TDS on Salary Calculator: How to Calculate TDS on Salary in India

TDS Calculation Example (With Salary Breakup & Deduction)

To understand how TDS on salary is calculated, let's take a practical case study of an individual earning ₹12,00,000 per annum and compare the TDS under the Old vs. New Tax Regime.

🔹 Case Study: TDS Calculation for ₹12 Lakh Annual Salary

📌 Assumptions:

• Gross Annual Salary: ₹12,00,000
• Basic Salary: ₹6,00,000 (50% of Gross Salary)
• House Rent Allowance (HRA): ₹2,40,000
• Special Allowance: ₹2,00,000
• Provident Fund (PF) Contribution: ₹72,000 (12% of Basic)
• Professional Tax: ₹2,400 (₹200/month)
• Eligible Deductions: Under 80C, 80D, and HRA exemption (only in Old Regime)

🔹 Step-by-Step TDS Calculation Under the Old Tax Regime

📌 1. Calculate Total Taxable Income (After Deductions)

📌 2. Compute Tax Liability Using Old Tax Slabs (FY 2025-26)

📌 3. Monthly TDS Deduction Under Old Regime
Total Tax Payable: ₹93,620
📌 Monthly TDS Deduction: ₹7,802 (₹93,620 ÷ 12)

🔹 Step-by-Step TDS Calculation Under the New Tax Regime

📌 1. Calculate Taxable Income (No Deductions Allowed)

📌 2. Compute Tax Liability Using New Tax Slabs (FY 2025-26)

📌 3. Monthly TDS Deduction Under New Regime
Total Tax Payable: ₹57,200
📌 Monthly TDS Deduction: ₹4,767 (₹57,200 ÷ 12)

🔹 Comparison of TDS Under Old vs New Tax Regime

📌 Key Takeaways:
✔ New Tax Regime results in lower TDS deductions (₹4,767 vs. ₹7,802 per month).
✔ Old Regime is beneficial if you claim deductions like 80C, HRA, and 80D.
✔ If you don't claim deductions, the New Regime saves ₹36,420 annually.

💡 How Deductions Like HRA, 80C, and 80D Affect TDS?

📌 Deductions significantly lower TDS in the Old Regime, making it the better choice for salaried individuals who maximize tax-saving investments.

💡 Final Thoughts: Plan Your TDS Smartly!

• If you claim multiple deductions, Old Regime is better as it reduces taxable income and lowers TDS.
• If you don’t invest in tax-saving instruments, New Regime results in lower monthly TDS deductions.
• Use a TDS on Salary Calculator like HR Calcy’s TDS Calculator to get accurate monthly TDS estimates.

TDS on Salary Calculator: How to Use It?

Calculating TDS on salary manually can be complex, especially with varying tax slabs, deductions, and exemptions. To simplify this process, using an online TDS on Salary Calculator is the best approach.

The HR Calcy TDS Calculator provides an instant and accurate estimate of your monthly and annual TDS deductions based on your salary structure and applicable deductions.

🔹 Step-by-Step Guide: How to Use the TDS on Salary Calculator?

Using an online TDS on Salary Calculator like the one on HR Calcy is simple. Just follow these steps:

📌 Step 1: Visit the TDS Calculator Page

Go to the HR Calcy TDS Calculator.

📌 Step 2: Enter Your Salary Details

• Gross Annual Salary – Total earnings before deductions.
• Basic Salary – Fixed component of salary.
• House Rent Allowance (HRA) – If applicable.
• Other Allowances – Such as special allowance, conveyance, LTA, etc.

📌 Step 3: Input Deduction Details (Only for Old Regime)

• Standard Deduction (₹50,000) – Auto-applied.
• Section 80C Deductions (PF, PPF, ELSS, LIC, etc.).
• Section 80D (Health Insurance Premiums).
• HRA Exemption (if applicable).

