TDS on Salary FY 2025-26: New vs Old Tax Regime, Slabs, Form 16 and Calculation Guide

New Tax Regime Is the Default for Salary TDS

For FY 2025-26, the new tax regime remains the default regime. If you want your employer to calculate TDS under the old regime, you should intimate the employer during the year and submit the required deduction details.

This employer intimation is only for TDS calculation. For salaried taxpayers without business income, the final regime choice is still made while filing the income tax return , subject to applicable rules. So, an employee may have TDS deducted under one regime during the year but choose the other regime while filing ITR, if eligible.

Income Tax Slabs for FY 2025-26

New Tax Regime Slabs

Old Tax Regime Slabs

Senior citizens get a basic exemption limit of ₹3,00,000 and super senior citizens get ₹5,00,000 under the old regime. 

Section 87A Rebate and Marginal Relief

Section 87A Example

Marginal relief ensures that when taxable income slightly exceeds ₹12,00,000 under the new regime, the extra tax payable does not exceed the extra income above ₹12,00,000. In simple terms, tax after marginal relief = excess income over ₹12,00,000, plus applicable cess . For example, if taxable income is ₹12,25,000, the excess income is ₹25,000, so tax is restricted to about ₹25,000 plus 4% cess, instead of the normal slab tax amount.

How Salary TDS Is Calculated

Under the New Regime

1. Add salary components such as basic salary, DA, HRA, allowances, bonus and taxable perquisites .
2. Subtract standard deduction of ₹75,000.
3. Add other income declared to the employer, if any.
4. Apply the new regime slab rates.
5. Check Section 87A rebate and marginal relief, if applicable.
6. Add 4% Health and Education Cess.
7. Divide the annual tax by the remaining salary months for TDS deduction.

Under the Old Regime

1. Add all salary components.
2. Subtract standard deduction of ₹50,000.
3. Allow eligible exemptions such as HRA and LTA, based on proof and conditions.
4. Allow eligible deductions such as 80C, 80D, 80E, home loan interest and NPS, where applicable.
5. Apply old regime slab rates.
6. Apply Section 87A rebate if taxable income does not exceed ₹5,00,000.
7. Add 4% Health and Education Cess.
8. Divide annual tax by the remaining months for salary TDS.

For example, suppose gross salary is ₹10,00,000. In this case, the new regime is better because the Section 87A rebate wipes out the full tax liability.

For example, gross salary is ₹15,00,000. In this case, the new regime still gives lower TDS even after considering old regime deductions of ₹4.5 lakh including standard deduction.

New Regime vs Old Regime: Which One Should You Choose?

The better regime depends on the employee’s actual salary structure, deductions and exemptions. The new regime is usually easier for employees who do not claim high deductions. It also works well where the rebate benefit makes the final tax very low or nil.

The old regime can still be useful when the employee has strong recurring claims such as HRA, 80C investments, health insurance, home loan interest or NPS. The safest approach is to compare the final tax under both regimes rather than choosing based solely on habit or investment amount.

A practical rule is simple: if your deductions are low, test the new regime first. If you have high rent, home loan interest and full deduction claims, compare both before informing your employer.

Form 12BB and Investment Proofs

Form 12BB is used by employees to submit claim details and supporting evidence to the employer for salary TDS calculation . It is relevant mainly when an employee wants old regime benefits such as HRA, LTA, home loan interest, and Chapter VI-A deductions. Section 192 also allows the employer to obtain evidence or proof of prescribed claims before considering them for TDS.

Form 16 and Form 24Q

Form 16 is the annual salary TDS certificate issued by the employer to an employee when tax is deducted from salary under Section 192 of the Income-tax Act, 1961. It has two parts:

For FY 2025-26, employers must issue Form 16 by 15 June 2026. Employees should match Form 16 with Form 26AS and AIS before filing their income tax return to confirm that TDS has been correctly deducted and credited. The Income Tax Department lists Form 16 as the employer-issued salary TDS certificate with a due date of 15 June every year.

Form 24Q is the quarterly TDS statement filed by employers for salary payments and TDS deducted under Section 192. It continues to apply for FY 2025-26. The Q4 Form 24Q is especially important because it contains the full-year salary, exemption, deduction and tax details used for Form 16 preparation . The quarterly TDS statement due dates are 31 July, 31 October, 31 January and 31 May.

From 1 April 2026 onward, under the Income Tax Act, 2025 framework, salary TDS reporting will move to new forms: Form 16 is replaced by Form 130, and Form 24Q is replaced by Form 138. However, these new form references should not replace Form 16 and Form 24Q in a guide focused on FY 2025-26 salary income.

Employer TDS Deposit Deadlines and Penalties

TDS Deposit Due Dates

Employers must deposit the TDS deducted from employees' salaries within the prescribed due dates . The deadline depends on the type of deductor and the month in which TDS is deducted.

Form 24Q Filing Due Dates

Apart from depositing TDS, employers must also file Form 24Q every quarter to report salary payments and TDS details. These due dates help employees receive correct TDS credit in Form 26AS and AIS.

Penalties and Consequences

Delay or default in deducting, depositing, or reporting salary TDS can lead to interest, late fees, penalties, and a risk of prosecution in serious cases. The consequences vary depending on the type of default.

The employer should not treat salary TDS as a year-end activity. It needs monthly tracking because bonus, arrears, perquisites, previous employment income and late proofs can all change the final TDS calculation.

If an employee changes jobs during FY 2025-26, the new employer may not automatically have access to the salary and TDS details from the previous employer. The employee should submit previous salary and TDS details, usually through Form 12B or the employer’s internal declaration format. This avoids under-deduction. Without prior salary details, the new employer may calculate TDS only on the new salary, resulting in a tax shortfall at the time of ITR filing.

Common Mistakes to Avoid

• Do not treat ₹12.75 lakh as a flat exemption limit. It works because of the standard deduction and Section 87A rebate, subject to eligibility.
• Do not assume the tax suddenly jumps to the full slab amount when income slightly crosses ₹12 lakh. Marginal relief may apply in eligible new-regime cases.
• Do not opt for the old payroll regime without submitting the required proof. The employer may disregard unsupported claims when calculating the final TDS.
• If you changed jobs during the year, share your previous salary and TDS details with the new employer early.
• If Form 16, Form 26AS, and AIS do not match, get the issue corrected before filing your return.

Conclusion

TDS on salary for FY 2025-26 requires careful handling because the new tax regime offers significant relief, but only when the income and rebate conditions are correctly understood. Salaried employees with normal income up to ₹12.75 lakh can generally pay zero tax under the new regime due to the ₹75,000 standard deduction and the Section 87A rebate.

The old regime is still useful for employees with strong recurring deductions such as HRA, 80C, 80D, home loan interest, and NPS. The right choice depends on actual numbers, not assumptions. Employees should declare their regime on time, submit proofs early, check Form 16 against Form 26AS and AIS, and keep previous employer salary details ready if they changed jobs during the year.

Businesses can also use BUSY accounting software to manage payroll, TDS tracking and business accounts in one place.