Income tax · TDS and TCS
How does my employer deduct TDS on salary, and how do I declare my investments?
Short answer
Your employer estimates your income for the whole year under the regime you choose, works out the tax, and deducts it evenly from each month's salary. To get old-regime deductions and HRA reflected, declare them at the start of the year and give proof, usually by January, in Form 124 (formerly Form 12BB). You can also tell your employer about other income, TDS elsewhere and a house-property loss. Whatever is missed can still be claimed in your return.
How the employer works it out
- Estimate your taxable salary for the year, including perquisites, after the standard deduction and the exemptions and deductions you have declared.
- Apply the regime you have chosen. If you do not tell the employer, the new regime applies by default.
- Spread the tax over the remaining months and deduct it from each salary. Adjustments are made later in the year as actual proofs come in.
TDS is deducted only if your estimated income exceeds the taxable limit, so in the new regime, salary up to ₹12.75 lakh usually has no TDS.
What to give your employer
| When | What |
|---|---|
| Start of the year | Your choice of regime, and a declaration of planned investments, rent and loans |
| Usually by January | Proof in Form 124: rent receipts and the landlord's PAN (rent above ₹1 lakh a year), investment receipts, insurance premiums, home-loan interest certificate, LTA bills |
| Any time | Salary and TDS from a previous employer in the same year |
| Any time | Other income (such as interest) and TDS or TCS suffered on it, and any loss from house property, so the employer can take them into account |
Giving details of other income and TCS (for example TCS on a foreign remittance) avoids a large tax bill, or a large refund, at the year end.
Two employers in a year
Give your new employer the salary and TDS of the earlier one. Otherwise both will allow the full standard deduction and the lower slabs, and you will owe tax with interest when you file.
After the year
Your employer issues Form 130 (formerly Form 16) by 15 June. Check it against your payslips and against Form 26AS or the AIS. Deductions your employer did not allow can still be claimed in the return, if you choose the old regime there. See Form 16, 26AS and AIS mismatches.
Legal basis
- Section 392, Income-tax Act, 2025 (salary paid from 1 April 2026), formerly section 192, Income-tax Act, 1961
- Form 124 (formerly Form 12BB) and Form 130 (formerly Form 16), Income-tax Rules, 2026
Official sources
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