TDS on Salary: Section 192 and Form 24Q Explained

Unlike most other TDS provisions that apply a fixed percentage to a payment, Section 192 requires the employer to act almost like a mini tax assessor for each employee: estimating annual income, applying the correct slab rates and regime, and deducting an average monthly amount that should, ideally, leave the employee with little or no tax payable or refundable at year-end. Getting this computation right, and filing the resulting quarterly return correctly, is one of the most operationally involved TDS obligations any employer carries.

How Section 192 TDS Is Computed

At the start of the financial year (or when employment begins), the employer estimates the employee's total salary income for the full year, including any perquisites and profits in lieu of salary. Based on the tax regime the employee has opted for, the employer reduces eligible deductions and exemptions, such as standard deduction, house rent allowance where the old regime is chosen, and Chapter VI-A deductions substantiated by proof. Tax is computed on the resulting estimated total income at the applicable slab rates, and the resulting annual tax figure (including cess and any applicable surcharge) is divided by the number of remaining months in the employee's tenure for that year to arrive at the average monthly TDS.

This average rate is not static. Whenever the estimate changes, whether due to a salary increment, a bonus, a job change during the year, or a late declaration of investments or a home loan, the employer recalculates the annual liability and adjusts the TDS for the remaining months so that, by the end of the year, the cumulative deduction closely tracks the employee's actual tax liability.

Old Regime vs New Regime for TDS Purposes

An employee can intimate the employer, typically at the start of the year or before the first salary payment, of the tax regime they wish to have TDS computed under. If no intimation is made, the employer must deduct TDS based on the default new tax regime. This intimation only affects how TDS is computed during the year; the employee retains the ability to choose a different regime when filing their own income tax return, though a mismatch between the regime used for TDS and the regime chosen at filing can result in additional tax payable, or a refund, once the return is processed.

Missing or Late Investment Declarations

Employees are usually asked to submit a declaration of proposed investments and expenses early in the year, followed by proof closer to year-end. If proofs are not submitted on time, the employer is entitled to deduct TDS without allowing the corresponding deduction, or based on the new regime default, rather than accepting an unverified claim. This can result in higher TDS during the year than the employee's actual final liability; any excess can be recovered by the employee by claiming the deduction directly in their income tax return and receiving a refund. Employers should retain documentation of what was declared, what was substantiated, and when, since this is often scrutinised in a salaried employee's ITR filing reconciliation.

Depositing TDS and Filing Form 24Q

TDS deducted on salary must be deposited with the government by the 7th of the following month (except for March, where the due date is April 30), using the appropriate challan. Separately, the employer must file a quarterly return reporting the salary paid and TDS deducted for each employee. This return has historically been called Form 24Q. Under the Income Tax Act 2025 and the accompanying return-form restructuring effective for FY 2026-27, Form 24Q has been renumbered to Form 138; the quarterly filing cadence and the underlying reporting requirements (employee-wise salary, deductions claimed, and tax deducted) remain the same, only the form number and reference in the rules have changed.

The four quarterly due dates for FY 2026-27 are July 31 (Q1), October 31 (Q2), January 31 (Q3), and May 31 (Q4). The Q4 filing is the most consequential of the four, because it consolidates the full year's salary and TDS details and is used to generate Form 16, the annual TDS certificate every employee needs to file their own return.

Consequences of Short Deduction or Late Deposit

An employer that fails to deduct TDS correctly, deducts but fails to deposit it, or files the quarterly return late faces interest, late fees, and potential disallowance of the corresponding salary expense in the employer's own tax computation, in addition to being treated as an assessee in default for the shortfall. Because the average-rate computation depends on estimates that change through the year, employers should build in a mid-year and pre-Q4 review to true up TDS before the final quarter, rather than discovering a large shortfall only when Form 16 is being generated.

Section 192 Under the Income Tax Act 2025

The obligation to deduct tax on salary, previously Section 192, is now housed in Section 392 of the Income Tax Act 2025, with the detailed computation mechanics (including the average rate method and regime-based adjustments) set out under Section 402. The substance of the provision, deduct at the average rate on estimated annual salary income, recompute as estimates change, has not been altered; only the section numbering and the corresponding return form (24Q to Form 138) have changed for filings from FY 2026-27 onward.