDS → Refund while filing ITR

• Short TDS → Additional tax payable by employee

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FAQs (Schema-Ready)

Is TDS applicable if salary is below basic exemption limit?

No. TDS applies only if taxable income exceeds exemption limit.

Can employer change tax regime without consent?

No. Regime choice must be declared by employee.

Is bonus also subject to TDS?

Yes. Bonus is fully taxable and included in salary.

Can multiple employers deduct TDS?

Yes, but employee must disclose previous salary details.

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Internal Links (WonderTax)

• Income Tax Filing for Salaried Employees
  https://wondertax.in/income-tax-filing

• Old vs New Tax Regime Comparison
  https://wondertax.in/old-vs-new-tax-regime

• Income Tax Notice Handling
  https://wondertax.in/services/income-tax-notice-handling

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Conclusion

Section 192 is the foundation of salaried tax compliance in India. Accurate TDS calculation:

• Avoids year-end tax shocks

• Prevents notices

• Ensures smooth ITR filing

Both employers and employees must stay aligned to avoid compliance issues.

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CTA – WonderTax

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• Salary tax review

• TDS mismatch correction

• ITR filing & refunds

• Notice handling

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