TDS Calculator on Monthly Salary – Easy & Accurate (FY 2025–26)

Confused about TDS on your salary? Use this simple monthly TDS calculator guide to estimate your deductions, compare regimes, and plan your taxes better.

Most salaried individuals in India see a chunk of their income deducted every month without fully understanding why. This deduction, known as Tax Deducted at Source (TDS), is one of the most significant components that affect your in-hand salary. But how much is actually deducted? Why does it change over time? And how can you estimate it correctly?

This guide is crafted to help you decode how TDS is calculated on a monthly salary. Whether you’re just starting a new job or planning your tax-saving declarations, understanding your monthly deductions is essential to managing cash flow and avoiding unpleasant surprises at the end of the year.

Why Monthly TDS Matters More Than You Think

TDS isn’t just a backend number. It directly shapes your financial freedom. Every rupee deducted affects your ability to invest, spend, or save. Yet, many employees either leave it to HR or only realize the actual impact when Form 16 is issued at the end of the financial year.

Monthly TDS is computed based on your estimated annual taxable income, then divided across your months of service for that financial year. However, this isn’t a one-size-fits-all calculation. Your regime choice (old vs new), income declarations, exemptions, bonuses, and even changes in salary mid-year can influence the exact figure.

If your employer overestimates your income or underestimates your deductions, it could mean excessive TDS. On the flip side, under-deduction could lead to tax dues and interest under Section 234B and 234C. Knowing the right monthly TDS helps strike the right balance.

How Employers Calculate Monthly TDS

Employers are legally responsible for deducting and depositing TDS from your salary under Section 192 of the Income Tax Act. But their calculation is based largely on your own inputs — mainly your income proofs and investment declarations.

Here’s a simplified version of how they typically do it:

1. Annual Gross Salary Estimate:
   Includes basic salary, DA, HRA, special allowances, bonuses, and any other recurring income.
2. Exemptions and Deductions:
   These include:
   • ₹50,000 standard deduction
   • HRA exemptions (based on rent paid and city classification)
   • Eligible deductions under Chapter VI-A (80C, 80D, 80CCD, etc.)
3. Choice of Tax Regime:
   Whether you opt for the old regime (with deductions) or the new regime (lower slabs but no exemptions) significantly alters your liability.
4. Tax Computation and Cess:
   Tax is computed on the taxable income, plus 4% Health & Education Cess.
5. Monthly TDS:
   The total tax is divided by 12 (or remaining months in the year), resulting in your monthly deduction.

The employer is required to deposit the deducted amount with the government and provide you with a TDS certificate (Form 16) annually. You can track these deductions on the TRACES portal under your PAN number to verify correct deposits.

Monthly TDS Deduction – A Quick Illustration

Let’s say your total annual salary is ₹9,00,000, and you’ve declared ₹1.5 lakhs under Section 80C and ₹25,000 for medical insurance under 80D. Under the old regime, your taxable income drops to ₹7,25,000.

This table is indicative. Your actual monthly deduction may vary depending on bonus cycles, HRA eligibility, or changes in investments mid-year.

You can also cross-check expected TDS amounts using financial tools like ET Money’s tax calculator which dynamically adjusts based on your regime choice and deductions.

Old vs New Tax Regime: Impact on Your Monthly TDS

One of the most important decisions that affects your TDS on salary is choosing between the old and new tax regimes. This single choice can significantly alter your taxable income, monthly deduction, and in-hand salary — even if your CTC remains the same.

In the old regime, you can reduce your taxable income using deductions and exemptions such as HRA, 80C, 80D, LTA, and more. The new regime, introduced in FY 2020-21 and updated in the Union Budget 2023, offers lower tax rates but removes most deductions and exemptions.

Let’s look at a side-by-side comparison to understand how monthly TDS differs under each regime:

Calculations assume standard declarations under the old regime and no deductions under the new regime.

While the new regime appears beneficial for those without investments or housing rent, it may lead to higher tax outgo for salaried individuals who actively claim deductions. That’s why many employees evaluate their options at the start of every financial year and inform their HR department accordingly.

If you’re unsure about which regime works best for you, using tools like the Income Tax Department’s official tax calculator can help simulate both scenarios.

