How Much TDS Is Deducted from Salary? Section 192 Calculation Rules

By Pradipta Ray · Published 3 October 2026

Every month, salaried employees see Tax Deducted at Source (TDS) taken out of their paychecks. But how do employers actually calculate this figure, and why does it change during the year? Here is the exact mechanics of Section 192.

Unlike TDS on fixed deposits or contractor payments which have flat rates (such as 10%), salary TDS under Section 192 has no fixed percentage. Your employer acts as a tax collector, computing your annual average income tax rate and deducting it in equal monthly instalments.

Direct Answer: Monthly TDS = [Estimated Total Annual Tax on Gross Salary minus Declared Deductions] ÷ [Number of Months Remaining in Financial Year]. On a ₹12 Lakh salary under the New Regime, monthly TDS is approximately ₹6,396.

Step-by-Step Salary TDS Mechanism

How payroll systems compute monthly TDS
Step	Action Taken by Employer	Timing
Step 1	Employee selects New or Old Regime and submits provisional declarations	April (Start of FY)
Step 2	Employer computes estimated annual tax and divides by 12	April to December
Step 3	Employee submits actual proof documents (rent receipts, 80C)	December / January
Step 4	Employer reconciles actuals and adjusts TDS for remaining months	January to March
Step 5	Employer issues Form 16 showing total earnings and TDS deposited	May / June (After FY ends)

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Switching Jobs Mid-Year: The Double Basic Exemption Trap

When you change jobs during the financial year, your new employer often assumes your income started from zero and applies the basic tax exemption limit (₹3,00,000) a second time. This results in artificially low monthly TDS. At year-end, both incomes combine on your ITR, creating a massive unexpected tax demand with interest under Section 234B and 234C. Always submit Form 12B to your new employer detailing your previous earnings.

How to Prevent Sudden Salary Drops in Q4

Upload complete investment proofs to your company payroll portal before the December deadline.
Check your Form 26AS each quarter to ensure your employer has deposited deducted TDS with the government.
Verify that your PAN in employer records matches your Aadhaar exactly to prevent uncredited TDS.

Frequently asked questions

How is monthly TDS on salary calculated?

Under Section 192, your employer estimates your total annual taxable income for the financial year, calculates the total annual tax payable based on your chosen regime and declarations, and divides that total tax equally across remaining months of the financial year.

Why did my salary TDS suddenly spike in January or February?

If you fail to submit investment proofs (such as rent receipts, ELSS statements, insurance receipts) to HR by December/January, your employer revokes provisional exemptions and recalculates tax on full salary, spreading the shortfall over the remaining 2 or 3 months.

Can I get a refund of excess TDS deducted by my employer?

Yes. When you file your annual Income Tax Return (ITR), you can declare all eligible deductions and bank account details. The Income Tax Department refunds excess TDS along with statutory interest.

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