Definition
TDS on Salary
TDS on salary is the income tax your employer deducts each month based on your estimated annual income and declared deductions, depositing it against your PAN.
Under TDS on salary, the employer estimates your annual tax based on your salary, chosen tax regime and declared investments (via Form 12BB), then deducts a proportionate amount of tax from each month's pay and deposits it with the government against your PAN.
Accurate declarations help avoid large shortfalls or excess deductions; the year-end true-up adjusts for actual proofs submitted. The deducted tax is reflected in Form 16 and Form 26AS/AIS.
If TDS exceeds your final liability, you claim a refund at filing; if it falls short, you pay the balance. Choosing the right regime and declaring deductions on time keeps monthly take-home aligned with your real tax.
Related terms
- Old vs New Tax RegimeIndia offers two personal income-tax regimes: the old one with various deductions and exemptions, and the new one with lower slab rates but most exemptions removed.
- Form 12BBForm 12BB is the declaration an employee submits to their employer detailing investments and expenses claimed for tax, so the employer can deduct the correct TDS from salary.
- Form 16 (Parts A & B)Form 16 is the TDS certificate your employer issues for salary, with Part A showing tax deducted and deposited, and Part B detailing the salary breakup and deductions.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.