TDS Filing on Salary – A Practical Guide for Employers

TDS on salary is one of the most common and closely monitored compliances under the Income Tax Act. If you are an employer—whether running a proprietorship, partnership, LLP, or company—deducting and depositing TDS on employee salaries correctly is not optional. This article explains salary TDS filing in a simple, practical manner, without legal jargon.

What is TDS on Salary?

TDS (Tax Deducted at Source) on salary is governed by Section 192 of the Income Tax Act, 1961. It means the employer deducts income tax from the employee’s salary at the time of payment and deposits it with the government on the employee’s behalf.

Unlike other TDS sections, there is no fixed percentage rate for salary TDS. The deduction depends on the employee’s estimated annual taxable income and applicable slab rates.

Who is Required to Deduct TDS on Salary?

Any employer is required to deduct TDS if:

• Salary paid to an employee exceeds the basic exemption limit under the Income Tax Act
• There exists an employer–employee relationship

This applies to:

• Proprietors
• Partnership firms
• LLPs
• Private & public limited companies
• Trusts and NGOs (if salaries are taxable)

How is TDS on Salary Calculated?

Salary TDS is calculated on an annual basis, not month-wise. The employer needs to estimate the employee’s yearly income and tax liability.

Step-by-step calculation:

1. Calculate gross annual salary (basic, HRA, allowances, bonus, etc.)
2. Reduce exemptions (HRA, LTA, etc., if applicable)
3. Reduce standard deduction (₹50,000)
4. Reduce eligible Chapter VI-A deductions (80C, 80D, etc.) based on employee declarations
5. Compute tax as per applicable slab (old or new regime)
6. Divide total tax by remaining months and deduct accordingly

The employer must adjust TDS during the year if salary or declarations change.

Investment Declarations & Proofs

At the beginning of the financial year, employees usually submit investment declarations. Based on this, provisional TDS is calculated.

Before the end of the year, employees must submit actual investment proofs. If proofs are not submitted, the employer is required to recompute tax without those deductions and recover shortfall TDS.

When Should Salary TDS be Deposited?

TDS deducted on salary must be deposited on or before the 7th of the following month.

Example:

• TDS deducted in April → Deposit by 7th May

For the month of March, TDS can be deposited up to 30th April.

Which TDS Return is Filed for Salary?

For salary payments, employers must file Form 24Q.

Key details in Form 24Q:

• Employer and employee PAN details
• Salary paid
• Tax deducted and deposited
• Challan details
• Tax regime opted by employee

Due Dates for Form 24Q

Filing on time is critical to avoid penalties and employee grievances.

Issuance of Form 16

Form 16 is the salary TDS certificate issued by the employer to the employee. It consists of:

• Part A – TDS details, challans, employer information
• Part B – Salary breakup and tax computation

Form 16 must be issued on or before 15th June following the end of the financial year.

Common Mistakes Employers Make

• Not considering previous employer income
• Incorrect PAN of employee
• Delay in TDS deposit
• Mismatch between challan and return data
• Not revising TDS after proof verification

These mistakes often result in notices, penalties, and dissatisfaction among employees.

Penalty for Non-Compliance

Non-compliance can lead to:

• Interest on late deduction or late deposit
• Late filing fee under Section 234E
• Penalty under Section 271H
• Disallowance of salary expense in some cases

Practical Tip for Employers

Salary TDS is not just a compliance—it directly affects your employees’ tax filings. Accurate deduction and timely filing build trust and avoid unnecessary tax notices for both employer and employees.

If payroll is small, TDS can be managed internally. However, once the number of employees increases or salary structures become complex, professional handling ensures peace of mind.

Need Help with Salary TDS Filing?

We assist employers with:

• Salary structuring and tax optimisation
• Monthly TDS calculation & deposit
• Quarterly Form 24Q filing
• Form 16 generation
• Handling income tax notices related to TDS