📌 Step 4: Choose Tax Regime

Select whether you want to calculate TDS under:
✔ Old Tax Regime (with deductions)
✔ New Tax Regime (lower tax rates, no deductions)

📌 Step 5: Click on 'Calculate TDS'

The calculator will instantly show:
✔ Annual TDS Payable
✔ Monthly TDS Deduction
✔ Tax Savings in Old vs. New Regime

📌 Step 6: Adjust and Compare

Modify values to compare how different salary structures and tax regimes impact TDS deductions.

🔹 Benefits of Using a TDS on Salary Calculator vs Manual Calculation

Key Takeaway: Using an online TDS calculator like HR Calcy ensures fast, error-free, and updated TDS calculations.

Important TDS Exemptions & Deductions

When it comes to TDS on salary, there are several exemptions and deductions available under the Income Tax Act that can help reduce your taxable income and, ultimately, the amount of tax deducted at source. These exemptions and deductions are designed to lower your overall tax liability. Let's look at some key exemptions and deductions that can help you save tax.

🔹 List of Exemptions Available Under the Income Tax Act

1. House Rent Allowance (HRA) Exemption

   • Employees receiving HRA are eligible to claim an exemption on the rent paid. The exemption amount depends on factors such as the salary, rent paid, and city of residence.
   • The exemption is calculated based on the lowest of the following:
     • Actual HRA received
     • Rent paid minus 10% of salary
     • 50% of salary (for metro cities like Delhi, Mumbai, Kolkata, and Chennai) or 40% (for non-metro cities)

2. Leave Travel Allowance (LTA)

   • Employees can claim LTA exemption for travel expenses incurred during holidays, but only for domestic travel.
   • This exemption is available twice in a block of 4 years.

3. Gratuity Exemption

   • Gratuity received by an employee on retirement or resignation is exempt up to a certain limit under Section 10(10). The limit varies depending on the type of employment (government or private).

4. Transport Allowance Exemption

   • A certain portion of the transport allowance is exempt from tax under Section 10 if the employee is receiving it to meet transportation costs for commuting between their residence and workplace.

🔹 Popular Deductions Under the Income Tax Act

The Income Tax Act allows various deductions that can help reduce taxable income. Here are some of the most common ones:

1. Section 80C – Tax Saving Investments

   • Maximum Deduction: ₹1.5 lakh per year.
   • Eligible Investments/Expenses:
     • Employee Provident Fund (EPF)
     • Public Provident Fund (PPF)
     • National Savings Certificates (NSC)
     • Life Insurance Premiums
     • Tax-saving Fixed Deposits (FDs)
     • Children's Tuition Fees
     • Home Loan Principal Repayment

2. Section 80D – Health Insurance Premiums

   • Maximum Deduction:
     • ₹25,000 for self, spouse, children (₹50,000 for senior citizens aged 60+).
     • Additional ₹25,000 for insurance of parents (₹50,000 for senior citizens).
   • Deductions are available for premiums paid towards health insurance for self, spouse, children, and parents.

3. Section 24(b) – Home Loan Interest

   • Deduction on Interest Paid on Home Loan:
     • ₹2 lakh per year on home loan interest paid for self-occupied property.
   • This is beneficial for individuals paying EMIs on home loans.

4. Section 10(13A) – House Rent Allowance (HRA)

   • Employees who live in rented accommodation can claim HRA exemption to reduce their taxable income.

5. Section 80E – Interest on Education Loan

   • Deduction on interest paid for an education loan. The entire interest paid in a financial year is eligible for deduction.

6. Section 80G – Donations to Charitable Institutions

   • Donations to certain approved charitable institutions are eligible for a deduction under this section.

🔹 How Claiming HRA Exemption Can Lower TDS?

One of the most significant ways to reduce TDS on salary is by claiming HRA exemption. If you're living in a rented house, you can claim an exemption on the rent paid, which directly reduces your taxable salary and, therefore, the amount of tax deducted at source.

