TDS on Salary Under New Income Tax Act 2025:
A detailed analysis of TDS on Salary for the Financial Year 2025-26
The New Income Tax Act 2025 has brought significant changes to Tax Deducted at Source (TDS) on salary.
Here’s what you need to know to avoid any mistakes and get the Benefits of the new amendments.
Key Highlights of the amendments are as follows:
Increased Exemption Limit: The basic exemption limit for TDS on salary has been increased to ₹4 lakhs under the new tax regime.
Average Rate of Tax: Employers will deduct TDS at the average rate of income tax applicable to an employee’s total income, including perquisites.
Standard Deduction: The standard deduction has been raised to ₹75,000, reducing taxable income and tax deduction .
TDS Rates for Salary Income:
Up to ₹4 lakhs: No TDS
₹4 lakhs to ₹8 lakhs: 5% tax
₹8 lakhs to ₹12 lakhs: 10% tax
₹12 lakhs to ₹16 lakhs: 15% tax
₹16 lakhs to ₹20 lakhs: 20% tax
Above ₹24 lakhs: 30% tax
Calculating TDS on Salary is given below:
To calculate TDS, employers will:
1. Estimate the employee’s total income for the financial year.
2. Deduct standard deductions and exemptions.
3. Calculate the average rate of tax based on the employee’s total income.
4. Deduct TDS monthly based on the average rate .
Example:
For an employee with an estimated salary of ₹9,50,000 and no other income, the TDS would be calculated as follows :
– Total Income: ₹9,50,000
– Tax Payable: ₹65,000
– TDS deducted on other sources: ₹8,000
– Net Tax payable: ₹57,000
– Average Rate of TDS: 6%
Changes in TDS Thresholds:
The government has revised TDS exemption limits for various income sources, including:
– Interest Income: ₹1,00,000 for senior citizens and ₹50,000 for others
– Dividend Income: ₹10,000
– Commission and Brokerage: ₹20,000
The new slabs are helpful for both the Employers and Employees in complying with the regulations.
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