TDS on salaries in India: Section 192, Form 24Q, and Form 16

What is TDS on salaries?

TDS on salaries is the income tax that an employer is required to deduct each month from an employee's estimated annual taxable salary and deposit with the Central Government. It is governed by Section 192 of the Income Tax Act, 1961. The employer acts as a deductor on behalf of the Government, while the employee receives credit for the tax already paid against their final annual tax liability.

Who must comply?

Every person responsible for paying salary chargeable to income tax must deduct TDS under Section 192 — this includes companies, LLPs, partnerships, proprietorships, government bodies, and trusts. There is no turnover or headcount threshold. The obligation to deduct arises whenever the estimated annual taxable salary of an employee exceeds the basic exemption limit applicable for the financial year, after taking into account the employee's choice between the old regime and the new regime under Section 115BAC.

• TAN requirement: The deductor must hold a valid Tax Deduction and Collection Account Number (TAN) under Section 203A.
• Regime declaration: Employers must collect a fresh regime declaration at the start of the financial year and recompute TDS if the employee switches.
• Multiple employers: If an employee changes jobs mid-year, the new employer can consider prior salary and TDS upon receiving Form 12B from the employee.

Statutory framework

The end-to-end framework for salary TDS draws on multiple sections of the Income Tax Act, 1961 and the Income Tax Rules, 1962:

• Section 192: Deduction of tax on salary at the average rate, computed on estimated annual salary.
• Section 192(2D): Obligation to collect proof of investments and other deductions from the employee before allowing them while computing TDS.
• Section 115BAC: The new tax regime, which is the default from FY 2023-24 onwards unless the employee opts out.
• Section 200 and Rule 30: Procedure and timelines for depositing TDS with the Government.
• Section 200(3) and Rule 31A: Filing of quarterly TDS statements (Form 24Q).
• Section 203 and Rule 31: Issue of TDS certificates to employees (Form 16).

Filing forms and deadlines

• Monthly TDS deposit: TDS deducted in a month must be deposited by the 7th of the following month, except for March when the due date is 30 April.
• Form 24Q (quarterly statement): Filed quarterly with TRACES / NSDL. Due dates are typically 31 July (Q1), 31 October (Q2), 31 January (Q3), and 31 May (Q4). Q4 includes Annexure II with the annual salary details of each employee.
• Form 16: Annual TDS certificate to be issued to each employee by 15 Juneof the assessment year. Part A is downloaded from TRACES and Part B is generated by the employer.
• Form 12BA: Statement of perquisites issued along with Form 16 where perquisites have been provided.
• Form 12B and Form 12BB: Form 12B is provided by an employee to a new employer; Form 12BB is the standardized declaration of claims for HRA, LTA, deductions, and home loan interest.

Penalties for non-compliance

• Interest on delayed deduction (Section 201(1A)): 1% per month from the date tax was deductible to the date it is actually deducted.
• Interest on delayed deposit (Section 201(1A)): 1.5% per month from the date of deduction to the date of deposit.
• Late filing fee (Section 234E): ₹200 per day until the TDS return is filed, capped at the TDS amount.
• Penalty (Section 271H): ₹10,000 to ₹1,00,000 for non-filing or incorrect filing of Form 24Q.
• Late Form 16 (Section 272A(2)(g)): ₹100 per day of default, capped at the TDS amount.
• Disallowance under Section 40(a)(ia): 30% of the salary expense can be disallowed while computing business income if TDS is not deducted or deposited within the prescribed time.

How Texlaculture automates this

• Regime-aware tax engine: Computes monthly TDS under both the old and new regimes, respecting the employee's declared choice and Section 115BAC defaults.
• Investment proof workflow: Employees upload Section 80C, 80D, HRA, and home loan proofs through self-service; finance approves and the engine recomputes TDS automatically.
• Challan generation: Pre-filled ITNS 281 challans by section and assessment year, ready for direct e-payment.
• Form 24Q ready files: Quarterly FVU-compatible files including Annexure I and Annexure II for Q4, with built-in validations against TRACES schema.
• Form 16 in bulk: Generates Part A from TRACES uploads and Part B from payroll data, with digital signing and password-protected e-mail delivery to employees.

Frequently asked questions

What is TDS on salary?

TDS on salary is the income tax that the employer deducts each month from an employee's estimated annual taxable salary under Section 192 of the Income Tax Act, 1961, deposits with the Government, and reports through quarterly Form 24Q returns and an annual Form 16.

How is monthly TDS computed?

The employer estimates the employee's annual taxable salary, applies the applicable slab rates under the chosen regime, allows verified deductions, and divides the resulting annual tax by the number of remaining months in the financial year. This produces an "average rate" of TDS as required by Section 192.

When is Form 24Q due?

Form 24Q is filed quarterly: Q1 by 31 July, Q2 by 31 October, Q3 by 31 January, and Q4 by 31 May following the close of the financial year. Q4 additionally carries Annexure II, the annual salary details of each employee.

When must Form 16 be issued?

Form 16 must be issued to every employee from whose salary tax has been deducted by 15 June of the assessment year following the financial year of deduction. Part A is downloaded from TRACES after Q4 filing, and Part B is generated from payroll.

What if an employee did not have any tax deducted?

If an employee's estimated annual income does not exceed the basic exemption limit after deductions, no TDS is required and Form 16 is not mandatory for that employee. However, issuing a Form 16 anyway is good practice for the employee's records.

What is the new tax regime under Section 115BAC?

Section 115BAC provides for concessional slab rates without most exemptions and deductions. From FY 2023-24 it is the default regime, and employees must explicitly opt for the old regime each year through a declaration to the employer.

What if an employee joins mid-year?

The employee should furnish Form 12B with prior employer's salary and TDS details. The new employer can then take the previous income and TDS into account while computing the balance TDS for the year under Section 192(2).