Here’s how HRA exemption can help:

• Salary Components: HRA is included in the total salary and is subjected to TDS.
• Exemption Calculation: As mentioned earlier, HRA exemption is calculated based on specific conditions, and claiming this exemption can significantly reduce the amount of salary considered for TDS.
• Effect on TDS: By reducing your taxable salary, HRA exemption lowers the overall tax liability, leading to a lower TDS deduction from your monthly salary.

Example: If an employee receives ₹60,000 as HRA and pays ₹30,000 as rent, claiming the HRA exemption can result in a reduced taxable income, thereby lowering the TDS.

Key Takeaway: Taking full advantage of available TDS exemptions and deductions can help minimize your TDS liability significantly. Using a TDS on salary calculator, like the one available on HR Calcy, can assist in calculating your eligible exemptions and deductions, providing a clearer picture of your tax savings and deductions.

How Employers Deduct and Deposit TDS?

Employers play a crucial role in the Tax Deducted at Source (TDS) process, particularly when it comes to salary. The responsibility for deducting and depositing TDS rests with the employer, who must ensure timely and accurate deductions as per the applicable Income Tax rules.

🔹 Employer's Responsibility for TDS Deduction & Deposit with the IT Department

As per the Income Tax Act, employers are required to:

1. Calculate TDS on Salary:

   • The employer is responsible for calculating the TDS on an employee's salary, which involves considering the employee's income, applicable exemptions, and deductions.
   • The TDS rate is determined based on the employee's income tax slab for the financial year, and adjustments are made for any deductions or exemptions the employee claims (like HRA, Section 80C, 80D, etc.).

2. Deduct TDS on a Monthly Basis:

   • Employers must deduct TDS from the employee's salary every month. The deduction is based on the estimated annual taxable income of the employee, calculated considering all allowances, exemptions, and deductions.
   • The amount of TDS deducted is then transferred to the Income Tax Department through online payment.

3. Deposit TDS with the Income Tax Department:

   • The employer must deposit the deducted TDS with the Central Government using Challan No. ITNS 281 by the prescribed due dates.
   • Employers must also generate a TDS certificate for each employee, which is provided at the end of the year. This certificate is known as Form 16.

4. Filing of TDS Returns:

   • The employer is also responsible for filing TDS returns (Form 24Q) quarterly. These returns detail the TDS deducted and deposited to the Income Tax Department.

🔹 Form 16: How Employees Can Check TDS Deductions

At the end of the financial year, employees receive a Form 16, which is a TDS certificate issued by the employer. This certificate serves as proof of the TDS deducted from the employee’s salary. It contains the following key details:

• Part A of Form 16:

  • Employer’s details: Name, PAN, TAN, and address.
  • Employee’s details: Name, PAN, address, and salary details.
  • TDS Details: The total TDS deducted, taxable income, and tax payable.

• Part B of Form 16:

  • A detailed breakdown of the employee’s income, exemptions, deductions, and TDS deducted.
  • This section helps employees understand how the TDS amount has been computed and gives a clear view of deductions under Section 80C, HRA, Section 10, etc.

Employees can use Form 16 to verify if the correct amount of TDS has been deducted and deposited.

🔹 Steps to Verify TDS Deductions via TRACES & Form 26AS

Employees can also verify their TDS deductions online by accessing their Form 26AS and the TRACES portal. Here are the steps for verification:

1. Accessing Form 26AS (Tax Credit Statement)

Form 26AS is an annual statement that reflects the details of all tax deducted at source (TDS) and tax collected at source (TCS) against the employee's PAN. Employees can check their Form 26AS by following these steps:

1. Log in to the Income Tax e-filing portal: Income Tax e-filing Portal
2. Navigate to 'View Form 26AS' under the 'My Account' section.
3. Select the assessment year and the type of Form 26AS you want to view.
4. The form will display the total TDS deducted against your PAN, showing the name of the deductor (employer), amount, and other details.

