Under the Income-tax Act, 2025, Tax Deducted at Source (TDS) on salary is strictly governed by Section 392.

Here is a comprehensive breakdown of the rules and procedures for deducting tax on salary under this section:

What is TDS on Salary?

Under Section 392(1), any person responsible for paying income chargeable under the head “Salaries” must deduct income-tax at the time of payment.

When is Income chargeable under the head “Salaries” ?

Under Section 15(1) of the Income-tax Act, 2025, income is chargeable to tax under the head “Salaries” in the following three scenarios:

1. On a Due Basis: Any salary that becomes due from an employer to a taxpayer in the tax year is chargeable, regardless of whether it has been actually paid or not.
2. On a Receipt/Advance Basis: Any salary that is paid or allowed to the taxpayer in the tax year is chargeable, even if it is not yet due or is paid before it becomes due. Note: If a salary paid in advance is included in your total income and taxed in the year of receipt, it will not be taxed again when it actually becomes due.
3. As Arrears: Any arrears of salary paid or allowed to the taxpayer in the tax year are chargeable, provided they were not already charged to income tax in any earlier tax year.

Important Clarifications:

• Definition of Employer: For the purposes of these rules, the term “employer” also includes a former employer.
• Partners in a Firm: Any salary, bonus, commission, or remuneration (by whatever name called) that is due to or received by a partner from their firm is not regarded as salary under this section.

Valuing Perks and Benefits (Form No. 123) for Salary

Salary isn’t just basic pay; it includes perquisites (like rent-free accommodation, company cars, etc.).

• Employers are required to furnish Form No. 123, which is a detailed statement showing the valuation of all perquisites, fringe benefits, and profits in lieu of salary provided to the employee.
• For non-monetary perquisites, the employer has the option to pay the tax out of their own pocket instead of deducting it from the employee’s actual salary payout.

Refer Form 123 Income Tax Rules 2026 Statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary with value thereof

Who Can Deduct TDS Under Section 392?

Employers are required to deduct TDS under section 392 every month and deposit it with the government within a specific time period. The employers can be:

• Companies (Private or Public)
• Individuals
• HUF
• Trusts
• Partnership firms
• Co-operative societies

The employer’s legal status, such as HUF, firm, or company, is irrelevant for the deduction of tax at source under this section. Only the employer-employee relationship matters. The law legally defines the “person responsible for paying” this tax as the “employer himself” (or the company itself).

According to section 392 of the Income-tax Act, 2025, there must be an employer-employee relationship between the deductor and deductee for TDS, because this section specifically applies only to income chargeable under the head “Salaries”. Moreover, the number of employees employed by the employer also does not matter for deducting TDS.

TDS on Salary is deducted under which regime ?

Default Regime: The New Tax Regime is the default for TDS calculations unless the employee specifically declares they want to opt for the Old Tax Regime. Refer Section 202 Income Tax Act 2025 New tax regime for individuals, Hindu undivided family and others.

What are the Rate of TDS on Salary

Rate of TDS on Salary depends on whether employee has opted New Tax Regime or Old tax regime with his employer . This option has to be exercised at the beginning of the Tax Year and can not be changed during the Tax year. However Taxpayer can change the scheme at the time of filing of his ITR.

For Example if TDS has been deducted under Old regime, Taxpayer can choose to file his Income Tax Return under new Regime.

TDS Slab Rates (Tax Year 2026-27) under New Tax Regime

TDS Slab Rates (Tax Year 2026-27) under old Tax Regime

• Up to ₹ 2,50,000: Nil
• From ₹ 2,50,001 to ₹ 5,00,000: 5%
• From ₹ 5,00,001 to ₹ 10,00,000: 20%
• Above ₹ 10,00,000: 30%

• Up to ₹ 3,00,000: Nil
• From ₹ 3,00,001 to ₹ 5,00,000: 5%
• From ₹ 5,00,001 to ₹ 10,00,000: 20%
• Above ₹ 10,00,000: 30%

