In short
- From 1 April 2026 the Income-tax Act, 2025 applies. Salary TDS is now section 392 (formerly 192), and the year is called the tax year (2026-27).
- Under the new regime, the default, a salary of up to about ₹12.75 lakh a year pays no tax: ₹75,000 standard deduction plus the rebate on income up to ₹12 lakh.
- Every employer that deducts tax needs a TAN, and pays the tax deducted by the 7th of the next month (March: by 30 April).
- File the quarterly salary statement, now Form 138 (formerly Form 24Q), by 31 July, 31 October, 31 January and 31 May.
- Give each employee Form 130 (formerly Form 16) by 15 June after the year. A late statement costs ₹200 a day.
What changed on 1 April 2026
The Income-tax Act, 1961 was replaced by the Income-tax Act, 2025 from 1 April 2026. Salary paid from that date (including April 2026 salary paid on 30 April) follows the new Act, and the employer starts a fresh TDS calculation for tax year 2026-27. The rates and limits for salary TDS did not change in the 2026 Budget; the section and form numbers did.
| What | Now | Formerly |
|---|---|---|
| Duty to deduct tax from salary | Section 392 | Section 192 |
| Quarterly TDS statement for salaries | Form 138 | Form 24Q |
| Salary TDS certificate to the employee | Form 130 | Form 16 |
| Employee's claims and proofs (rent, LTA, deductions) | Form 124 | Form 12BB |
| Salary from a previous employer, other income | Form 122 | Form 12B |
| Statement of perquisites | Form 123 | Form 12BA |
| TAN application | Form 135 (Form 134 for government) | Form 49B |
| Annual information statement | Form 168 | Form 26AS |
| Challan to pay TDS | ITNS 281N (e-Pay Tax) | ITNS 281 |
| Late-filing fee | Section 427 | Section 234E |
How much to deduct
The employer estimates each employee's salary income for the whole year, works out the tax on it at the year's rates, and deducts it at the average rate from each payment. Later deductions can be raised or lowered in the same year to correct an excess or shortfall, for example after a raise or new investment proofs.
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 to ₹8,00,000 | 5% |
| ₹8,00,001 to ₹12,00,000 | 10% |
| ₹12,00,001 to ₹16,00,000 | 15% |
| ₹16,00,001 to ₹20,00,000 | 20% |
| ₹20,00,001 to ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
- Standard deduction: ₹75,000 from salary under the new regime (₹50,000 under the old regime).
- Rebate: under the new regime, no tax when taxable income is up to ₹12 lakh (rebate up to ₹60,000), with marginal relief just above it.
- Cess: 4% health and education cess on the tax. Surcharge starts above ₹50 lakh and is capped at 25% under the new regime.
Example: an employee on ₹15 lakh a year under the new regime. Taxable income: ₹15,00,000 − ₹75,000 = ₹14,25,000. Tax: ₹20,000 (4-8 lakh) + ₹40,000 (8-12 lakh) + ₹33,750 (15% of ₹2,25,000) = ₹93,750, plus 4% cess = ₹97,500, or about ₹8,125 a month.
Old or new regime, and the employee's declarations
- The new regime is the default. The old regime (slabs from ₹2.5 lakh, with HRA, LTA and deductions such as PF, life insurance and home-loan interest) still exists for those who choose it; the final choice is made in the employee's income-tax return.
- In practice employers ask each employee at the start of the year which regime to use for TDS, and work it out on the new regime when the employee says nothing.
- An employee on the old regime gives the claims and proofs in Form 124 (formerly 12BB). The landlord's PAN is needed when the year's rent is above ₹1 lakh.
- An employee who changed jobs during the year can report the earlier salary and its TDS in Form 122 (formerly 12B), so the new employer deducts the right amount.
TAN and paying the tax deducted
- TAN: every employer that deducts tax must have a tax deduction account number and quote it on every challan, statement and certificate. Apply in Form 135 (formerly 49B). Not having one can cost a ₹10,000 penalty.
