Understanding TDS on Salary: Calculations for Rs 15, 20, 25 Lakh CTCs

Understanding Tax Deducted at Source (TDS) on your salary is crucial. Employers calculate your annual tax liability based on declared income and deductions, then divide it to deduct tax monthly. This ensures smooth tax collection throughout the year. The article details TDS calculations for CTCs of Rs 15, 20, and 25 lakh under both old and new tax regimes, offering insights for salaried individuals.

At the start of a financial year, based on what an employee declares, the employer takes out tax deducted at source (TDS) from the employee's salary. In simple terms, the employer has to deduct tax from the employee's salary whenever they make a payment, whether it's the monthly salary, bonuses, allowances, or any taxable perks.

But keep in mind that this TDS deduction isn't a one-size-fits-all percentage for every employee. Keep reading to learn more about how TDS is deducted from salary and what happens for CTCs of Rs 15 lakh, Rs 20 lakh and Rs 25 lakh. Also note that the ITR filing due date for Salaried, pensioners, students and others who are not required to conduct an income tax audit is on or before July 31, 2027. For AY 2026-2027, the ITR filing due date is July 31, 2026.

Calculations for TDS on salary work for CTC of Rs 15 lakh, Rs 20 lakh, Rs 30 lakh under new and old tax regime

The calculations are based on Tax Year 2026-2027 and Income Tax Rules, 2026.

CTC: Rs 15 lakh

ParticularsCTC - 15 LakhOld Tax RegimeNew Tax RegimeBasic Salary5,62,5005,62,500Dearness Allowance1,87,5001,87,500Other Salary Components7,50,0007,50,000Gross pay15,00,00015,00,000Less: Standard deduction50,00075,000Less: Children Education Allowance72,000- Less: Hostel Expenditure Allowance2,16,000- Taxable salary11,62,00014,25,000Loss from Self Occupied Property(2,00,000)- Less: Deduction u/s 80C1,50,000- Less: Deduction u/s 80CCD(2) - Employer's NPS Contribution75,0001,05,000Less: Deduction u/s 80CCD(1B) - NPS50,000- Less: Deduction u/s 80D Health insurance50,000- Net taxable salary6,37,00013,20,000Total Tax Liability41,50081,120TDS to be Deducted Per Month3,4586,760

CTC: Rs 20 lakh

Particulars CTC - 20 LakhOld Tax RegimeNew Tax RegimeBasic Salary7,50,0007,50,000Dearness Allowance2,50,0002,50,000Other Salary Components10,00,00010,00,000Gross pay20,00,00020,00,000Less: Standard deduction50,00075,000Less: Children Education Allowance72,000- Less: Hostel Expenditure Allowance2,16,000- Taxable salary16,62,00019,25,000Loss from Self Occupied Property(2,00,000)- Less: Deduction u/s 80C1,50,000- Less: Deduction u/s 80CCD(2) - Employer's NPS Contribution1,00,0001,40,000Less: Deduction u/s 80CCD(1B) - NPS50,000- Less: Deduction u/s 80D Health insurance50,000- Net taxable salary11,12,00017,85,000Total Tax Liability1,51,9401,63,280TDS to be Deducted Per Month12,66213,607

CTC: Rs 25 lakh

Particulars CTC - 25 LakhOld Tax RegimeNew Tax RegimeBasic Salary9,37,5009,37,500Dearness Allowance3,12,5003,12,500Other Salary Components12,50,00012,50,000Gross pay25,00,00025,00,000Less: Standard deduction50,00075,000Less: Children Education Allowance72,000- Less: Hostel Expenditure Allowance2,16,000- Taxable salary21,62,00024,25,000Loss from Self Occupied Property(2,00,000)- Less: Deduction u/s 80C1,50,000- Less: Deduction u/s 80CCD(2) - Employer's NPS Contribution1,25,0001,75,000Less: Deduction u/s 80CCD(1B) - NPS50,000- Less: Deduction u/s 80D Health insurance50,000- Net taxable salary15,87,00022,50,000Total Tax Liability3,00,1402,73,000TDS to be Deducted Per Month25,01222,750

How is TDS deducted from salary?

The objective of deducting TDS from an employee's salary is to make sure that tax is collected smoothly and regularly throughout the year, which helps lighten the load when it's time to file the income tax return (ITR).

Chartered Accountant Suresh Surana explains that the employer computes the estimated total taxable salary income of the employee for the entire financial year, after considering all salary components such as basic pay, allowances, bonus, taxable perquisites, and other benefits.

From this estimated income, the deductions, exemptions, and reliefs that the employee can claim, like house rent allowance (HRA), deductions under Chapter VI-A (for example, section 80C, 80D), and rebate under Section 87A, wherever applicable are taken into account based on supporting documents submitted by the employee, as noted by Surana.

Once the annual tax liability is computed based on the applicable slab rates for that financial year, the total tax amount is divided proportionately over the remaining months of the year.

Accordingly, Surana says, TDS is deducted every month at the average rate of tax rather than at slab-wise monthly rates.

Surana explains by using an example. If the estimated annual tax liability is Rs 1.2 lakh and 12 salary months remain, the employer may deduct Rs 10,000 per month as TDS from salary.

The law also allows the employer to consider certain other income disclosed by the employee, such as interest income, rental income, or loss from one self-occupied house property, while computing salary TDS.

Surana says: "This helps ensure that the total tax deducted during the year closely matches the employee's final tax liability."

Surana says that taxable non-cash perquisites such as company-provided accommodation, car benefits, or stock-based compensation may also be included while computing TDS.

What happens if you have changed jobs during the year?

If the employee has changed jobs during the year or has more than one employer, details of the salary and tax deducted by the previous or other employer may also be furnished so that the current employer can deduct the correct amount of tax.

According to Surana, in case there is any shortfall or excess deduction during earlier months, the employer is permitted to increase or reduce the TDS in subsequent months within the same financial year to balance the overall tax deduction.

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