Use this guide to understand TDS on monthly salary with examples, tax regime comparison, calculators, downloadable sheets, and expert tips. Simplify tax planning and maximize your in-hand salary today.
Tax Deducted at Source (TDS) on monthly salary is more than just a statutory deduction—it's an essential part of your financial planning. If you're a salaried employee in India, understanding how your TDS is calculated each month can help you better manage your in-hand salary, plan deductions efficiently, and avoid year-end surprises during income tax filing.
Whether you're a central government employee tracking allowances or a private sector worker trying to estimate take-home pay under the new tax regime, this guide breaks down everything you need to know. Plus, we include an interactive TDS calculator to simplify the process for you.
What is TDS on Salary and Why Is It Deducted?
TDS on salary is governed by Section 192 of the Income Tax Act, 1961. It mandates that employers must deduct tax at source from an employee's salary before crediting it to their bank account. This deduction is based on the estimated annual taxable income, broken down into monthly deductions.
Key Considerations in TDS Calculation:
| Component | Details |
|---|---|
| Taxable Salary | Basic Pay + Allowances + Bonuses – Exemptions – Deductions |
| Applicable Tax Slab | Based on chosen regime (Old or New) |
| Deductions Allowed | Under Sections like 80C, 80D, HRA, Standard Deduction |
| Surcharge & Cess | Health & Education cess @ 4% added to total tax |
| PAN Availability | TDS @ 20% flat if PAN not submitted to employer |
The deduction is calculated at the start of the financial year by estimating your total annual income and distributing the tax payable across 12 months (or the remaining months in case of mid-year joining).
Step-by-Step: How Monthly Salary TDS Is Actually Calculated
Here’s a simplified walkthrough of how monthly TDS is determined:
- Calculate your gross annual income – this includes your fixed pay, allowances (like DA, HRA), bonuses, and other perks.
- Subtract eligible exemptions – such as standard deduction (₹50,000), HRA exemption, and allowances for travel or children’s education.
- Apply deductions under Chapter VI-A – including investments under Section 80C (up to ₹1.5 lakh), 80D for medical insurance, and NPS contributions under 80CCD(1B).
- Choose your tax regime – New regime offers lower rates but no deductions, whereas Old regime allows all deductions.
- Calculate total tax liability using current income tax slabs.
- Divide by number of months for monthly TDS deduction.
This tax calculation also includes a 4% health and education cess, and in some cases, a surcharge if the taxable income exceeds ₹50 lakh.
Monthly TDS Calculation Example (Old Tax Regime)
To make it more relatable, let’s break it down with a practical example.
Assumptions:
- Annual Salary: ₹10,00,000
- Deductions: ₹1,50,000 under Section 80C
- Standard Deduction: ₹50,000
- Net Taxable Income: ₹8,00,000
- Tax Regime: Old
- Financial Year: 2024–25
TDS Breakdown Table
| Particulars | Amount (₹) |
|---|---|
| Gross Salary | 10,00,000 |
| Standard Deduction (Section 16) | 50,000 |
| 80C Deduction (LIC, PF, etc.) | 1,50,000 |
| Net Taxable Income | 8,00,000 |
| Total Tax Liability | 72,500 |
| Health & Education Cess @4% | 2,900 |
| Total Payable Tax | 75,400 |
| Monthly TDS (approx.) | 6,283 |
You can also use government-aligned calculators like Income Tax Department’s TDS Tool or financial platforms such as ET Money for quick estimates.
Choosing Between Old and New Tax Regimes
One of the key decisions that affect your monthly TDS is the choice between Old vs New tax regime. Under the new regime, introduced in Budget 2020, taxpayers can opt for reduced slab rates but have to forgo most deductions.
Old Regime: Ideal for those with higher deductions like home loan interest, PF, and insurance premiums.
New Regime: Better for those with minimal tax-saving investments.
Choosing the wrong regime can lead to higher monthly TDS and reduced take-home pay. Fortunately, you can declare your choice at the beginning of the financial year and revise it next year if needed.
How to Use a Monthly Salary TDS Calculator (Step-by-Step Guide)
Using a monthly salary TDS calculator helps you avoid guesswork and get accurate deductions within seconds. Whether you’re employed in the government, private, or public sector, these tools are designed to simplify tax estimation and salary planning.