What Happens if Your Salary Changes Mid-Year?

A common yet overlooked scenario is the revision of salary during the year — either through appraisals, bonuses, or promotions. Since monthly TDS is based on estimated annual income, any change in your salary structure means your employer must recalculate your projected tax liability for the remaining months.

Here’s what typically happens:

• The employer updates your projected income for the year
• Tax is recalculated accordingly
• The remaining tax is evenly divided over the rest of the months
• Your monthly TDS increases (or decreases) depending on how much extra you’re projected to earn

For example, if you receive a ₹1,00,000 bonus in November, your total annual income increases. Your company adjusts the remaining months’ TDS to meet the total liability. This can result in a sudden spike in deductions unless you’re proactive and provide additional tax-saving declarations.

To avoid last-minute surprises, always report salary changes and new investments immediately to your payroll department. Most employers now use automated platforms like Clear’s HR suite to manage declarations and automate monthly recalculations.

How to Accurately Calculate Your Monthly TDS

While understanding the theory behind TDS deductions is useful, what’s more practical is knowing how to estimate your monthly TDS in advance — based on your salary structure, tax regime, and declared investments. This helps avoid underpayment or over-deduction during the financial year.

The basic formula used by most employers goes like this:

Total Taxable Income – Eligible Deductions = Net Taxable Income
→ Tax is computed as per applicable slabs
→ Add 4% cess
→ Divide total tax by the number of working months

Let’s simplify this with a working example.

Assumptions:

• Annual CTC: ₹10,00,000
• Deductions: ₹1,50,000 under 80C, ₹25,000 under 80D
• Chosen regime: Old
• No other exemptions or perquisites

Of course, these values can change based on your allowances, bonus payouts, and mid-year income updates.

To eliminate guesswork, many people now use reliable online TDS calculators that give near-accurate results based on the latest tax slabs and provisions. One such tool is the TDS calculator by Groww, which allows users to input salary details and instantly get monthly deduction estimates under both regimes.

Real-Life Scenarios Where TDS Calculation Varies

Even if two employees earn the same CTC, their TDS deductions may differ based on their location, rent paid, declarations made, and tax-saving strategy. Let’s consider a few real examples to see how that works:

Scenario 1:

• Salary: ₹8,00,000/year
• Lives in a metro city, pays ₹20,000 rent/month
• Declares investments under 80C, pays ₹25,000 premium under 80D

Due to HRA eligibility and 80C/80D deductions, net taxable income reduces significantly — leading to TDS of approx. ₹2,500/month

Scenario 2:

• Same salary but lives with parents, no rent paid
• No tax-saving declarations

Here, there’s no HRA exemption or deductions. Result: TDS jumps to nearly ₹4,900/month

Such scenarios show why blanket estimations can be misleading. You need to assess your actual situation carefully.

For those working in organizations where HR doesn’t offer personalised TDS planning support, you can verify your TDS history by logging into your Form 26AS through the official income tax portal. It gives a clear breakdown of tax deducted each month against your PAN.

In-Hand Salary vs Monthly TDS – What Really Gets Credited?

A common source of confusion for employees is the difference between the salary mentioned in their offer letter and the actual amount they receive in their bank account each month. This gap is mostly because of TDS deductions, statutory contributions (like EPF), and other company-specific deductions such as insurance or meal cards.

Let’s break down a standard example to highlight how monthly TDS fits into the bigger salary puzzle.

Sample Salary Structure – ₹12,00,000 Annual CTC

As shown above, TDS forms a major deduction line item that directly impacts what you take home. If you declare eligible deductions at the beginning of the year, this monthly deduction can be brought down significantly. On the other hand, skipping tax-saving investments or not opting for the right regime may leave you with less liquidity throughout the year.

To better understand the true value of your net salary, many HR departments encourage employees to use salary comparison and planning tools. Platforms like BankBazaar offer dedicated pages that guide users through how tax is calculated, what declarations are accepted, and how Form 16 is generated at year-end.