• Up to ₹ 5,00,000: Nil
• From ₹ 5,00,001 to ₹ 10,00,000: 20%
• Above ₹ 10,00,000: 30%

• Health and Education Cess: A flat 4% cess is applied to the total income tax and surcharge.
• Surcharge: If your total taxable income is very high (exceeding ₹ 50 Lakhs), a surcharge is applied on the calculated income tax, ranging from 10% to 37% depending on the income bracket

How the TDS Rate is Calculated

Unlike other payments that have a flat TDS rate (like 1% or 10%), TDS on salary is deducted at the “average rate of income-tax”.

• The employer estimates the employee’s total salary income for the entire tax year.
• They calculate the total tax liability on that estimated income using the applicable tax slab rates (rates in force).
• That total tax liability is then divided by the estimated income to find the average rate, which is deducted monthly.

Employer’s Option for Non-Monetary Perquisites

If an employee receives non-monetary perquisites (such as a rent-free accommodation or a company car), Section 392(2)(a) gives the employer a special option. The employer can choose to pay the tax on the whole or part of these non-monetary perquisites out of their own pocket, without actually deducting that specific tax amount from the employee’s monetary salary payout.

• If the employer exercises this option, they must issue a specific certificate to the employee detailing the tax paid on their behalf.

Adjustments for Other Incomes, Reliefs, and Losses

Adjusting TDS with Other Incomes (Form No. 122) If an employee has other sources of income or specific losses, they can submit Form No. 122 to their employer.

• What can be declared: Salary from previous employers in the same year, income from other heads, and tax already deducted by others.
• The House Property Rule: The employer can increase the TDS based on other incomes, but they are strictly prohibited from reducing the TDS for any declared losses except for a loss under the head “Income from house property” (e.g., interest paid on a home loan).

Under Section 392(4)(a), an employee has the option to furnish their employer with details of their other financial activities using Form No. 122. The employer must take these details into account, which can increase or decrease the final TDS amount. The employee can report:

• Salary received from other previous or concurrent employers.
• Other taxable incomes.
• Eligible relief for arrears/advance salary under Section 157.
• TDS already deducted by others.

Refer Form 122 Income Tax Rules 2026 Form for furnishing details of income under section 392(4)(a) for the purposes of making deduction where income is chargeable under the head “Salaries”

Relief for Arrears or Advance Salary (Form No. 39)

If an employee receives a lump sum of arrears, advance salary, or family pension, it might push them into a higher tax bracket for that year.

• Employees can claim relief under Section 157 to neutralize this higher tax burden.
• To claim this relief and adjust the TDS accordingly, the employee must file Form No. 39.

Refer

Special Rule for Eligible Start-ups (ESOPs)

Under Section 392(3), if the employer is a designated “eligible start-up” allotting specified security or sweat equity shares (ESOPs) to an employee, they are subject to special deferral rules. They must deduct or pay the tax on these shares within a specifically extended timeframe, based on the rates in force for the tax year in which the shares were allotted or transferred.

(Note: There are also special rules for start-ups. If an “eligible start-up” gives ESOPs/sweat equity shares to an employee, they are allowed to defer the deduction and payment of TDS on those shares up to 60 months from the end of the tax year, or until the employee leaves the company or sells the shares, whichever is earlier).

TDS on Salary in Foreign Currency

If an employee’s salary is payable in a foreign currency, Section 392(8) mandates that the value must be converted into Indian Rupees calculated at a strictly prescribed rate of exchange before computing the TDS. Refer the Followings Income Tax Rules

RULE 206 INCOME-TAX RULES 2026 Rate of exchange for conversion into rupees of income expressed in foreign currency.

RULE 207 INCOME-TAX RULES 2026 Rate of exchange for the purpose of deduction of tax at source on income payable in foreign currency.