2. Verifying TDS on the TRACES Portal

The TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal is managed by the Income Tax Department and provides a platform for taxpayers to track their TDS records. Here’s how you can verify TDS using TRACES:

1. Visit the TRACES portal: TRACES Portal
2. Register on the portal (if not already done) and log in using your PAN details.
3. Go to 'Tax Credit Statement': Select the appropriate assessment year.
4. The portal will display your TDS status, including deductions made by the employer and any corrections or adjustments.

Key Takeaway: As an employee, it’s essential to verify TDS deductions to ensure that the correct tax has been deducted and deposited. By using Form 16, Form 26AS, and the TRACES portal, you can easily monitor your TDS deductions and ensure compliance with tax rules.

TDS Refund: When & How Can You Claim It?

Sometimes, employees might find that the Tax Deducted at Source (TDS) deducted by their employer is higher than their actual tax liability. In such cases, employees are eligible for a TDS refund. The refund is a return of the excess amount deducted by the employer, and it can be claimed through the Income Tax Return (ITR) filing process.

🔹 Situations Where Employees Can Claim a TDS Refund

Employees may be eligible for a TDS refund in the following situations:

1. Excess TDS Deduction Due to Incorrect Estimation of Income
   If the TDS was calculated based on a higher income estimate than the actual income, an employee may end up with excess TDS. For instance, if an employee anticipates receiving a higher salary or additional bonuses during the year, but the actual income is lower, the TDS deducted may be more than required.

   • Example: If an employee earns ₹10 Lakh per year but the employer mistakenly calculates the TDS for ₹12 Lakh, the employee can claim a refund for the excess TDS.

2. Claims for Deductions and Exemptions Not Accounted for by Employer
   Employers might not consider certain deductions or exemptions available under the Income Tax Act, such as Section 80C, Section 80D, or HRA. If an employee claims these deductions while filing their Income Tax Return (ITR), they may be eligible for a refund of the excess TDS deducted.

   • Example: If an employee claims HRA exemption and Section 80C deductions for PPF or ELSS but the employer didn’t account for these while calculating TDS, a refund is due.

3. Income Below the Taxable Limit
   In case an employee's total income falls below the taxable limit after accounting for exemptions and deductions, but TDS was deducted based on their gross salary, the employee can claim the excess TDS as a refund.

   • Example: If an employee's income falls below ₹2.5 Lakh, but TDS was deducted on the full salary, they are eligible for a refund of the entire amount.

4. Tax Credits and Other Refundable Deductions
   Sometimes, tax credits like Section 87A rebate (for taxpayers with income below ₹5 Lakh) are not considered during TDS deduction. Once these credits are accounted for during ITR filing, a refund can be claimed.

🔹 ITR Filing Process for Claiming TDS Refund

To claim a TDS refund, employees need to file their Income Tax Return (ITR) with the Income Tax Department. Here’s a step-by-step guide to filing the ITR and claiming a refund:

1. Step 1: Gather All Required Documents

   • Form 16: Provided by your employer, it contains details of your salary and the TDS deducted.
   • Form 26AS: It contains all TDS records against your PAN, including TDS deducted by your employer and other deductors.
   • Bank Statements, Investment Proofs, and Deduction Documents: These are necessary for claiming deductions under Sections 80C, 80D, etc.

2. Step 2: Choose the Correct ITR Form

   • For salaried individuals, ITR-1 (Sahaj) or ITR-2 is typically used. The choice of form depends on whether the individual has other income sources (e.g., capital gains or business income).

3. Step 3: Fill in the Required Details

   • Fill in the details of your income (salary, interest income, etc.) and claim the eligible deductions.
   • Enter the TDS details from Form 16 and Form 26AS. Ensure that the amount of TDS deducted by your employer matches what’s shown on these forms.

4. Step 4: Calculate Taxable Income and Tax Liability

   • Once all information is filled in, the system will calculate your taxable income and tax liability.
   • The system will also automatically account for the TDS deducted and check if any refund is due.

