TDS on Salary 2026-27: Section 392 and Why It Varies

Every month, before your salary reaches your account, your employer takes out an estimate of your income tax and pays it to the government against your PAN. That is TDS on salary. It used to be section 192; under the Income-tax Act, 2025, in force since 1 April 2026, it is section 392. The mechanics did not change, but two forms were renamed: the declaration you give your employer is now Form 124 (it was Form 12BB), and the certificate you get after the year is Form 130 (it was Form 16).

How your employer works out monthly TDS

TDS on salary is not a flat percentage. Your employer estimates your tax for the whole year and spreads it over the months:

1. Estimate your income for the year: salary, allowances, expected bonus and perquisites.
2. Apply the regime you chose and the deductions and exemptions you declared.
3. Work out the tax for the year, including cess.
4. Divide what is left by the remaining months and deduct it each month.

So April's TDS rests on a projection of the whole year. Each time reality moves away from that projection, with a bonus, a raise or a missing proof, the employer recalculates and the monthly figure shifts to catch up.

The useful mental model: TDS is a running correction towards your estimated tax for the year, not a fixed monthly rate.

Why TDS jumps in some months

A bonus or variable pay was paid

A bonus is taxed at your slab rate like the rest of your salary, but employers usually collect all of the extra tax in the month they pay it. At the 30% slab, a ₹2 lakh bonus can mean about ₹62,000 of extra TDS that month. The tax is not higher; it is front-loaded. The bonus tax guide has worked figures.

You got a raise mid-year

A raise lifts your yearly estimate while fewer months are left to collect the extra tax, so the monthly TDS rises by more than the raise alone suggests.

Your investment proofs didn't arrive

Early in the year, old-regime employees declare rent, section 123 (80C) investments, insurance and home loan interest, and TDS is cut to reflect them. Around January and February the employer asks for proof. Without it, they must recompute as if the deductions never existed and recover the shortfall in the last two or three months. That is the classic "why is my February salary so small" story.

Your regime choice changed or was never made

If you did not tell your employer which regime you want, it uses the new regime, the default. Switching partway through the year triggers a recalculation.

Declaring to your employer: Form 124

To have deductions and exemptions reflected in TDS, you declare them on Form 124, which replaced Form 12BB from April 2026. It covers HRA and rent, including the landlord's PAN when rent passes ₹1 lakh a year and your relationship with the landlord, LTA, home loan interest and your section 123 and other deductions. In the new regime there is little to declare beyond the employer's own NPS contribution. The Form 124 guide goes through each part of the form.

New regime or old regime for TDS

The regime you give your employer only sets the monthly deduction. With salary income alone you can still choose either regime when you file your return. If the other one turns out cheaper, you get the difference back as a refund. Compare both with the income tax calculator; for tax year 2026-27, a salary up to ₹12.75 lakh pays nothing in the new regime.

Form 130, 26AS and AIS

After the year ends, your employer gives you Form 130, the new name for Form 16. Part A lists the TDS deposited each quarter; Part B shows how your salary and tax were worked out. The first Form 130 covers tax year 2026-27 and arrives in 2027; for FY 2025-26 you still get a Form 16. The Form 16 and Form 130 guide walks through both parts.

Before filing, match the TDS in Form 130 against Form 26AS and the Annual Information Statement (AIS) on the income tax portal. If your employer deducted tax but did not deposit it, or quoted the wrong PAN, it will be missing there, and your employer has to correct it. From tax year 2026-27 the statement to check is Form 168, which replaces Form 26AS.

Changing jobs in the middle of the year

Each employer deducts TDS as if its salary were your only income, so two employers in one year often under-deduct: each uses the lower slabs on its own portion. Give your new employer your previous salary and TDS, or expect a bill when you file. The full and final settlement guide covers the rest of leaving a job.

Getting TDS back

If more was deducted than you owe, because proofs were late, you switched regime or you left mid-year, you claim the difference in your return and the refund comes to your bank account. If less was deducted, you pay the balance before filing. Tax left unpaid at the end of the year can also attract interest under section 424 (the old 234B), which is why people with income beyond salary pay advance tax.

Frequently asked questions

What is the new section for TDS on salary?

Section 392 of the Income-tax Act, 2025, which replaced section 192 from 1 April 2026. Employers still estimate your tax for the year and deduct it monthly.

Why is my TDS different every month?

Because your employer keeps re-estimating your tax for the year. Bonuses, raises, late investment proofs and regime changes all trigger a recalculation, and the remaining months absorb the difference.

What replaced Form 12BB?

Form 124, from April 2026. It is the declaration of rent, investments and home loan interest that lets your employer reduce TDS in the old regime.

Is Form 16 still issued?

For FY 2025-26, yes. From tax year 2026-27 the same certificate is called Form 130, and the first one is issued in 2027.

Can I get back excess TDS deducted by my employer?

Yes. File your return claiming your actual deductions and the regime that suits you, and the excess is refunded to your bank account.