Here’s a simplified guide to understand how to use a TDS calculator for monthly salary:
Step 1: Enter Gross Monthly or Annual Salary
Input your fixed pay including allowances like Dearness Allowance (DA), HRA, transport, and other benefits.
Step 2: Specify Your Tax Regime
Choose either the Old or New tax regime based on your investment habits. The old regime allows exemptions like 80C, HRA, and others, while the new regime offers lower slab rates without deductions.
Step 3: Fill in Deductions (if under Old Regime)
Enter deductions under applicable sections such as:
- Section 80C (PF, PPF, LIC, ELSS, etc.)
- Section 80D (Health insurance premiums)
- Section 24 (Interest on home loan)
- Standard deduction (automatically applicable)
Step 4: Declare HRA, LTA, or Other Exemptions
Input exemptions like House Rent Allowance, Leave Travel Allowance, or children's education allowance if applicable.
Step 5: PAN Availability
Declare whether you’ve submitted your PAN to your employer. Without PAN, TDS is charged at a flat 20% plus cess.
Step 6: Calculate
Once all fields are filled, the calculator gives you:
- Estimated annual tax
- Monthly TDS deduction
- Net in-hand salary
- Tax regime-wise comparison (in some calculators)
Many platforms like Groww and ClearTax offer intuitive online calculators, accessible anytime for free.
Impact of PAN Not Being Provided on TDS
If you haven’t submitted your Permanent Account Number (PAN) to your employer or deductor, you will face a higher TDS rate under Section 206AA of the Income Tax Act.
Why It Matters:
- PAN ensures that your tax credit reflects in your Form 26AS.
- Without PAN, the TDS is deducted at 20% flat, regardless of your actual income slab.
- You lose out on slab-wise calculation, resulting in excessive deductions.
- You may still claim a refund while filing your Income Tax Return (ITR), but your liquidity suffers throughout the year.
TDS Rate Comparison with and without PAN
| Criteria | With PAN | Without PAN |
|---|---|---|
| Salary: ₹50,000/month | Slab-wise (as low as 5%) | Flat 20% |
| Approx. Monthly TDS | ₹1,200 – ₹2,500 | ₹10,000 |
| Tax Credit in Form 26AS | Yes | May be delayed |
| Refund Eligible via ITR | Yes | Yes (but delayed) |
This is why it’s always advisable to submit your PAN when you join a new employer or before the financial year begins. Additionally, ensure that your employer has correctly mentioned your PAN in quarterly TDS returns to avoid any mismatch during tax filing.
Monthly Salary TDS vs Annual TDS: What’s the Difference?
It’s common for employees to get confused between annual TDS calculation and monthly salary TDS deduction. Here's the key difference:
- Annual TDS is calculated at the start of the financial year, based on projected annual income.
- Monthly TDS is the portion of that annual tax divided equally (or proportionately) across the remaining months in the year.
If your salary changes mid-year—due to bonus, promotion, or HRA revision—your monthly TDS will be revised accordingly by your employer.
Example Scenario:
| Month | Salary (₹) | Cumulative Income | Revised TDS (₹) |
|---|---|---|---|
| April | 80,000 | 80,000 | 4,000 |
| October (after increment) | 90,000 | 6,60,000 (projected) | 5,500 |
Thus, monthly TDS is a dynamic value that evolves with changes in income or submitted declarations. Staying informed ensures that you neither overpay nor underpay your taxes.
Monthly Salary TDS Calculator
Now that you've understood how monthly TDS works, it's time to calculate your own deduction in seconds. The embedded calculator below allows you to estimate your monthly TDS based on your income, deductions, and tax regime. It's mobile-friendly, simple to use, and works for both old and new tax structures.
To get started:
- Enter your monthly or annual salary
- Choose Old or New Tax Regime
- Add eligible deductions under Section 80C, 80D, and others (if applicable)
- Submit your PAN status
- Click Calculate to get instant results
The output includes:
- Estimated monthly TDS
- Annual tax payable
- Net in-hand salary after TDS
- Tax breakdown with and without deductions
If you're planning year-end investments or declaring salary revisions, revisit this calculator monthly for accurate results.