Mandatory Statements and Declarations

• Statement of Perquisites: Under Section 392(5), the employer is legally obligated to furnish a statement (using Form No. 123) containing correct and complete particulars of the value of all perquisites or “profits in lieu of salary” provided to the employee.
• Accumulated PF Balances: If an employee withdraws their accumulated balance from a recognized provident fund, the TDS deduction by the trustees is governed by Section 392(7).

Refer Form 123 Income Tax Rules 2026 Statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary with value thereof

How to Calculate TDS on Salary Under Section 392 of Income Tax Act 2025

Step 1: Estimate Salary

The employer first estimates the employee’s salary for the relevant tax year (the term “financial year” has been replaced under the new Act). This includes:

• Basic pay and dearness allowance.
• Perquisites provided by the employer (under Section 17).
• Profits in lieu of salary (under Section 18).
• Allowances such as House Rent Allowance (HRA), travel concession, etc..
• Employer’s contributions to provident funds or pension schemes (in excess of specified limits).
• Bonus, commission, gratuity.
• Salary received from any other employer during the tax year, if reported by the employee.

Step 2: Calculate Exemptions (Section 11 and Schedule III) and Salary Deductions

The employer calculates exemptions available under Section 11 read with Schedule III (which replaces the old Section 10), and deductions under Section 19:

• HRA, travel allowance, and special allowances for the performance of duties.
• Professional tax paid (tax on employment).
• Standard deduction: ₹75,000 (under the New Tax Regime governed by Section 202) or ₹50,000 (under the Old Tax Regime).

Step 3: Derive Taxable Salary

The allowable exemptions and standard deductions are subtracted from the gross salary. The balance amount is treated as the taxable income from salary.

Step 4: Add Other Incomes and Adjust Losses If the employee has submitted details of other incomes or losses (via Form No. 122), the employer adjusts the taxable income:

• Income chargeable under any other head (such as interest from bank deposits) can be added to the taxable salary.
• Crucial restriction for losses: The employer is legally prohibited from reducing the TDS amount for any declared losses except for a loss under the head “Income from house property” (e.g., interest paid on a home loan). The result is the employee’s Gross Total Income.

Step 5: Apply Deductions (Chapter VIII)

The employer then reduces the eligible deductions declared by the employee under Chapter VIII (which replaces the old Chapter VI-A) like :

• Investments and Expenditures (Section 123): PPF, EPF, life insurance premium, tuition fees, etc., up to a limit of ₹1,50,000.
• Pension Schemes (Section 124): Contributions to notified pension schemes.
• Health Insurance (Section 126): Medical insurance premiums.
• Donations (Section 133): Contributions to specified charitable funds.

Step 6: Choose Tax Regime & Compute Tax Liability

The employer calculates the tax liability at the “average rate of income-tax” under the applicable regime:

• Old Tax Regime: Utilizes traditional slab rates, allowing for all standard exemptions (like HRA) and Chapter VIII deductions.
• New Tax Regime (Section 202): Offers lower slab rates and a higher tax rebate (up to ₹60,000 for income up to ₹12,00,000 under Section 156), but strictly limits deductions and exemptions.

The total estimated tax is divided across the tax year and deducted monthly at the time of salary payment.

Important Notes:

• The New Tax Regime (Section 202) is the default. If an employee wants to opt for the Old Regime, they must explicitly exercise this option and inform their employer.
• Under the New Tax Regime, most Schedule III exemptions (like HRA and leave travel concession) and Chapter VIII deductions (like Section 123 for life insurance and Section 126 for health insurance) are not permitted. The major exceptions allowed under the new regime are the enhanced ₹75,000 standard deduction and specific employer pension contributions.

Illustration

Here is the rechecked and remade illustration formatted strictly as per the provisions of the Income-tax Act, 2025.

Under the new Act, the following key section updates apply:

• TDS on salary is governed by Section 392 (replacing old Section 192).
• Standard Deduction is provided under Section 19.
• Deductions for investments (ELSS, PPF, NSC) fall under Chapter VIII / Section 123 (replacing Chapter VI-A / 80C).
• The New Tax Regime is the default regime governed by Section 202, and the tax rebate is provided under Section 156.

