The new TDS rules on salary are very radical in the financial year 202526. These changes would be to make taxation simpler, offer fair deductions, and introduce more transparency between the employers and employees. We should know how the new TDS system will affect people who are paid a salary and what measures are necessary to comply with it effectively.
Key Highlights of the New TDS Rules on Salary
- There is an increase in the Basic Exemption Limit: The new regime has increased the exemption limit of the new TDS rules on salary to 4,00,000. The workers who have a lower earning than this limit will not be subjected to TDS deduction.
- The standard deduction will be improved: The standard deduction has been raised to 75,000 instead of 50,000, which lessened the taxable income and tax deduction.
- Adjusted Perquisites Thresholds: Perquisites like accommodation, medical, and meal allowances now have increased tax-free thresholds, which give increased take-home pay.
- Compulsory Declaration of Regime: This means that employees have to indicate by the beginning of each financial year whether they are choosing to be on the old regime or the new regime. The new TDS rules about the salary will be used by the employers depending on this decision.
- Revised TDS Computation: TDS will be calculated monthly and the employer will take into account the regime chosen by the employee, the investments reported by the employee, exemptions and deductions made by the employee.
How the New TDS Deduction Works?
Section 192 of income tax act provides that employers are obliged by the law to deduct tax at source on the salaries. The new TDS rules on salary include a simplified breakdown as follows:
- Determine the taxable income of the employee annually.
- Adjust exemptions, deductions and choice of regimes.
- Proportional deduction of TDS and total tax liability calculated on a per month basis.
- Remit the amount deducted to the Central Government within a due date.
In case the taxable income of an employee is not greater than the exemption limit, no TDS would be deducted.
Importance of Timely TDS Return Filing
Compliance does not finish with deduction, as it goes as far as TDS return filing, where the correct reflection of tax credit on the employees is made. Some of the important details to be remembered while TDS return filling are:
- TDS on salaries should be liable to be disclosed quarterly in Form 24Q.
- Presentation of tds return filing:
- Q1 (Apr–Jun): 31 July 2025
- Q2 (Jul–Sep): 31 October 2025
- Q3 (Oct–Dec): 31 January 2026
- Q4 (Jan–Mar): 31 May 2026
- Failure to file tds returns on time is subject to a fine of 200 per day under Section 234E which has a limit of the entire amount of tds.
Proper TDS return filing ensure the employee the proper tax credit in their Form 26AS and AIS returns besides avoiding the penalties.
Impact on Salaried Individuals
The new TDS regulations on wage will favour the middle-income earners because the exemptions will increase and deductions will be reduced each month. Nevertheless, employees are expected to confirm their payslips and Form 26AS regularly in order to make sure that TDS is paid properly.
The individuals who have other income sources are supposed to report them as early as possible to prevent under-deduction. The correct regime (old vs. new) that should be selected at the beginning of the year may also help to avoid the unnecessary TDS and make the final filing of the tax less complicated.
The new TDS ruling on salary under the Income Tax Act 2025 is a significant stride towards ease and convenience to the taxpayer. Employers should be concerned with their timely compliance and proper tds return filing, whereas the employees should remain active in terms of their declarations and tax planning. Being updated today is the way to easy returns tomorrow.
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