BooksIQEvery employer must deduct TDS on salary at the employee's applicable slab rate, computed on the estimated annual income and spread across each month of the financial year.
Key points
- The employer is the deductor, and any salary payment to an employee triggers the obligation.
- The withholding rate is the average rate of income-tax computed on the employee's estimated total income for the financial year, applied monthly.
- There is no minimum threshold — TDS applies even on the first rupee if the employee's projected annual income exceeds the basic exemption limit.
- While computing the monthly withholding, the employer must factor in any Chapter VI-A deductions (§80C, §80D, §80G and so on) the employee declares via Form 12BB, along with HRA, the standard deduction, and any loss from house property (subject to applicable limits).
Reference: §192, ITA 1961 — under ITA 2025 (FY 26-27 onwards), this is §392
This page is general information for Indian businesses, current as of the
financial year shown above — not legal or tax advice. Tax law changes,
and how a provision applies depends on your specific facts. Confirm the
current position with a qualified professional before you act.
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