Illustration: TDS on Salary under Income-tax Act, 2025

Scenario:-1 A resident employee Raman (aged 40) has a fixed salary of ₹1,00,000 per month (Total ₹12,00,000 for the tax year). He has invested ₹50,000 in ELSS, ₹60,000 in PPF, and ₹40,000 in NSC (Total Chapter VIII investments = ₹1,50,000).

Below is the comparative calculation of his monthly TDS under Section 392 for both the Old Tax Regime and the default New Tax Regime:

Conclusion

• If Raman opts for the Old Tax Regime: He must inform his employer to apply the old rules. His employer will deduct a monthly TDS of ₹9,750 under Section 392.
• Under the Default New Tax Regime (Section 202): Even without claiming any investment deductions, his enhanced standard deduction of ₹75,000 brings his total income to ₹11,25,000. Since his income does not exceed the ₹12,00,000 threshold under Section 156(2), he is eligible for a full tax rebate. Therefore, no TDS will be deducted from his salary.

Sources:

[i] Income-tax Act, 2025, Section 19(1)

[ii] Income-tax Act, 2025, Section 19(1)

[iii] Income-tax Act, 2025, Section 123

[iv] Income-tax Act, 2025, Section 202(2)(a)(xii)

[v] Finance Act, 2026, First Schedule, Part I-B, Paragraph A

[vi] Income-tax Act, 2025, Section 202(1)

[vii] Income-tax Act, 2025, Section 156(1)

[viii] Income-tax Act, 2025, Section 156(2)

Scenario:-2  Computation of TDS on Pension under Income-tax Act, 2025

Mr Sahil Senior Citizen (aged 60 to 79) receives a pension of Rs 30,000 per month and income from interest in savings account is Rs 12,000 during the FY 2025-26. What will be the monthly TDS amount deducted from the pension?

As per Section 392, TDS is required to be deducted on all the monetary amounts paid by the employer under the head ‘Salary’. Since, ‘Salary’ also includes pension, TDS on the same needs to be deducted as per Section 392.

Under the new Act, the following key section updates apply:

• TDS on Salary/Pension is now governed by Section 392.
• “Salary” officially includes pension under Section 16(b).
• The Standard Deduction is provided under Section 19(1) (₹75,000 for the New Regime and ₹50,000 for the Old Regime).
• The Tax Rebate (formerly 87A) is now governed by Section 156.
• The New Tax Regime is the default regime governed by Section 202.

As per Section 392, TDS is required to be deducted on all the monetary amounts paid by the employer under the head ‘Salaries’. Since ‘Salary’ includes pension, TDS on the same needs to be deducted at the “average rate of income-tax”.

Below is the comparative calculation for Mr. Sahil under both the Old Tax Regime and the default New Tax Regime:

Conclusion

Under both the Old Tax Regime and the default New Tax Regime, Mr. Sahil final income tax payable is zero. Therefore, the employer (or pension disbursing bank) will not deduct any monthly TDS under Section 392 from his pension.

(Note: Under the Old Regime of the 2025 Act, Mr. Sahil could have also claimed a deduction of up to ₹50,000 on his savings interest under Section 153, which would have reduced his taxable income to ₹3,10,000. However, even without claiming it as shown in the original example, his tax liability is completely neutralized by the Section 156 rebate).

Salary from More than One Employer

Under the Income-tax Act, 2025, if you receive salary from more than one employer during the same tax year—whether concurrently (working two jobs at once) or consecutively (changing jobs during the year)—the law provides a specific mechanism to consolidate your income and ensure accurate Tax Deducted at Source (TDS).

Here is how it works under the new provisions:

1. The Governing Rule: Section 392(4)(a)(i) Under Section 392(4)(a)(i), an employee has the option to furnish details of the income due or received under the head “Salaries” from any other employer (or former employer) to their current or chosen employer. This allows one employer to calculate your total tax liability for the year and adjust your monthly TDS accordingly, preventing a huge tax demand at the time of filing your return.

