TDS on Salary for 2026-27: How Much Tax Is Cut Each Month, and Why

If you have a salaried job, income tax isn't something you pay once a year. Your employer cuts a part of it from every month's salary and sends it to the government. This is TDS, tax deducted at source. Understanding how it's worked out helps you check your payslip, avoid a big cut in the last months of the year, and plan your regime choice.

From 1 April 2026, the Income-tax Act, 2025 replaced the 1961 Act. The rules for salary TDS are the same in spirit, but the numbers changed: salary TDS is now section 392 (earlier 192), the year is called the tax year, and some forms have new numbers, explained below.

How your employer works out monthly TDS

1. Estimate your salary for the whole year, from April to March.
2. Subtract what your regime allows: the standard deduction (₹75,000 new regime, ₹50,000 old), and in the old regime also HRA, section 123 (old 80C) investments and other deductions you've declared.
3. Work out the tax for the year on what's left, including the 4% cess.
4. Subtract any tax already deducted this year, and spread the rest evenly over the months remaining.

Because it's an estimate, it's recalculated whenever something changes: a raise, a bonus, new investment proofs. That's why your TDS can change during the year even if your salary looks the same.

Monthly TDS at common salaries (new regime)

These assume the same salary all year, no other income, and include the 4% cess. In the new regime, a rebate of up to ₹60,000 makes the tax zero up to ₹12 lakh of taxable income, which is ₹12.75 lakh of salary after the standard deduction.

Why ₹13 lakh pays so little: marginal relief

Without a special rule, earning ₹1 more than ₹12 lakh of taxable income would suddenly mean tax of about ₹60,000. To stop that jump, marginal relief caps your tax at the amount by which your taxable income exceeds ₹12 lakh. At a ₹13 lakh salary, taxable income is ₹12.25 lakh, ₹25,000 above the line, so the tax is ₹25,000 plus cess: ₹26,000. Relief fades out at roughly ₹12.7 lakh of taxable income, after which normal slab tax applies.

Old regime example

Someone on ₹12 lakh who declares the full ₹1.5 lakh under section 123 (old 80C) and ₹25,000 of health insurance has taxable income of ₹9.75 lakh in the old regime. Tax with cess is ₹1,11,800, about ₹9,317 a month. In the new regime the same salary pays nothing. Our new vs old regime guide shows where the old regime starts to win.

What happens after a raise or bonus

Say you earn ₹1 lakh a month from April to September. Your employer estimates ₹12 lakh for the year, so TDS is zero. In October you get a raise to ₹1.2 lakh a month. Your yearly salary is now ₹13.2 lakh and the tax for the year becomes ₹46,800. None of it has been cut yet, so it is spread over the six months left: ₹7,800 a month from October to March.

A bonus works the same way. Many employers deduct the extra tax on the bonus in the month it's paid, which is why a bonus month can show an unusually large TDS.

Declaring investments: Form 124 (earlier 12BB)

If you choose the old regime, your employer only allows deductions you declare. At the start of the year you give an estimate, and around January to February you submit proofs: rent receipts, insurance premiums, PPF or ELSS statements. Under the 2026 rules the declaration form is Form 124, which replaces Form 12BB.

If you don't submit proofs in time, your employer has to ignore those deductions, and the missing tax is cut from your last two or three salaries. You can still claim the deductions when you file your return and get a refund, but your cash flow takes the hit first.

Changing jobs in the middle of the year

Each employer gives you the standard deduction and works out tax as if their salary were your only income. With two jobs in one year, both may cut too little tax. Give your new employer the salary and TDS figures from your earlier job, so they can deduct the right amount. If you don't, you'll likely owe tax when you file your return.

Form 130 (earlier Form 16) and checking your TDS

After the tax year ends, your employer gives you a TDS certificate showing your salary and the tax deducted. It used to be Form 16 and is now Form 130. Match it with the Annual Information Statement (AIS) on the income tax portal, which shows the TDS actually deposited against your PAN.

• Too much TDS: you get the extra back as a refund when you file your return.
• Too little TDS: for example because of interest income or two jobs, you pay the balance before filing.

Quick checks on your payslip

• Is this month's TDS close to the tax still due for the year, divided by the months left? Use the table above or the calculator.
• Has your employer applied the regime you chose?
• After a raise, did TDS go up in the following month?
• Does the TDS on your payslip match what shows in AIS each quarter?

Try it: the Income Tax Calculator works out your yearly tax under both regimes, which you can divide by the months left to check your TDS. The Salary Calculator converts between yearly and monthly pay, and the HRA Calculator shows your tax-free rent in the old regime.

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