How does TDS affect my take-home salary?
Short answer: Your employer estimates your tax for the whole year and deducts a share of it from each month's salary as TDS (tax deducted at source). That deduction is one of the main reasons your take-home pay is lower than your gross salary.
At the start of the year, your employer asks which tax regime you want and, if you choose the old regime, what investments and deductions you plan to claim. They use this to estimate your annual tax and spread it across the remaining months.
Why your TDS can change during the year
- You get a raise or a bonus.
- You submit proof of investments that is less than you declared.
- You tell your employer about income from a previous job in the same year.
Where to check it
Your salary slip shows the TDS each month. After the year ends, your employer gives you Form 16, which summarises your salary and the tax deducted. The same TDS also appears in your Form 26AS and Annual Information Statement on the income tax portal.
TDS is not an extra tax. When you file your return, it is credited against your final tax. If too much was deducted, you get a refund. If too little, you pay the balance.
See what your annual tax looks like under each regime with our income tax calculator.
Official sources
- Income Tax Department, Income Tax Department
- Income Tax e-filing portal, Income Tax Department
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