TDS on Salary and Form 24Q: The Employer’s Guide for India

The first time you run payroll for a salaried hire, you inherit a job the tax department has handed to you: deduct the right tax every month, deposit it on time, and prove it four times a year.

TDS on salary looks simple until an employee’s Form 16 does not match their Form 26AS, or a late deposit quietly grows an interest bill. This guide walks through the whole cycle: estimating the tax under Section 392, depositing by the 7th, filing Form 24Q each quarter, and issuing Form 16 by 15 June. We compute a real monthly figure so you can see exactly how the number is built.

1 What TDS on salary means and when it starts

Under Section 392 of the Income-tax Act, every employer paying a salary that is taxable must deduct income tax at source before paying the employee. There is no fixed percentage. You estimate the employee’s tax for the whole year at slab rates, then spread that tax across the remaining pay months.

Two things trigger the duty. First, the employee’s estimated annual salary crosses the basic exemption. Second, you hold a valid TAN (Tax Deduction and Collection Account Number), which is what you quote on every deposit and return. A PAN does not substitute for a TAN here.

How the monthly figure is built

The method is always the same three steps:

• Estimate gross salary for the full financial year, minus the standard deduction and any exemptions the regime allows.
• Compute the annual tax on that figure at slab rates, add 4% health and education cess.
• Divide by the number of pay months left in the year. That is the TDS you deduct this month.

Re-run it whenever pay changes (a raise, a bonus, a new proof), so the last months absorb the difference and the year ends balanced.

2 Computing monthly TDS: a worked example

Numbers make this concrete. Brewly, a coffee-tech startup, hires a manager on a gross salary of ₹18,00,000 a year and deducts under the default new regime.

Now take a lower-paid colleague to see the rebate at work.

3 Depositing the tax: the 7th-of-month rule

Deducting is only half the duty. The tax you withhold is government money you hold in trust, and it must reach the treasury fast.

4 Filing Form 24Q every quarter

Form 24Q is the quarterly statement of TDS on salary. Each return lists your employees, the salary paid, the tax deducted, and the challan details for the deposits you made. Miss the quarter and the Section 427 fee starts the next day.

The Q4 return carries an extra annexure with the full-year salary breakup for each employee, which is the source of their Form 16. Get Q4 right and Form 16 practically writes itself.

5 Form 16 and what non-compliance costs

After the year ends you download Form 16 from the TRACES portal and issue it to every employee by 15 June. Part A shows the tax deducted and deposited; Part B shows the salary and tax computation. It is the document employees use to file their own returns, so it must reconcile with what you filed in Form 24Q.

The costs of slipping are cumulative:

• Late filing of Form 24Q: a fee of ₹200 per day under Section 427, running until you file, capped at the TDS amount in the statement.
• Late deposit: interest of 1.5% per month on tax deducted but deposited late.
• Failure to deduct: interest of 1% per month, and the expense can be disallowed in the company’s own tax computation.

6 Your monthly and quarterly checklist

1. Get a TAN before your first salaried payout, and collect each employee’s regime choice and deduction proofs in April.
2. Estimate annual tax per employee, divide across pay months, and re-run it whenever pay or proofs change.
3. Deduct at payout and deposit by the 7th of the next month (March by 30 April).
4. File Form 24Q by 31 July, 31 October, 31 January and 31 May, including the Q4 salary annexure.
5. Download Form 16 from TRACES and issue it to every employee by 15 June.
6. Reconcile each employee’s Form 16 against their Form 26AS before year-end so nothing surfaces later.

7 FAQs

Disclaimer: This article is general information as of August 2026 and is not tax advice. Tax slabs, rates and due dates change from year to year and can vary by an employee’s regime choice. Confirm your specific obligations with a qualified professional before deducting or filing.