TDS on Salary Calculation – Tax Slab, Eligibility, Limits & Online Payment

To calculate ‘TDS for Salary’ – it is imperative to define which earnings come under salary. Salary is the type of payment received on specific intervals and by a specific amount for providing certain services as per a contract signed by two parties namely – the employer and the employee. If the relationship between the two parties connected by payment terms are not ‘Employer and Employee’, then the concept of salary does not work even though payment is given and income is earned. Such cases are called non-salary incomes.

Some of these include: Fees for technical or professional services, Payments to contractors and sub-contractors, Payment of Dividends, Interest earned on securities, Interests earned on Bank deposits, Payments for repurchase of units by Unit Trust of India or a Mutual Fund, Prizes from winning lottery or crossword puzzles, Commission and other profits on sale of lottery tickets, Payment of Insurance Commission, commission or brokerage, Rent and so on.

To calculate the income tax on salary, the first thing to consider is the Income Tax slabs decided by the Income Tax Department of India for the financial year.

For financial year of 2025-26, the Tax slabs are as follows:

For all three categories in addition to appropriate taxes, the following are also collected :

Salary consists of several components which together makes the CTC of the employee. The key component parts of salary include:

While talking about Tax calculations, the first thing comes up in this context is the tax deductions and exceptions that are available in the Indian Tax return contexts. Both deduction and exemption of taxes are the ways to lower the tax burden and give some benefits to the people.

There will be certain standard tax exemptions allowed by the Government of India. While computing TDS for the salary, these exemptions are deducted first from the total annual salary as per specification of Income Tax Department of India. Then tax is calculated on the non-exempt part of annual income. There are several provisions by Income Tax Department of India regarding availing tax exemptions. The employees need to submit those proofs of exemption along with the declaration to their employers so that TDS could be computed properly. Employer is responsible for computation of TDS based on the proofs and declaration, deducting the taxes from salary and depositing those with the authority.

Deduction of allowances under Section 10A of IT Act

Cumulative total for Sections 80C, 80CCC and 80CCD cannot go beyond Rs. 200,000 i.e. Rs. 1.5 lakhs plus an additional Rs. 50,000 is tax deductible for NPS contribution.

For Senior citizens and super senior citizens, it is Rs. 1,00,000 exemption.

There are some other profession-specific sub-sections where the TDS is applicable. These Government supported tax saving benefits include:

TDS return filing dates for FY 2025-26

Below mentioned is the given format for calculation of TDS on Salary (in Rs.):

Gross annual salary

Less: Exemption under Section 10 (Rs.)

(i.e. HRA, Conveyance Allowance, Medical Allowance, etc.)

Income chargeable under Salary head

Add: Income from House Property

Rental Income

Less: deduction under Sec. 24(b)

– 30% of rental Income

– Interest paid on housing loan

Add: Income from any Other Sources

Gross Total Income

Less: Chapter VI-A deduction

Taxable Income

Tax deduction at source is a system where income tax is deducted at the time of making payment by the employer to the employee. The TDS amount deducted shall be deposited to the government within the due dates specified. With the advent of technology, TDS on salary can be paid through online mode easily.

Let’s have a look at the steps for making payment of TDS on Salary:

Step 1: Visit the NSDL’s website at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp for e-payment of taxes.

Step 2: Select “CHALLAN NO./ITNS281” under TDS/TCS section. After clicking you will be redirected to e-payment page.

Step 3: Select ‘Company Deductees’ under Tax applicable section, if TDS deducted is made for payment to company. In any other case, select ‘Non- Company Deductees’.

Step 4: Enter your TAN and Assessment Year for which the payment is to be made. Fill in your ‘Pin Code’ and ‘State’ from the drop down menu.

Step 5: Select whether the payment is made for TDS deducted and payable by you or TDS on regular assessment.

Step 6: Select ‘Nature of Payment’ and ‘Mode of Payment’ for further processing for payment of TDS on Salary and then click submit button.

Step 7: After submission, a confirmation screen will be displayed. On confirmation of the data entered you will be redirected to net banking portal of your bank.

Step 8: Enter your credentials for payment. On successful payment, a challan counterfoil will be displayed containing CIN, payment details, and bank name through which e-payment has been made. Keep this counterfoil with you as this acts as a proof for the payment made.