Why TDS on Salary Matters for Every Employee
TDS on salary is the amount your employer deducts monthly toward your annual income tax. While you can't eliminate TDS entirely, you CAN significantly reduce it by claiming the right deductions, submitting investment proofs on time, and choosing the optimal tax regime. Every rupee saved in TDS increases your monthly take-home — over a career, optimising TDS can save lakhs. Many employees lose thousands each year simply because they don't declare investments, forget rent receipts for HRA, or miss proof submission deadlines. Use our CTC to In-Hand Calculator to see your take-home after all deductions.
Section 80C: The ₹1.5 Lakh Workhorse
Section 80C allows deduction of up to ₹1,50,000 from gross total income. Eligible investments include: Employee PF (mandatory — your 12% EPF contribution counts automatically), PPF (15-year lock-in, tax-free interest), Life Insurance Premiums, ELSS mutual funds (3-year lock-in), 5-year Tax-Saving FDs, NSC, Tuition Fees for up to 2 children, Home Loan Principal Repayment, Sukanya Samriddhi Yojana, and Senior Citizens Savings Scheme. The ₹1.5 lakh is combined across ALL 80C items. See our CTC Structure guide for how 80C investments fit into salary planning.
Section 80D: Health Insurance Premiums
Self + spouse + children: Up to ₹25,000 (₹50,000 if senior citizen). Parents: Additional ₹25,000 (₹50,000 if senior citizens). Preventive health check-up: ₹5,000 within above limits. Maximum: ₹1,00,000 if all insured are seniors.
Section 80CCD(1B): NPS Additional ₹50,000
Exclusive ADDITIONAL deduction over and above 80C's ₹1.5 lakh for NPS Tier I contributions. For retirement comparisons, use our EPF Calculator.
HRA Exemption and Other Key Deductions
HRA exemption under Section 10(13A) = lowest of actual HRA, 50% basic (metro) or 40% (non-metro), or rent minus 10% basic. Use HRA Calculator. Standard Deduction: Flat ₹50,000. Home Loan Interest: Up to ₹2,00,000 (Section 24). Education Loan Interest: No limit (Section 80E, 8 years). Savings interest: ₹10,000 (80TTA) / ₹50,000 (80TTB seniors).
Employer TDS Compliance: What Every Kerala Business Must Know
TDS on salary is not just an employee concern — it imposes significant compliance obligations on the employer as well. The Income Tax Act contains specific provisions regarding how TDS must be computed, deducted, deposited, and reported, with strict penalties for non-compliance:
- Form 16 must be issued by 15th June: Every employer must issue Form 16 to each employee by 15th June of the financial year following the year in which TDS was deducted. Form 16 contains the employee's PAN, the employer's TAN, gross salary, deductions claimed, and TDS deducted. Late issue of Form 16 attracts a penalty of ₹100 per day under Section 272A. This is a common compliance gap in small Kerala establishments.
- TDS deposit deadline is 7th of the following month: All TDS deducted from salaries must be deposited with the government by the 7th of the following month. Late deposit attracts interest at 1.5% per month for delay in TDS payment (not deducted) and 1% per month for TDS deducted but not deposited. The TAN (Tax Deduction Account Number) must be quoted on all challans and returns.
- Quarterly TDS returns (Form 24Q): Every deductors must file Form 24Q — the quarterly TDS return for salaries — by the 31st of the month following each quarter (31st July, 31st October, 31st January, and 31st May for Q4). The return must include PAN of all employees, the salary paid per quarter, TDS deducted, and TDS deposited. The Income Tax Department cross-verifies this data with the employee's individual ITR — any mismatch triggers an automated notice.
- Correct tax regime computation: Since FY 2023-24, the new tax regime is the default. Employees who want to stay in the old regime must submit Form 10-IEA (or the relevant declaration) to the employer at the beginning of the financial year. If an employee fails to submit this form, the employer must compute TDS under the new regime. Mid-year changes in regime are not permitted (can be changed only when filing the ITR).
- Declaration verification: Employers are not required to verify the supporting documents for an employee's investment declarations (rent receipts, insurance premiums, etc.) but must retain them as part of the employee's tax records for 6 years. If the Income Tax Department discovers false declarations during assessment, the primary liability is on the employee — not the employer — provided the employer computed TDS based on the declarations given.
For hassle-free TDS compliance, our Payroll Services include TDS computation, Form 16 generation, quarterly TDS return filing, and PAN/TAN management. Contact us for a payroll compliance assessment and ensure your TDS processes are error-free.
Old vs New Tax Regime 2026-27
| Feature | Old Regime | New Regime (Default) |
|---|---|---|
| Exemption Limit | ₹2,50,000 | ₹3,00,000 |
| 80C, 80D, HRA, etc. | Available | Not available |
| Standard Deduction | ₹50,000 | ₹75,000 |
| Best for | High investments/expenses claiming deductions above ~₹2L | Low investments or simplified filing |
If your total deductions exceed approximately ₹2,00,000, the old regime typically results in lower tax. Otherwise, the new regime is simpler and often better. Use our CTC to In-Hand Calculator to compare both regimes side by side.
📊 See Your Take-Home After All Deductions
Calculate your exact monthly take-home pay, accounting for PF, ESIC, PT, TDS, 80C investments, and HRA exemption — all in one place.
Open CTC to In-Hand Calculator →TDS Compliance for Kerala Employers
Employers must correctly compute TDS based on declared investments, deduct monthly, deposit by 7th of following month, and issue Form 16 by 15th June. Incorrect TDS deduction creates compliance issues for both employer and employee. GHR Consultancy's Payroll Services include TDS computation, Form 16 generation, and quarterly TDS return filing. Read our Professional Tax Guide and CTC Structure Guide. Contact us for a payroll compliance assessment.