For further analysis, the Tax Information Network provides an overview of how deductors file TDS returns and how employees can track their Form 26AS through the TRACES portal.
Components That Affect Your Monthly Salary TDS
Understanding what goes into your salary is essential to estimate your TDS accurately. Many salaried employees overlook how various components—like allowances, reimbursements, and deductions—impact their tax liability.
Major Components Influencing TDS:
| Salary Element | Impact on TDS |
|---|---|
| Basic Pay | Forms the core of taxable income |
| Dearness Allowance (DA) | Fully taxable; often revised for govt employees |
| House Rent Allowance (HRA) | Partially exempt under certain conditions |
| Standard Deduction | ₹50,000 flat deduction for all salaried employees |
| Investments under 80C | Up to ₹1.5 lakh exempt |
| Health Insurance (80D) | Deduction up to ₹25,000 (₹50,000 for senior citizens) |
| NPS Contribution (80CCD(1B)) | Additional deduction up to ₹50,000 |
If you're a central or state government employee, your DA gets revised twice a year, which can change your taxable salary. When DA increases, your gross income rises, potentially increasing your monthly TDS if you don't revise your investment declarations.
To better manage these fluctuations, keep track of the Dearness Allowance updates, especially under the recommendations of the 7th Pay Commission, which often impacts lakhs of public sector employees. You can refer to recent updates on PIB for accurate DA hike announcements.
TDS for Mid-Year Joinees and Job Switches
If you've switched jobs or joined mid-financial year, your monthly TDS calculation follows a slightly different approach. Employers are expected to calculate TDS only on the salary paid during your period of employment. However, it’s your responsibility to declare your previous income from earlier employers to ensure correct deductions.
Here’s how it works:
- If Previous Salary Declared: New employer includes that income in annual estimation, calculates combined tax liability, and deducts proportionate monthly TDS.
- If Not Declared: New employer deducts tax only on their portion; you’ll need to pay self-assessment tax at year-end if underpaid.
This situation often leads to under-deduction, resulting in tax dues at the time of ITR filing. The Income Tax Department allows you to use Form 12B to declare your previous income when changing jobs within the same financial year.
For official guidelines, you may refer to the Income Tax India portal which outlines employer responsibilities and employee declarations under Form 12B.
Understanding Form 16 and Its Link to Monthly TDS
Form 16 is a crucial document issued annually by employers that certifies the TDS deducted on your salary and deposited with the government. It’s not just a compliance form—it’s a powerful tool to cross-verify whether your monthly TDS deductions were calculated correctly across the year.
Employers must issue Form 16 by 15th June following the end of the financial year. It comes in two parts:
- Part A includes employer details, PAN/TAN, employee PAN, and the summary of TDS deducted and deposited.
- Part B gives the detailed breakup of your gross salary, exemptions claimed, deductions under Chapter VI-A, and the final tax liability.
How Form 16 Helps You:
| Purpose | Benefit |
|---|---|
| Verify monthly TDS | Confirms whether correct amount was deducted |
| Track exemptions and deductions | Validates your 80C, 80D, HRA, and other claims |
| Match with Form 26AS | Ensures tax credits are reflected correctly with PAN linkage |
| Use for ITR filing | Pre-fills your income and tax details |
| Support refund claims | Helps in claiming refund if excess TDS was deducted |
If there is a discrepancy between your Form 16 and the TDS shown in Form 26AS, you must follow up with your employer or deductor. Accurate TDS data avoids notices from the Income Tax Department or delayed refunds.
To view your consolidated TDS entries and Form 26AS, log in to your account on the TRACES portal using your PAN credentials. Cross-checking this with Form 16 ensures you are in sync with government records.
Old vs New Tax Regime: Which Impacts Your Monthly TDS More?
One of the most important decisions every salaried employee must make at the start of the financial year is whether to opt for the Old Tax Regime or the New Tax Regime. This choice directly affects your monthly TDS deductions.