2. The Declaration Form: Form No. 122 To officially declare the salary from another employer, you must submit Form No. 122 to your current employer. Specifically, you must fill out Part B of this form, titled “Particulars of Income under head ‘Salaries’ due or received from any other employer(s)”.

Refer Form 122 Income Tax Rules 2026 Form for furnishing details of income under section 392(4)(a) for the purposes of making deduction where income is chargeable under the head “Salaries”

3. Details to be Furnished in Form No. 122 When submitting this form, you will need to provide comprehensive details regarding your other employment, including:

• Employer Details: The Name, Permanent Account Number (PAN), and Tax Deduction and Collection Account Number (TAN) of the other employer.
• Employment Period: The exact period of your employment with them.
• Salary Breakdown: The total salary paid or due, including standard pay, house rent allowance, conveyance allowance, and the valuation of any perquisites or accretions to your provident fund account.
• Investments/Deductions: Any amounts already deducted in respect of life insurance premiums, provident fund contributions, etc., under Section 123.
• Tax Already Deducted: The total amount of tax (TDS) that the other employer has already deducted during the year. You must enclose the TDS certificate issued by the other employer under Section 395(4) as proof.

4. The Current Employer’s Obligation Once you submit Form No. 122, your current employer is legally required to take this consolidated information into account to adjust (increase or decrease) the TDS deducted from your ongoing salary payouts.

Furthermore, your current employer will report this aggregated data—specifically the reported salary received from your other employer(s) and the tax they already deducted—to the government in their own quarterly TDS statement using Form No. 138 (Annexure II).

Time Limit to Deposit the TDS of Section 392 of Income Tax Act

Under the Income-tax Act, 2025, the time limits and procedures for an employer to deposit the tax deducted on salary under Section 392 are clearly laid out, along with strict consequences for delays:

A. General Time Limit (Section 397) According to Section 397(3)(a), every employer responsible for deducting tax on salaries, or opting to pay tax out of their own pocket on non-monetary perquisites under Section 392(2)(a), is legally required to pay the amount to the credit of the Central Government “in such time as may be prescribed”.

Based on the text of Rule 218 you provided in your query, here is the plain-English breakdown of the deadlines for an employer to deposit TDS on salary (under Section 392) to the government.

1. For Non-Government Employers (Private Companies, Firms, Individuals, etc.)

• TDS deducted in March: You are given a bit of extra time. The tax must be deposited on or before 30th April.
• TDS deducted in any other month (April to February): The tax must be deposited on or before the 7th day of the following month. (For example, if you deduct TDS from an employee’s salary in August, you must deposit it to the government by the 7th of September).

2. For Government Employers

• Payment without a challan: If the government office is transferring the tax without producing a standard income-tax challan, it must be deposited on the exact same day the deduction is made.
• Payment with a challan: If they are using an income-tax challan, they follow the standard rule and must deposit it on or before the 7th day of the following month.

If an employer fails to meet these exact deadlines outlined in Rule 218, they officially become an “assessee in default” and trigger the 1.5% monthly penalty interest we discussed earlier.

Refer RULE 218 INCOME-TAX RULES 2026 Time and mode of payment to Government account of tax deducted or collected at source or tax paid under section 392(2)(a).

B. Special Deferral for Eligible Start-ups (ESOPs) There is a specific exception for start-ups under Section 392(3). If the employer is an “eligible start-up” (as per Section 140) and provides non-monetary perquisites in the form of specified securities or sweat equity shares to an employee, the tax deduction and deposit are deferred. The employer must deduct or pay the tax on these shares within 14 days of whichever of the following three events happens earliest:

• The expiry of 60 months from the end of the relevant tax year.
• The date the employee sells those specified securities or sweat equity shares.
• The date the employee ceases to be employed by the company that allotted the shares.

