TDS on Salary & Form 16 Explained Line by Line

How Monthly TDS Is Calculated

Under Section 192, your employer is required to estimate your annual tax liability at the start of the financial year (or from your joining month) and deduct it in equal monthly instalments. The calculation broadly works like this:

Use the ITR Form Selector — AY 2026–27 to apply these points to your figures or facts.

1. Estimate annual gross salary (basic + allowances + perquisites + any bonus already announced)
2. Subtract exempt allowances (HRA exemption, LTA, etc. — only if the employee has declared the regime and submitted proofs)
3. Apply standard deduction
4. Subtract Chapter VI-A deductions declared by the employee (80C, 80D, home loan interest) — applicable only under the old regime
5. Compute tax on the resulting taxable income using the applicable slab rates for the chosen regime, apply Section 87A rebate if eligible, and add 4% cess
6. Divide the annual tax figure by the number of remaining months in the year to arrive at the monthly TDS

This is why your TDS often changes mid-year — a bonus payout, a salary revision, or updated investment declarations all trigger a recalculation for the remaining months. It's also why employees who submit investment proofs late in the year (Jan-March) often see a sharp jump or drop in their final quarter’s take-home pay as the employer "true-ups" the annual figure.

Worked example: In April, your employer estimates your annual tax liability at ₹96,000, with 12 payroll months remaining. Monthly TDS = ₹96,000 ÷ 12 = ₹8,000, deducted each month from April through July (₹32,000 deducted so far). In August you submit updated investment proofs, and your employer’s revised annual-liability estimate falls to ₹78,000. With 8 payroll months left (August–March), the employer recalculates: (₹78,000 − ₹32,000 already deducted) ÷ 8 = ₹5,750 a month for the rest of the year. Same annual figure, re-spread across fewer remaining months — this is exactly the "true-up" described above.

Form 16 Part A: The TDS Certificate

Part A is generated by your employer from the TRACES portal and is essentially a certificate confirming tax was deducted and deposited on your behalf. It contains:

For the connected rule, example or next step, see Form 16 Mismatch: Salary, TDS and Employer Proofs.

• Employer's TAN and PAN and your PAN
• Assessment Year and the period of employment with this employer during the year
• Quarter-wise summary of TDS deducted and deposited (matches the employer's Form 24Q filings)
• A unique certificate number and digital signature

The total TDS shown in Part A should match the TDS deducted entries for this employer in your Form 26AS. If your employer changed mid-year, you'll receive a separate Form 16 (Part A and B) from each employer for the period you worked there.

Form 16 Part B: The Salary & Deduction Breakup

Part B is prepared by the employer's payroll team and contains the actual computation:

Cross-Checking Form 16 Against Your Payslips

Before filing your ITR, do a quick three-way check:

• Form 16 Part B gross salary vs. sum of 12 payslips: Should match. Mismatches often arise from reimbursements wrongly included/excluded, or a salary revision applied retroactively.
• Form 16 Chapter VI-A deductions vs. your actual investment proofs: Employers sometimes cap or disallow late-submitted proofs — but you can still claim the full eligible amount in your ITR if you have valid proof, even if your employer didn't account for it.
• Form 16 TDS total vs. Form 26AS / AIS: This is the most important check — see our Form 26AS vs AIS vs TIS guide for how to reconcile.

What If You Switched Jobs Mid-Year?

If you had more than one employer in the financial year, each issues its own Form 16. Crucially, your new employer does not automatically know about income or TDS from your previous employer unless you provide Form 12B (a statement of prior income and tax deducted) at the time of joining. Without this, both employers may apply the basic exemption and standard deduction independently — resulting in under-deduction of TDS overall, which becomes a liability you must settle (often with interest under Section 234B/234C) at the time of filing your ITR.