Quick Comparison Table
| Criteria | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹50,000 |
| 80C/80D/Other Deductions | Allowed | Not Allowed |
| Slab Rates | Higher | Lower |
| Best for | High-investment employees | Low or no deductions |
| Monthly TDS Impact | Lower with proper investments | Higher if no deductions in old regime |
The New Regime introduced under Section 115BAC offers simplified slab rates but disallows most deductions except NPS under 80CCD(2), EPF (employer share), and standard deduction (reintroduced in 2023-24). For those unable to utilise deductions effectively, the New Regime may result in lower monthly TDS, even with a higher gross income.
Use this regime selection wisely each year. Most payroll systems allow declaration in April, but if you miss it, the default regime may apply. You can still make your final choice when filing your ITR under Section 139(1).
To calculate impact using updated slab rates, you can also try Income Tax Department’s tax regime comparison resources, which outline current slabs and exemptions for both regimes.
Common Mistakes That Lead to Incorrect Monthly TDS
Even when employers use automated payroll systems, errors in monthly TDS calculation still happen. These usually stem from incorrect declarations, missed updates, or lack of communication between employee and HR/payroll.
Mistake Checklist:
- Not declaring previous employer income (especially after job switch)
- Forgetting to submit investment proofs on time
- Selecting wrong tax regime or failing to opt in/out explicitly
- Not updating HRA eligibility after change of residence
- Missing PAN submission or entering incorrect PAN
- Not informing employer about deductions like NPS Tier I/II or education loan interest
Correcting these mistakes late in the year may result in higher TDS in later months or under-deduction followed by self-assessment tax payment at year-end.
To reduce such errors, many companies have started integrating employee portals with payroll systems where declaration and proof uploads can be done in real time. Some leading platforms like Keka or Zoho Payroll offer employee-facing dashboards for TDS tracking and proof submission.
Questions About Monthly Salary TDS
Understanding the nuances of TDS on monthly salary often leads to several questions, especially when salary structure or tax laws change. Here are some of the most common and practical queries employees face, along with clear answers to help you navigate them confidently.
1. Can I change my tax regime after the financial year begins?
For salaried individuals, the tax regime selection made at the beginning of the year is used by the employer to deduct monthly TDS. However, you can change the regime while filing your Income Tax Return under Section 139(1), regardless of what you declared to your employer.
This means your TDS might have been calculated under one regime, but your final tax calculation (and refund, if applicable) can be based on another. Always plan your investment declarations accordingly.
2. What happens if I miss the investment proof submission deadline?
If you fail to submit proofs (such as LIC, PPF, tuition fees, etc.) by your employer’s deadline, they will reverse the deductions claimed earlier and re-calculate your taxable income. This can result in a sudden increase in monthly TDS during the last few months of the financial year.
You can still claim those deductions directly while filing your ITR, but by then, the excess tax may already have been deducted.
3. Is TDS applicable if my annual income is below the taxable limit?
No, if your estimated annual income after all deductions and exemptions is below the basic exemption limit (₹2.5 lakh for most individuals), then no TDS is required. You must, however, submit Form 12B or Form 10BA (for HRA) and declare relevant proofs.
For senior citizens, the exemption limit is higher—₹3 lakh for those aged 60–79 and ₹5 lakh for those 80 and above. For up-to-date limits, visit Income Tax India’s official notification archive.
4. Does bonus affect monthly TDS?
Yes. Any bonus, performance incentive, or arrear payment is considered part of your gross salary. When such a component is credited, your employer may revise your annual income projection and accordingly adjust the TDS for the remaining months.
Often, after a mid-year bonus, employees experience a spike in their monthly TDS unless additional deductions are declared.
Best Practices to Manage Monthly TDS Effectively
TDS deductions don't need to feel unpredictable or stressful. By being proactive, you can ensure smoother salary credits, better cash flow, and even avoid paying excess taxes. Here are some tips every employee should follow:
Maintain an Updated Investment Plan
At the beginning of each financial year, list out your planned deductions under:
- 80C: PPF, ELSS, LIC, Home Loan Principal
- 80D: Medical insurance premiums
- 80CCD(1B): NPS contributions
- Section 24: Home loan interest
Submit a declaration to your employer with a planned proof submission timeline.
Review Monthly Payslips
Always verify the monthly TDS amount shown in your payslip. If you notice any inconsistency, raise a query with your payroll or HR team promptly. For companies using systems like GreytHR, payslips can be accessed easily via self-service portals.