C. Strict Consequences for Late Deposit If an employer deducts the tax but fails to deposit it with the Central Government within the prescribed timeframe, they face severe legal and financial penalties:

• Assessee in Default: The employer will be officially deemed an “assessee in default” under Section 398(1).
• 1.5% Monthly Interest: Under Section 398(3)(a)(ii), the employer is liable to pay simple interest at 1.5% for every month (or part of a month) on the tax amount. This interest is calculated precisely from the date the tax was deducted to the date it is actually paid to the government.
• Rigorous Imprisonment: Failing to pay the deducted tax to the credit of the Central Government is a criminal offence under Section 476(1)(a). The responsible person can face rigorous imprisonment for a minimum term of 3 months, which can extend up to 7 years, along with a monetary fine.
• Exception to Imprisonment: However, Section 476(2) offers a small window of relief; the imprisonment provisions will not apply if the employer ultimately deposits the delayed tax before the prescribed deadline for filing the quarterly TDS statement (under section 397(3)(b)).

How to Deposit TDS on Salary online

Refer video on How to Deposit TDS of Salary as per new section codes after 1 april 2026 due to new Income Tax Act 2025

Filing of TDS Return by Employer

Employer’s Quarterly Reporting (Form No. 138) for TDS on Salary

Once the employer deducts the tax, they must deposit it with the government and file a quarterly TDS statement specifically for salaries using Form No. 138.

Frequency and Due Dates Form 138 must be filed quarterly. The specific due dates are:

• Quarter 1 (Apr – Jun): 31st July of the Financial Year.
• Quarter 2 (Jul – Sep): 31st October of the Financial Year.
• Quarter 3 (Oct – Dec): 31st January of the Financial Year.
• Quarter 4 (Jan – Mar): 31st May of the Financial Year immediately following the Tax Year.

Refer Form 138 Income Tax Rules 2026 Quarterly statement of deduction of tax under section 397(3)(b) of the Act in respect of salary paid to employee under section 392, or income of specified senior citizen under section 393(1) [Table: Sl. No. 8(iii)], for the quarter ended ……….. (June/September/December/March) ……. (Tax Year)]

Issue of TDS Certificate for TDS on Salary

Under the Income-tax Act, 2025, the provisions for issuing a TDS certificate for salary are primarily governed by Section 395(4).

Here is the complete breakdown of the rules and forms regarding the salary TDS certificate:

 Issue of TDS Certificate of Salary (Form No. 130)

Under Section 395(4)(a), every employer who deducts tax from an employee’s salary is legally obligated to issue a TDS certificate to the employee. This certificate replaces the old Form 16 and is now issued in Form No. 130. The certificate must explicitly specify:

• The amount of tax that has been deducted.
• The rate at which the tax has been deducted.
• Any other prescribed particulars. (Note: For TDS deducted on incomes other than salary, the certificate is issued in Form No. 131).

The due date for issuance of Form No. 130 is by the 15th June of the Financial Year immediately following the Tax Year in which the income was paid and tax was deducted

Refer Form 130 Income Tax Rules 2026 Certificate under section 395 for tax deducted at source on salary paid to an employee under section 392 or pension or interest income of specified senior citizen under section 393(1) [Table: Sl. No. 8(iii)] 

 Special Certificate for Tax Paid on Non-Monetary Perquisites’

If an employer provides non-monetary perquisites (like a company car or rent-free accommodation) and exercises the option under Section 392(2)(a) to pay the tax on these perquisites out of their own pocket instead of deducting it from the employee’s payout, a special provision applies. Under Section 395(4)(b), the employer must issue a specific certificate to the employee confirming that this tax has been paid to the Central Government on their behalf. This certificate must specify:

• The exact amount of tax so paid by the employer.
• The rate at which the tax was calculated and paid.

Statement of Perquisites (Form No. 123)

While Form 130 serves as the primary TDS certificate for the tax deducted, it is also accompanied by a mandatory statement regarding the valuation of the employee’s benefits. Under Section 392(5)(a), the employer must furnish a statement in Form No. 123, which contains the correct and complete particulars of the value of all perquisites, fringe benefits, or “profits in lieu of salary” provided to the employee during the tax year.