5. Step 5: Submit Your ITR

   • After filling in the details and verifying the information, submit your ITR through the Income Tax e-filing portal.
   • You will receive an acknowledgment (ITR-V) once the form is successfully submitted.

6. Step 6: E-Verify Your ITR

   • For the ITR to be processed, it must be e-verified. You can e-verify your return through Aadhaar OTP, Net Banking, or by sending a signed copy of ITR-V to the Income Tax Department.

🔹 Step-by-Step Refund Tracking via the Income Tax Website

Once your ITR is processed, the Income Tax Department will calculate the exact amount of TDS refund due to you. Here's how you can track your refund:

1. Step 1: Visit the Income Tax Department Website
   Go to the official Income Tax Department Refund Status Portal.

2. Step 2: Login to Your Account
   Use your PAN and password to log in to your e-filing account.

3. Step 3: Check Refund Status
   Once logged in, go to the 'View Returns/Forms' section and select 'Income Tax Returns'. Under the 'Status' column, you’ll be able to see the refund status.

   • The status will show if the refund is processed, issued, or pending.

4. Step 4: Track Refund Details

   • If your refund has been issued, the portal will display the date and mode of payment (e.g., NEFT transfer or Cheque).
   • You can also check the refund amount here.

5. Step 5: Wait for Refund Delivery
   Once your refund status indicates it has been processed, the amount will be transferred directly to your bank account. The process generally takes 15-45 days post-ITR processing, depending on the circumstances.

Key Takeaway:
Claiming a TDS refund is a straightforward process, but it's essential to file your ITR correctly and track the refund status regularly. By using Form 16, Form 26AS, and the Income Tax Portal, you can ensure that any excess TDS deducted is refunded to you without hassle.

Common Mistakes to Avoid in TDS Calculation

When calculating TDS on salary, employees and employers must ensure accurate calculations to avoid discrepancies or overpayment of taxes. Here are some common mistakes people often make during the TDS calculation process:

🔹 1. Misreporting Salary Components

One of the most frequent errors occurs when salary components are not reported accurately or are misunderstood. The salary is made up of various components such as Basic Pay, HRA (House Rent Allowance), Special Allowances, Bonus, and Other Benefits.

How this affects TDS:

If any component of the salary is not reported correctly, it could lead to an inaccurate calculation of taxable income. For example:

• HRA might be underreported, leading to a higher tax deduction than necessary.
• Special allowances and other reimbursements might not be accounted for properly.
• Bonus or overtime pay might be omitted.

Tip: Always double-check that the salary breakup is accurate and that each component has been properly accounted for during TDS calculation.

🔹 2. Not Considering All Available Deductions

Employees are eligible for various deductions under the Income Tax Act, but many people forget to factor them into their TDS calculation. Popular deductions like those under Section 80C, Section 80D, 80G, or 80E can significantly reduce the taxable income, thus lowering the TDS liability.

Common overlooked deductions:

• Section 80C: Deduction for investments in EPF, PPF, LIC, ELSS, etc.
• Section 80D: Deduction for insurance premiums paid for self, family, or parents.
• Section 80E: Deduction on interest for education loans.
• Section 24(b): Deduction on home loan interest.

How this affects TDS: If these deductions are not considered, you could end up paying more TDS than necessary, as the taxable income will be overstated.

Tip: Always review your eligible deductions and exemptions carefully before finalizing the TDS calculation. Using an online TDS calculator can help ensure all applicable deductions are included.

🔹 3. Incorrectly Choosing Between Old vs New Tax Regime

In recent years, the government introduced an optional new tax regime that provides lower tax rates but removes most exemptions and deductions. The old tax regime, on the other hand, offers higher tax rates but allows deductions and exemptions.

