A 25-person architecture practice in Pune pays two of its people the same ₹18,00,000 a year. In April, one of them owes about ₹12,567 of tax a month and the other about ₹10,335. By January the second figure has nearly doubled, and none of it is a mistake. This post walks through why, and through everything else an employer is on the hook for when it pays a salary that attracts tax.
TDS on salary employer responsibility, in six duties
- Have a TAN. The tax deduction account number goes on every deposit and every return. Apply for it before the first salary that attracts tax.
- Ask for the regime and the claims. At the start of the year, or when somebody joins, each employee says which regime they want and, under the old regime, what they'll claim.
- Work out the year's tax and deduct a share each month. The deduction is an estimate of the whole year's tax, spread over the months left, and it's reworked whenever the inputs change.
- Deposit it. By the 7th of the following month, and by 30 April for March.
- File the quarterly return. Form 138 from 2026-27, which was Form 24Q until 2025-26.
- Issue Form 16, under its new number from 2026-27. Each employee gets it after the year closes, and files their own return from it.
An employer that deducts and doesn't deposit is in a worse position than one that never deducted at all, because it's now holding the employee's money. That's why the dates matter as much as the arithmetic.
TDS on salary calculation, for two people on ₹18,00,000
Farah, a senior architect, didn't hand in any declaration. Since the new regime is the default, the practice deducts under it. Her salary less the ₹75,000 standard deduction leaves ₹17,25,000 of taxable income, the tax on it for the year is ₹1,50,800, and that divided by 12 is ₹12,567 a month.
Vikram, a project lead, rents a flat in Pune and pays for his parents' health insurance. He chose the old regime and declared his claims in April: rent that makes ₹4,50,000 of his HRA exempt, ₹1,50,000 under 80C, ₹75,000 of health insurance for himself and his parents, and ₹50,000 into NPS. With those, and the old regime's ₹50,000 standard deduction, his tax for the year is ₹1,24,020, against ₹1,50,800 under the new regime.
₹12,567Farah, a month, new regime
₹10,335Vikram in April, old regime
₹19,695Vikram from January
In January the practice asks for proofs. Vikram's rent receipts and insurance are in order, but his 80C proofs add up to ₹60,000, not ₹1,50,000. His tax for the year goes up to ₹1,52,100. Nine months at ₹10,335 have already taken ₹93,015, so the rest, ₹59,085, is spread over January, February and March: ₹19,695 a month.
What April's choice cost him: on the claims he could prove, the old regime now charges ₹1,52,100 and the new one ₹1,50,800. The employer has to deduct under the regime he declared, but he isn't stuck with it. He can pick the new regime when he files his own return and get the difference back as a refund.
This is the part people get wrong in a spreadsheet. The monthly figure is always the year's tax, less what's been deducted, divided by the months left, and it has to be worked out again every time something changes: a raise, a bonus, a proof that falls short, a new joiner halfway through the year. Divide the year's tax by 12 once in April and March ends with a surprise.
The employee tax regime declaration
The new regime applies unless the employee tells you otherwise. It has lower slabs and few deductions, and a rebate that means nobody pays tax on taxable income up to ₹12,00,000. The old regime keeps the exemptions and deductions most people remember: HRA, 80C, 80D, home-loan interest and the rest.
| Salary a year | Tax, new regime | Tax, old, no claims |
|---|
| ₹12,75,000 | ₹0 | ₹1,87,200 |
|---|
| ₹13,00,000 | ₹26,000 | ₹1,95,000 |
|---|
| ₹18,00,000 | ₹1,50,800 | ₹3,51,000 |
|---|
The first two rows are ₹25,000 of salary apart and ₹26,000 of tax apart under the new regime. Past the rebate, marginal relief lets the tax catch up with the income above ₹12,00,000 of taxable income, and cess goes on top. Somebody just over the line can end up with less in hand than somebody just under it, which is worth knowing before you set a raise.
For most salaried people the new regime is cheaper, and the tax regime calculator works out how much somebody would need to claim under the old one to break even. Ask for the choice in writing at the start of the year, with the claims beside it, and ask for proofs before the last quarter. The employee's statement of claims, Form 12BB under the old Act, is the record of what they told you to allow.
How a salary is split into Basic, HRA and allowances changes the HRA exemption and the PF, so it changes TDS too. CTC to in-hand salary covers the split.
Deposit dates and the Form 24Q quarterly return
The TDS deducted in a month is deposited by the 7th of the next month, with one exception: tax deducted in March is due by 30 April. The quarterly return then reports, employee by employee, what was deducted and which deposit it went into.
The Income-tax Act, 2025 took effect on 1 April 2026, and it renumbered the forms. The quarterly return for salaries is Form 138 from 2026-27. For every quarter up to March 2026 it's still Form 24Q, and plenty of people and portals will keep calling it that for a while. It's the same return with a new number.
| Quarter | Months | Return due by |
|---|
| Q1 | Apr 2026 to Jun 2026 | 31 Jul 2026 |
|---|
| Q2 | Jul 2026 to Sep 2026 | 31 Oct 2026 |
|---|
| Q3 | Oct 2026 to Dec 2026 | 31 Jan 2027 |
|---|
| Q4 | Jan 2027 to Mar 2027 | 31 May 2027 |
|---|
The fourth quarter gets two months instead of one, because its return carries the annexure that reconciles the whole year for each employee. It's the one most often filed late. The compliance calendar has every date for the year, with PF and ESI beside them, and adds them to your own calendar.
Form 16 for employees
Form 16, which the Income-tax Rules 2026 renumber from the 2026-27 tax year (widely reported as Form 130; TRACES will show the number it issues), is the certificate of the tax deducted from somebody's salary, and it's what they file their own return from. Part A lists what was deducted and deposited each quarter, and it comes from the department's TRACES portal once the returns are filed. Part B is the working from gross salary to tax, which the employer prepares. It goes to each employee by 15 June after the year ends.
The new number is the only real change. The content is the same: if the returns were filed correctly, Part A matches what the employee sees in their own tax statement, and Part B matches their payslips.
When it goes wrong
- Tax not deducted carries interest for every month it's late, and the employer can be treated as the one in default for the tax itself.
- Tax deducted and not deposited carries a higher rate of interest, and it's the one the department pursues hardest.
- A late return costs a fee for each day it's late, capped at the tax in the return.
Almost every one of these starts with the monthly working being done by hand, late, from the wrong figures. Get the April declaration, the January proofs and the monthly deposit right, and filing the returns becomes routine.