Track Form 26AS Regularly
It’s wise to review your Form 26AS at least twice a year. This report contains all TDS entries reported against your PAN. You can download it from the TRACES portal or through your net banking account linked to PAN.
Notify Changes Promptly
If you’ve changed address, rental agreements, or made unplanned investments, inform your employer immediately. TDS adjustments can be made mid-year to reflect these updates.
In-Hand Salary Optimization Using TDS Awareness
One of the lesser-understood areas of salary planning is how monthly TDS affects your actual in-hand salary. Most employees focus only on gross figures, ignoring the impact of tax on their net take-home.
By actively managing your deductions and choosing the appropriate regime, you can:
- Reduce monthly TDS
- Boost cash flow
- Avoid refund delays or tax notices
- Make informed investment decisions
To estimate your monthly in-hand amount post-TDS, you can also use hybrid calculators offered by financial platforms like Scripbox that combine TDS, income tax, and net salary insights in one view.
Final Thoughts: Mastering Your Monthly TDS with Confidence
Understanding how monthly salary TDS works empowers you to take control of your income, avoid unexpected tax burdens, and ensure compliance without losing out on liquidity. Rather than waiting for tax season surprises, a proactive approach—backed by the right tools and awareness—can help you navigate your financial year far more efficiently.
Let’s recap the key takeaways from this guide:
| Action Item | Why It Matters |
|---|---|
| Choose the right tax regime early | Impacts monthly deductions and take-home salary |
| Declare exemptions and deductions on time | Minimises excessive TDS and ensures correct tax projection |
| Use a monthly TDS calculator regularly | Helps simulate salary changes, bonuses, and DA revisions |
| Submit PAN and verify Form 26AS | Prevents flat 20% deduction and ensures TDS credit is recorded |
| Cross-check with Form 16 annually | Aligns employer's deduction with actual filing requirements |
When all these elements work in sync, your monthly salary structure becomes transparent, optimised, and tax-efficient. Even for employees drawing high salaries under revised pay commissions or those expecting bonuses, informed TDS management leads to better financial planning.
For deeper government-issued insights, you may explore NSDL’s TDS guide which covers procedural aspects of TDS filing, refund claims, and employee obligations.
Downloadable Tools & Bonus Resources
To make your tax planning even easier, we suggest bookmarking and downloading the following tools:
- Monthly TDS Calculator Sheet (Excel) – Offered by the Income Tax Department under ITR utilities section. You can input monthly gross income, applicable deductions, and it will auto-calculate the TDS.
- Tax Regime Comparison PDF – This helps you compare new and old tax regimes in terms of slabs, exemptions, and TDS impact. You may generate or download one using built-in calculators on trusted platforms like BankBazaar.
- Annual Tax Planner for Salaried Employees – Many payroll tools allow you to export annual TDS projection reports. These help you forecast changes in in-hand salary in case of DA hikes or mid-year bonuses.
FAQ
What is TDS on monthly salary?
TDS on monthly salary is the tax deducted by your employer based on your projected annual income. It ensures your taxes are paid in advance.
How can I calculate my monthly TDS?
You can calculate it using online TDS calculators by entering your salary details, deductions, tax regime, and PAN status.
Can I avoid TDS if my income is below ₹2.5 lakh?
Yes. If your income after deductions is below ₹2.5 lakh, no TDS is deducted. You need to declare this to your employer with Form 12B.
Does bonus or DA affect monthly TDS?
Yes, any increase in salary like bonus or DA hike raises your taxable income, which may increase your TDS from the next month onward.
Can I switch between old and new tax regime mid-year?
Employers allow selection only once a year, but you can change your regime when filing your Income Tax Return at year-end.
What happens if I don’t submit PAN to my employer?
If you don’t provide PAN, TDS will be deducted at a flat rate of 20% instead of slab-based rates, reducing your take-home pay significantly.
Is TDS refundable if deducted in excess?
Yes. If excess TDS is deducted, you can claim a refund when filing your ITR. Ensure Form 26AS reflects the correct amount deducted.
Does TDS deduction happen every month?
Yes, employers divide your annual tax liability over 12 months and deduct TDS from your salary each month based on that projection.
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