- Pay the tax deducted in a month by the 7th of the next month; tax deducted in March by 30 April. Government offices paying without a challan pay the same day.
- Pay online through e-Pay Tax on the income-tax portal with challan ITNS 281N, choosing tax year 2026-27 and "TDS payable by taxpayer".
- With the Assessing Officer's approval, an employer can be allowed to pay salary TDS quarterly: by 7 July, 7 October, 7 January and 30 April.
Quarterly statements and Form 130
| What | Covers | Due |
|---|---|---|
| Form 138 (formerly 24Q), quarter 1 | April to June | 31 July |
| Form 138, quarter 2 | July to September | 31 October |
| Form 138, quarter 3 | October to December | 31 January |
| Form 138, quarter 4 (with the full-year salary details) | January to March | 31 May |
| Form 130 (formerly Form 16) to each employee | The whole tax year | 15 June after the year |
Form 130 is downloaded from TRACES once the statements are processed, and signed by the employer, digitally or by hand. The tax deducted then shows in the employee's annual information statement (Form 168), which they use for their own return.
What a missed step costs
| Default | Consequence |
|---|---|
| Tax not deducted | Interest at 1% a month from when it should have been deducted; a penalty up to the tax not deducted; the employer is treated as in default |
| Tax deducted but paid late | Interest at 1.5% a month from deduction to payment. Keeping back tax deducted is also an offence: a fine, and imprisonment when it is more than ₹10 lakh |
| Form 138 filed late | Fee of ₹200 a day until it is filed, up to the tax deducted, paid before filing |
| Form 138 not filed or wrong | Penalty of ₹10,000 to ₹1 lakh. None if the tax, fee and interest are paid and the statement is filed within one month of the due date |
| Form 130 not given | ₹500 a day, up to the tax deducted |
| No TAN | Penalty of ₹10,000 |
Interest and the late fee must be paid before the statement is filed. Filing on time costs nothing, so a short checklist after each payroll run is the cheapest fix.
Questions people ask
What is the section for TDS on salary now?
Section 392 of the Income-tax Act, 2025, from 1 April 2026. It was section 192 of the Income-tax Act, 1961.
What replaced Form 16 and Form 24Q?
Form 130 replaced Form 16 (the salary TDS certificate) and Form 138 replaced Form 24Q (the quarterly salary TDS statement) under the Income-tax Rules, 2026.
Up to what salary is there no TDS?
Under the new regime, taxable income up to ₹12 lakh carries no tax because of the rebate. With the ₹75,000 standard deduction, a salary of up to about ₹12.75 lakh a year (with no other income) has no TDS.
When must TDS on salary be paid?
By the 7th of the following month. Tax deducted in March is paid by 30 April.
What are the due dates for Form 138 (24Q)?
31 July, 31 October and 31 January for the first three quarters, and 31 May for January to March.
What is the late fee for a TDS return?
₹200 a day until the statement is filed, up to the amount of tax deducted. It is paid before filing.
Can an employee choose the old regime?
Yes. The new regime is the default; the old regime remains for those who want HRA and deductions. Employees usually tell the employer at the start of the year so TDS follows their choice, and make the final choice in their return.
Sources
Written from these official pages and notifications, checked on 4 Nov 2026. Rules change by notification: before you act, check the latest position or ask us.
- Income-tax Act, 2025 (gazette): sections 19, 156, 202, 392 to 398, 427, 461 to 468
- Finance Act, 2026 (gazette): rates for tax year 2026-27
- Income-tax portal: TDS compliance FAQ for tax year 2026-27
- Income-tax portal: Form 138 (formerly 24Q) user manual
- Income-tax portal: challan ITNS 281N
- CBDT: Form 130 FAQs (salary TDS certificate)
- CBDT: Form 124 FAQs (employee's claims)
- CBDT: Form 134 and 135 FAQs (TAN)
General information, not legal or tax advice for your case. Parishrama Consulting Services is a private firm, not a government office.