TDS on salary, and the difference between a declaration and a proof
Tax deducted monthly against an estimated annual liability — where the year goes wrong if declarations are never tested against evidence.
What it is
Monthly deduction against projected annual liability: project income, apply the regime, allow declared reliefs, spread the tax.
The regime
The new regime is the default. An employee wanting the old one must opt in.
The trap
Treating a declaration as settled. Proofs arrive in the last quarter, and the correction lands on the employee.
TDS on salary is income tax deducted monthly by the employer against the employee’s estimated annual liability. The employer projects annual income, applies the chosen tax regime, allows declared exemptions and deductions, and spreads the resulting tax across remaining months.
How it works in practice
An employee declaring rent, insurance and a home loan in April sees lower monthly TDS than one who declares nothing until January — and the January declarer gets a painful few months.
What to watch for
Declarations are not proofs. Collect proofs before the last quarter or you will over-deduct or under-deduct.
How Klok handles it
Klok is regime-aware, holds declarations and proofs separately, and recomputes across the year rather than month by month.
TDS on salary FAQs
When should we collect investment proofs?
Early enough to recompute across the remaining months — typically December or January. Collecting them in March leaves no room to spread a correction, and produces the March payslip everyone remembers.
Can an employee change tax regime mid-year?
For TDS purposes an employer generally acts on the declaration made for the year, and the employee can still make their final choice when filing their return. Frequent mid-year switching is not something the payroll should be asked to absorb.
What if the employee declares nothing?
Then tax is computed without those reliefs, and the deduction is higher. That is correct rather than punitive — but tell them early, because the alternative is a surprise in the last quarter.
An employee says too much tax is being deducted.
Usually their declaration is missing or was submitted late, so the computation is running without the deductions they intend to claim. It corrects over the remaining months rather than being refunded by you.
Do we have to accept every declaration at face value?
Declared and verified are different things, and the employer is expected to obtain evidence for what it allows. Allowing an unverified claim shifts exposure onto you at assessment.
What about an employee who joined mid-year?
If they declare previous-employer salary, include it so the annual computation is right. If they do not, your computation covers your period alone and they may face a shortfall at filing.
Stop calculating this by hand
Klok computes it from your own attendance and salary data, every month, with the working shown.