Consequences of Non-Compliance under Section 392 income tax

Based on our previous discussions regarding the Income-tax Act, 2025, failing to comply with the TDS provisions under Section 392—specifically, failing to deposit the tax deducted from an employee’s salary to the government within the prescribed time—triggers severe financial and legal consequences for the employer.

Here are the specific consequences of non-compliance:

1. Deemed “Assessee in Default”

If an employer deducts the tax but fails to deposit it with the Central Government by the prescribed deadline (such as the 7th of the following month, or 30th April for March deductions), they are officially classified as an “assessee in default” under Section 398(1).

2. Penal Interest of 1.5% Per Month

Under Section 398(3)(a)(ii), the defaulting employer is strictly liable to pay simple interest at 1.5% for every month (or part of a month) on the outstanding tax amount. This interest is calculated precisely from the date the tax was originally deducted from the employee’s salary until the date it is actually deposited to the government account.

3. Criminal Prosecution (Rigorous Imprisonment)

Failing to pay the deducted tax to the credit of the Central Government is not just a financial default; it is a criminal offence under Section 476(1)(a). The person responsible for the deduction can face rigorous imprisonment for a minimum term of 3 months, which may extend up to 7 years, along with a monetary fine.

4. Small Window for Relief from Imprisonment

The Act provides a conditional safeguard against criminal prosecution under Section 476(2). The imprisonment provisions will not be applied if the employer corrects their mistake and ultimately deposits the delayed tax before the prescribed deadline for filing their quarterly TDS statement (Form No. 138). However, the 1.5% monthly interest will still apply for the period of delay.

Frequently Asked Questions for TDS on Salary

1. Who is responsible to deduct and pay tax under Section 392?

Any employer responsible for paying income chargeable under the head “Salaries” must deduct this tax. The employer can be a Private or Public Company, Individual, HUF, Trust, Partnership firm, or Co-operative society. The legal status of the employer is irrelevant; the only requirement is a valid employer-employee relationship between the deductor and the deductee.

2. When should the tax be deducted under Section 392?

TDS on salary must be deducted at the exact time of the actual payment of the salary to the employee. Furthermore, if an employer provides non-monetary perquisites (like rent-free accommodation) and chooses the option to pay the tax on those perquisites out of their own pocket, this tax must also be paid at the exact time the regular salary deduction would have normally been made.

3. Circumstances where no tax needs to be deducted under Section 392?

No TDS is deducted if the employee’s total estimated taxable income for the year does not result in any final tax liability. For example, under the default New Tax Regime (Section 202), if an employee’s total taxable income does not exceed ₹ 12,00,000, they are eligible for a 100% tax rebate under Section 156(2). Since their final tax payable becomes zero, the employer will not deduct any TDS.

4. What is Form No. 130?

Under the Income-tax Act, 2025, the old Form 16 has been replaced by Form No. 130. Governed by Section 395(4)(a), it is the mandatory TDS certificate that every employer must issue to their employee. This certificate explicitly details the amount of tax that has been deducted from the salary and the average rate at which it was deducted.

5. What is the time limit to deposit the tax under Section 392?

As mandated by Section 397(3)(a) of the Act and specified in Rule 218 of the Income-tax Rules, 2026, the time limits are as follows:

• For Non-Government Employers: TDS deducted in the month of March must be deposited on or before 30th April. TDS deducted in any other month must be deposited on or before the 7th day of the following month.
• For Government Employers: The tax must be deposited on the same day if paid without an income-tax challan, or within 7 days of the following month if paid accompanied by a challan.
• Special Deferral for Eligible Start-ups: If an eligible start-up allots ESOPs/sweat equity shares, the tax deposit is deferred. It must be deposited within 14 days of the earliest of three events: the expiry of 60 months from the end of the tax year, the sale of the shares by the employee, or the employee’s resignation.

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