How this affects TDS:

Choosing between the Old vs New Tax Regime can make a significant difference in the amount of TDS deducted. If an employee opts for the New Tax Regime, they lose the benefit of deductions like HRA, 80C, and 80D, but pay lower tax rates. On the other hand, opting for the Old Tax Regime allows for these deductions but at higher tax rates.

Mistake Example:

• An employee who qualifies for significant exemptions (like HRA or 80C deductions) might be better off under the Old Tax Regime, while someone with no exemptions might benefit more from the New Tax Regime.

Tip: Carefully evaluate both regimes before making a choice. A simple comparison of the two regimes and their impact on TDS can help ensure you pay the least amount of tax.

🔹 4. Not Accounting for Changes in Tax Laws

The Income Tax Act undergoes changes from time to time, and sometimes employees may miss updates regarding new TDS rates, tax slabs, or deductions. For instance, in FY 2025-26, there may be revisions to income tax slabs or new deductions that weren’t available in the previous years.

How this affects TDS:

Failing to stay updated with the latest tax law changes could result in incorrect TDS deductions. For example, if there’s a change in the tax slab, it could affect the amount of tax deducted from your salary.

Tip: Stay informed about any changes in tax laws and ensure that the employer applies the most recent updates in the TDS calculations.

🔹 5. Failing to Account for Non-Taxable Income or Exemptions

Some types of income or benefits are non-taxable or partially taxable under the Income Tax Act, such as:

• Gratuity
• Bonus (up to a certain limit)
• Leave Encashment (subject to conditions)
• HRA (House Rent Allowance) under certain conditions

How this affects TDS:

If these non-taxable incomes are mistakenly considered as part of the taxable salary, TDS will be deducted incorrectly, leading to an overpayment of taxes.

Tip: Always ensure that exempt incomes like HRA or gratuity are correctly factored in when calculating TDS.

🔹 6. Not Considering the Correct Taxable Salary

Employers should calculate the taxable salary accurately. Taxable salary is the amount left after accounting for exemptions, deductions, and allowances. Mistakes occur when employees or employers mistakenly include non-taxable components in the taxable salary, leading to higher TDS deductions.

Tip: Use the TDS on Salary Calculator to automatically compute the taxable income and avoid any misreporting.

🔹 7. Ignoring or Misusing the Standard Deduction

For the financial year 2025-26, a standard deduction of ₹50,000 is available for salaried individuals. If this is not considered during TDS calculation, employees will end up paying more tax than required.

Tip: Ensure the standard deduction is accounted for when calculating TDS to avoid overpaying taxes.

Key Takeaway:
Avoiding these common mistakes can ensure a more accurate TDS calculation and help you avoid overpaying taxes. Using tools like the HR Calcy TDS Calculator can streamline the process and ensure you don’t miss any critical elements while calculating TDS.

Conclusion

In conclusion, understanding TDS on salary is crucial for both employees and employers, as it directly affects the amount of tax deducted from an individual's salary. We've covered various important aspects, from the definition and legal background of TDS to the step-by-step calculation process. It's essential to ensure accurate calculations by considering all components of the salary, exemptions, deductions, and the correct tax regime.

Here are the key takeaways:

• TDS on salary is mandatory for salaried individuals to ensure timely tax payments.
• Accurate reporting of salary components and eligible deductions can significantly reduce the TDS burden.
• It's vital to choose between the Old Tax Regime and the New Tax Regime based on individual circumstances.
• Tools like the HR Calcy TDS on Salary Calculator can simplify the process and help avoid mistakes.

Accurate TDS calculation is not just important to avoid overpaying taxes, but it also ensures you remain compliant with the Income Tax Act. It’s essential for employees to be proactive in verifying their TDS deductions to avoid any surprises when filing their Income Tax Return.

For a hassle-free and accurate TDS on salary calculation, don’t hesitate to use the HR Calcy TDS on Salary Calculator. It simplifies the process and helps you understand your tax obligations better. Make your tax calculations stress-free today!

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