TDS on salary in India under new income tax law is one of the most important monthly compliance tasks for employers and payroll teams. This guide explains how TDS on salary in India under new income tax law works, what employers must do every month, and how employees can check if the correct tax has been deducted.
Who is responsible for TDS on salary in India under new income tax law
Under the new Income tax Act, every employer paying salary that is taxable in India must deduct TDS on salary in India under new income tax law at the time of payment. This obligation applies to:
- Companies and LLPs.
- Partnership firms and proprietorships.
- NGOs and trusts.
- Branch offices and liaison offices that have employees in India.
The employer is treated as the person responsible for deducting TDS and depositing it with the government.
Related: New income tax act for small businesses and startups (link: /blog/new-income-tax-act-for-small-businesses-and-startups)
How to compute TDS on salary in India under new income tax law
The basic steps to compute TDS on salary in India under new income tax law are:
1. Estimate total salary income for the financial year for each employee.
2. Collect declarations for investments and eligible deductions from the employee.
3. Consider perquisites, allowances, and any other taxable benefits.
4. Reduce eligible exemptions and deductions as per the new Income tax Act and Rules.
5. Compute estimated annual tax liability using the applicable tax slab rates.
6. Divide the total tax by the remaining months in the year to arrive at monthly TDS.
Employers should review declarations at mid year and at year end so that TDS on salary in India under new income tax law is broadly aligned with final tax liability.
Payroll process checklist for TDS on salary in India under new income tax law
A practical payroll checklist for TDS on salary in India under new income tax law should include:
1. Employee onboarding:
1. Collect PAN, Aadhaar and basic KYC.
2. Obtain declaration of previous employer salary and TDS.
3. Capture tax regime selection if options are available under the new Act.
2. Monthly payroll run:
1. Calculate gross salary and perquisites.
2. Apply exemptions for eligible allowances as per rules.
3. Calculate TDS on salary in India under new income tax law using year to date income.
3. Post payroll compliance:
1. Deposit TDS within the prescribed due date.
2. File quarterly TDS returns in the correct form.
3. Issue salary TDS certificates to employees.
Related: Payroll compliance checklist under new income tax regime (link: /blog/payroll-compliance-checklist-under-new-income-tax-regime)
Due dates and returns for TDS on salary in India under new income tax law
Compliance for TDS on salary in India under new income tax law includes both payment and reporting:
- TDS payment: Monthly due date is generally the 7th of the following month, with separate timelines for March deductions if notified.
- Quarterly TDS return: Employers must file the prescribed TDS statement (for example Form 24Q or its equivalent under the new Income tax Rules) by the notified due dates.
- TDS certificate: Salary TDS certificates must be issued to employees in the prescribed format, usually after each quarter or at year end.
Late payment of TDS on salary in India under new income tax law attracts interest and penalties. Incorrect or delayed TDS returns can also lead to late fee and possible penalty.
Employee view: how to verify TDS on salary in India under new income tax law
Employees should not assume that all TDS is always correct. To safeguard yourself, verify TDS on salary in India under new income tax law as follows:
1. Check monthly payslips to see the exact TDS amount and tax regime applied.
2. Download Form 26AS or the new Annual Information Statement (AIS) from the Income Tax portal.
3. Match the TDS figures reported by the employer with the amounts credited in the portal.
4. If there is any mismatch, raise it with the employer payroll team immediately.
If an employer fails to deposit TDS on salary in India under new income tax law, employees may face difficulty in claiming credit at the time of filing returns. Early detection helps in getting the issue corrected.
Common mistakes and risk areas for TDS on salary in India under new income tax law
Some recurring issues seen in practice with TDS on salary in India under new income tax law are:
- Ignoring previous employer income, leading to short deduction.
- Not adjusting for mid year changes in salary structure or bonus payouts.
- Misclassification of reimbursements versus perquisites.
- Applying old exemption rules instead of the new Act and Rules.
- Delay in changing employee regime option where permitted.
Employers should periodically review their payroll process and use official utilities or rule references from the Income Tax portal to ensure compliance.
External reference hints:
- Income Tax Department portal: https://www.incometax.gov.in
- TDS related utilities and rules are available under the Downloads or Tax Services sections.
Related: Step by step guide for TDS compliance under new income tax rules (link: /blog/step-by-step-tds-compliance-under-new-income-tax-rules)