Mistakes That Increase Your TDS – And How to Avoid Them

Even a small oversight can lead to higher-than-necessary monthly deductions. Below are some of the most common mistakes salaried employees make, often unknowingly:

• Not submitting investment declarations on time
  Most companies fix a window at the beginning of the financial year to declare tax-saving investments. Missing this window results in your TDS being calculated without any deductions, inflating the monthly amount.
• Ignoring HRA eligibility despite paying rent
  If you’re paying rent and not submitting rent receipts or PAN of the landlord (if rent exceeds ₹1,00,000 annually), you lose out on a key exemption.
• Choosing the wrong tax regime
  Many employees default to the new regime thinking it’s always cheaper. However, for those with home loans, insurance, and tuition fees, the old regime often results in lower tax.
• Not updating salary revision or bonus information
  When your income increases mid-year, if HR doesn’t adjust your tax projection, the shortfall is recovered in the last few months — often leading to very high deductions late in the year.

One way to stay updated is by regularly checking your tax credit status using your PAN on the NSDL TIN portal. This ensures that the amount deducted as TDS each month is correctly reflected in your government account.

Using a TDS Calculator to Estimate Monthly Deductions

Instead of depending solely on your employer or waiting for surprises on your payslip, using a reliable TDS calculator allows you to proactively plan your salary, tax-saving investments, and monthly cash flow. These tools make it easier to simulate your deductions under both the old and new regimes.

Typically, a well-designed calculator will ask you to enter the following:

• Gross annual salary or monthly income
• HRA received and rent paid
• Investment declarations under 80C, 80D, NPS, etc.
• Chosen tax regime (optional)
• Age bracket (since senior citizens have higher exemption limits)

Based on these inputs, the tool calculates your total tax liability and distributes it evenly across the year to show your monthly TDS.

One such intuitive platform is Tax2win, which offers a free monthly TDS calculator with instant breakdowns. It also helps you decide whether switching regimes would benefit you financially.

Year-End Adjustments and TDS Reconciliation

Even if your monthly deductions seem accurate, the real picture is only visible during the final quarter of the financial year. Between January and March, your employer reconciles all tax declarations with proof submissions. If there’s a mismatch or unsubmitted investment, your remaining TDS can spike dramatically in the last two or three months.

Here’s how it typically plays out:

To avoid such last-minute shocks, employees are encouraged to track their actual deductions and proofs. You can do this easily by viewing your monthly payslips or accessing your Form 26AS through TRACES, where all deducted and deposited tax is recorded against your PAN.

Being proactive with submission deadlines and regularly checking your status ensures your final TDS aligns with your income and exemptions.

What to Do If TDS Deducted Is Wrong or Missing

It’s not uncommon for employees to notice discrepancies in their TDS deductions — either too much being deducted or the deducted amount not showing up in official records. While this can be concerning, it’s usually resolvable when addressed early.

Here’s a breakdown of possible scenarios and what steps to take:

Always preserve your salary slips, proof of declarations, and acknowledgement of submissions. These become important if there’s a dispute at the time of filing returns or during departmental scrutiny.

Monthly TDS Questions – What Employees Often Ask

Q1. Is TDS deducted on gross salary or net salary?
TDS is calculated on your taxable income, which is gross income minus exemptions and deductions. It is not directly linked to your net (in-hand) salary.

Q2. Can I change my tax regime during the year?
Yes, you can switch between the old and new regimes while filing your ITR. However, for salaried individuals, the employer must follow the option you’ve declared at the beginning of the financial year unless changes are permitted by your company.

Q3. Will I get a refund if excess TDS is deducted?
Yes. After filing your income tax return, any excess amount paid will be refunded to your bank account, usually within a few weeks of processing.

Q4. Where can I see how much TDS has been deducted?
You can check this in your monthly payslip, annual Form 16, or the government’s consolidated 26AS statement. It reflects all tax deducted and deposited against your PAN.

Final Thoughts

Understanding your monthly TDS is more than just a tax exercise — it’s about controlling your cash flow, maximizing your take-home salary, and avoiding unnecessary year-end tax burdens. With salary structures becoming more complex and tax laws evolving rapidly, staying informed empowers you to make better financial decisions.

If you haven’t already, consider using a verified monthly TDS calculator to simulate your deductions under both regimes. Declare investments early, keep track of your payslips, and check your 26AS statement regularly. These simple actions can help you avoid surprises, secure timely refunds, and stay tax-compliant throughout the year.

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