TDS on Salary for Freshers: Why It Is Cut and How to Reduce It

Last updated: 13 October 2026 · By the Asuraa Team

Quick answer: TDS on salary is your yearly income tax collected monthly: your employer estimates your annual taxable salary, applies your chosen regime's slabs and deducts about one-twelfth each month, as ClearTax explains. Under the new regime for FY 2026-27, taxable income up to Rs 12 lakh carries nil tax after the rebate, so many freshers see no TDS. Choose the right regime, declare deductions early and give a new employer Form 12B.

Key takeaways

• TDS on salary is your annual income tax collected in monthly instalments, based on your employer's estimate of your full-year taxable salary and your chosen regime.
• The new regime is the default for TDS; you must tell your employer at the investment declaration stage if you want the old regime, and can choose again each year.
• For FY 2026-27, a salary of Rs 14 lakh under the new regime gives taxable income of Rs 13.25 lakh and annual tax of Rs 81,900 including 4% cess, about Rs 6,825 a month in this illustration.
• When you switch jobs, each employer deducts TDS only on its own salary unless you submit Form 12B, which can leave a large balance to pay at filing time.
• From 1 April 2026 TDS provisions sit in section 393 of the Income-tax Act 2025, and Form 130 replaces Form 16 for salary from Tax Year 2026-27, due by 15 June 2027.

TDS (tax deducted at source) on salary is your income tax collected in monthly instalments: your employer estimates your tax for the whole year and deducts roughly one-twelfth from each salary. It is not an extra tax. If too much is deducted you get it back as a refund when you file your return; if too little, you pay the balance. Figures below are for FY 2026-27, whose slabs, rebate and Rs 75,000 standard deduction were kept unchanged from FY 2025-26 in the Union Budget 2026-27 (Storyboard18).

This is general information, not tax advice.

Why is TDS deducted from your salary?

TDS is deducted because the law makes your employer collect your income tax as the salary is paid, rather than leaving it all to the end of the year. For FY 2025-26 this was section 192 of the Income-tax Act, 1961; from 1 April 2026, all TDS provisions are consolidated in section 393 of the Income-tax Act, 2025, according to ClearTax.

A fresher earning up to about Rs 12 lakh of taxable income may see no TDS at all under the new regime, because the section 87A rebate of up to Rs 60,000 brings tax to nil up to that level (Income Tax Department). TDS usually starts showing up once your projected salary crosses that line.

How does your employer calculate monthly TDS?

Your employer projects your full-year taxable salary, computes the tax and spreads it across the remaining months. ClearTax describes the method:

1. Estimate annual salary, including allowances, perquisites, bonus and commission.
2. Subtract exemptions and the standard deduction: Rs 75,000 under the new regime, Rs 50,000 under the old.
3. Add other income you declare, such as interest or rent.
4. Subtract deductions such as 80C, if you chose the old regime and declared them.
5. Apply the slabs of the regime you chose, then cess at 4% (ClearTax).
6. Deduct monthly, adjusting the remaining months as your salary or declarations change.

The new regime is the default. If you want the old regime, you must tell your employer at the time of the investment declaration, and you can choose again each financial year (ClearTax).

What does monthly TDS look like on a Rs 14 lakh salary?

This is an illustration with made-up figures, using FY 2026-27 new-regime slabs.

Under the old regime with only Rs 1,50,000 of 80C deductions and no rent, the same salary would give taxable income of Rs 12,00,000 and slab tax of Rs 1,72,500 before cess, so the new regime is far cheaper here. For the full regime comparison see our new tax regime guide.

Why does TDS change from month to month?

TDS changes because your employer re-runs the annual estimate whenever something changes. Common triggers are a bonus or variable payout, an appraisal hike, a joining bonus, or investment proofs submitted late. If proofs you declared in April are not submitted by the payroll deadline, the employer recomputes as if you had no deductions and recovers the gap in the last few months, which is why many old-regime employees see a large TDS spike in February or March.

Variable pay and joining bonuses are covered in our guide to variable pay and clawback clauses.

How can you legally reduce TDS on your salary?

You reduce TDS by making sure your employer's estimate reflects your real tax, not by avoiding it. The practical levers are:

1. Pick the right regime at the start of the year. For most freshers the new regime gives lower tax; switch only if your deductions are large.
2. On the old regime, declare everything early. Rent for HRA, 80C investments including PF, 80D health insurance. Our HRA and Section 80C guide explains the limits.
3. Submit proofs on time through Form 12BB, which the Income Tax Department describes as the form for HRA, LTC and other claims.
4. Ask about employer NPS. Employer contributions under 80CCD(2) are deductible even under the new regime, up to 14% of salary, per the Income Tax Department.
5. Restructure, do not skip. Moving part of CTC into employer NPS can cut taxable salary; refusing to declare income only creates a bill at filing time.

