"TDS on Salary Explained: Why Your Monthly Tax Deduction Varies"

Every month, before your salary reaches your account, your employer quietly removes a slice for income tax. That slice is TDS — Tax Deducted at Source — under Section 192 of the Income Tax Act. Most people notice it only twice: when it suddenly jumps, and when they wonder where their refund went.

Here is how the machine actually works, why it misbehaves in certain months, and how to make sure you never pay more than you owe.

How your employer calculates monthly TDS

TDS on salary is not a flat percentage. Your employer runs a full-year estimate and spreads the tax across the year:

1. Estimate your annual income — salary, allowances, expected bonus, perquisites
2. Apply your chosen tax regime and the deductions/exemptions you have declared
3. Compute the estimated annual tax, including cess
4. Divide by the remaining months of the financial year
5. Deduct that amount each month and deposit it with the government against your PAN

So your April TDS is based on a projection of the whole year. Every time reality diverges from the projection — a bonus, an increment, a missed investment proof — the employer recalculates, and your monthly deduction shifts to catch up.

That is the single most useful mental model: TDS is a running correction toward your estimated annual tax, not a fixed monthly rate.

Why TDS jumps in some months

If your in-hand suddenly dropped, one of these usually happened:

A bonus or variable payout landed

Bonuses are taxed at your slab rate, and employers typically deduct the full extra tax in the month of payment. A ₹2 lakh bonus for someone in the 30% bracket can mean roughly ₹60,000+ extra TDS in that single month. The bonus is not "taxed higher" — the tax is just front-loaded.

You got an increment mid-year

A raise increases your annual estimate, but you have fewer months left to pay the additional tax. The recalculated monthly TDS therefore rises by more than the raise alone would suggest.

You did not submit investment proofs

Early in the year, employers reduce TDS based on your declarations — HRA rent, 80C investments, insurance, home loan interest (relevant mainly under the old regime). Around January–February, they demand proof. Fail to submit, and the employer must recompute tax as if those deductions never existed — and recover the entire shortfall in the last two or three months. This is the classic "why is my February salary so small" story.

You joined mid-year without sharing previous income

If your new employer does not know what your old employer paid and deducted, both may compute tax as if theirs was your only salary — each giving you the full basic exemption and slab benefit. The combined TDS falls short, and you discover a painful self-assessment tax bill at ITR time.

Your regime declaration decides your monthly TDS

At the start of each financial year, your employer asks you to pick between the old regime (higher rates, but with deductions like 80C and HRA) and the new regime (lower rates, minimal deductions). That declaration directly drives your monthly TDS.

Things worth knowing:

• The declaration to your employer is for TDS purposes — you can still choose differently when you actually file your ITR (salaried individuals generally can, subject to rules)
• If you do not declare, the employer applies the default regime as per current rules
• Choosing the wrong regime does not mean losing money forever — it means wrong monthly deductions, corrected via refund or extra payment at filing time. But smoother is better

Run both scenarios through an income tax calculator before declaring, and if you want the deeper comparison, read the guide on new vs old tax regime. Ten minutes in April saves a year of misaligned deductions.

Over-deducted? The refund comes through your ITR

Employers estimate conservatively, people forget declarations, and mid-year job changes confuse projections. Over-deduction is common. The recovery path is standard:

1. File your ITR after the financial year ends, computing your actual tax on actual income with all eligible deductions
2. If TDS deposited exceeds your actual liability, the return shows a refund
3. The refund lands in your pre-validated bank account after processing, with interest in many cases

Two practical notes:

• Refunds only happen if you file. Skipping the ITR because "tax was already deducted" means gifting your over-deduction to the exchequer
• File early. Early filers generally see faster processing and refunds

Verify what was actually deposited: 26AS and AIS

Your payslip shows what was deducted. Two government-side documents show what was deposited and reported against your PAN:

• Form 26AS — your tax credit statement: TDS deposited by employers and others, advance tax, refunds
• AIS (Annual Information Statement) — a broader picture: salary, interest, dividends, securities transactions, and more

Make it a habit to check both, at minimum before filing your ITR. What you are verifying:

• Every month's TDS on your payslips actually appears in 26AS
• Your employer's reported salary matches reality
• No unknown entries exist against your PAN

If payslip TDS is missing from 26AS, your employer may have deducted but not deposited, or deposited against a wrong PAN. Raise it with payroll immediately — you only get credit for tax that reaches the government against your PAN, regardless of what your payslip claims. Your Form 16, issued annually, should reconcile cleanly with 26AS; mismatches there follow the same escalation path.

Keeping your TDS smooth: a short playbook

• April: declare your regime and planned deductions honestly — not optimistically
• Through the year: skim your payslip monthly; a salary slip worth its name shows the TDS line clearly, and your in-hand salary calculator estimate should roughly match what lands in the bank
• On job change: hand your new employer your previous income details so their projection covers the full year
• December: gather investment proofs early; do not bet on a January miracle
• June onwards: collect Form 16, match it with 26AS and AIS, file your ITR

TDS is not a tax on top of your tax — it is your annual tax paid in monthly instalments by someone else's spreadsheet. Understand the spreadsheet, feed it accurate inputs, and it stops surprising you.