What happens to TDS when you switch jobs mid-year?

Unless you tell your new employer about your earlier salary, each employer deducts TDS only on the salary it pays, which can leave you short. ClearTax explains that the new employer can use Form 12B details of your previous employment for the remaining months; without it, each computes separately.

Here is an illustration. Meera earns Rs 7,00,000 from employer A between April and September 2026 and another Rs 7,00,000 from employer B between October 2026 and March 2027.

Giving employer B Form 12B in October would have spread that Rs 40,950 over her last six salaries instead of leaving a lump sum, and possibly interest, for filing time.

What do most guides on TDS on salary get wrong?

They suggest that TDS is the final tax. It is only your employer's estimate. Your actual liability is settled in your return, and freshers who switch jobs, earn bank interest or take freelance work often find TDS was too low. Others, especially those who declared the old regime and then skipped proofs, find it was too high and wait for a refund.

They also tell freshers to "always choose the old regime to reduce TDS". Under the new regime, a fresher with taxable income up to Rs 12 lakh has nil tax, so the old regime would usually increase, not reduce, TDS.

How do you check that your TDS was actually deposited?

Check Form 26AS and the Annual Information Statement on the e-filing portal, and compare them with your payslips and Form 16 (Income Tax Department). ClearTax notes that employers must deposit TDS by the 7th of the following month (30 April for March deductions) and file quarterly returns in Form 24Q (ClearTax). For FY 2025-26, Form 16 was due by 15 June 2026; from Tax Year 2026-27, Form 130 replaces Form 16 and is due by 15 June 2027 (India Briefing).

If an amount shown on your payslip is missing from 26AS, raise it with payroll before you file. Our Form 16 explainer walks through each part, CTC vs in-hand salary shows where TDS sits in your take-home, and the money guide for freshers ties it all together.

Related guides

• Money Guide for Freshers in India: Salary, Tax, PF and Investing
• HRA and Section 80C for Freshers: How Much Tax You Actually Save
• ESOPs Explained for Freshers: Vesting, Tax and Startup Offers
• Variable Pay, Joining Bonus and Clawback: What Freshers Should Check

FAQ

Why is TDS deducted from my salary when I have not filed a return yet?

Because the law requires your employer to collect your income tax as salary is paid, rather than at year-end. Your employer estimates your full-year tax and deducts it monthly. When you file your return, the TDS is credited against your actual tax; any excess is refunded and any shortfall must be paid before filing. TDS is not an extra tax.

Why is no TDS deducted from my salary?

Most likely because your projected taxable income is within the new regime's rebate limit. For FY 2026-27, taxable income up to Rs 12 lakh carries nil tax under the new regime after the section 87A rebate, and the Rs 75,000 standard deduction is subtracted first. You may still need to file a return if your income is above the basic exemption limit.

How can I reduce TDS on my salary legally?

Choose the cheaper regime at the start of the year, declare rent and investments early if you pick the old regime, and submit proofs through Form 12BB before the payroll deadline. Under either regime, employer contributions to NPS under section 80CCD(2) are deductible. Restructuring salary into employer NPS lowers taxable salary; hiding income only moves the tax to filing time.

What is Form 12B and when should I submit it?

Form 12B is the statement of your salary and TDS from a previous employer in the same financial year. Give it to your new employer when you join mid-year so it can compute TDS on your combined salary. Without it, each employer deducts only on its own payments, which can leave you with a large tax balance at filing time.

My TDS suddenly increased in February. Why?

Usually because your employer recomputed your annual tax after the proof submission deadline. If you declared old-regime deductions such as HRA or 80C in April but did not submit proofs, the employer removes them and recovers the extra tax in the last months. A bonus, hike or arrears paid late in the year can have the same effect.

How do I check whether my employer deposited my TDS?

Log in to the income tax e-filing portal and view Form 26AS and the Annual Information Statement, which show TDS credited against your PAN. Compare them with your payslips and Form 16. Employers must deposit TDS by the 7th of the next month, or by 30 April for March deductions, and file quarterly TDS returns, so a gap usually shows within a quarter.

Final thoughts

TDS is only your employer's running estimate of your tax, so the way to control it is to give that estimate accurate inputs: the right regime, timely proofs and Form 12B when you switch. Check Form 26AS once a quarter and you will not be surprised at filing time. If a job switch is on your mind, browse current openings on Asuraa jobs and factor the TDS impact into your timing.