Section 192 of the Income Tax Act requires every employer paying salary in India to deduct income tax at source (TDS) before disbursement. It applies to all types of employers — companies, LLPs, partnerships, trusts, proprietorships — wherever the employee's estimated annual income exceeds the basic exemption limit.
Who must deduct salary TDS?
Any 'person responsible for paying' salary — defined in Section 204 — must deduct TDS. In practice, this is the company's finance/HR function that runs payroll. Every such entity needs an active TAN (Tax Deduction Account Number) and must file quarterly TDS returns in Form 24Q.
How is the TDS amount computed?
Unlike other TDS provisions that use flat rates, Section 192 uses the employee's average rate of tax for the financial year. Steps every payroll cycle should follow:
- Project the employee's total annual salary for the financial year.
- Add other income the employee has declared (interest income, previous-employer salary).
- Deduct exemptions (HRA, LTA, section 10 allowances) and deductions (80C, 80D, standard deduction, NPS under 80CCD(1B)).
- Compute tax using the slab the employee has chosen — new regime (default from FY 2023-24) or old regime.
- Divide the annual tax by 12 to arrive at the monthly TDS, adjusting for any under/over deduction already done in previous months.
When must TDS be deposited?
TDS deducted in a month must be deposited to the government by the 7th of the following month, except for March — where the due date is April 30. Deposits are made via challan ITNS 281 on the Income Tax e-filing portal.
TDS return filing — Form 24Q
Every quarter, employers file Form 24Q summarising all salary payments, TDS deducted, challans deposited, and employee-wise PAN/deduction details. Due dates:
| Quarter | Period | Due date |
|---|---|---|
| Q1 | Apr–Jun | July 31 |
| Q2 | Jul–Sep | October 31 |
| Q3 | Oct–Dec | January 31 |
| Q4 | Jan–Mar | May 31 |
Form 16 — employee TDS certificate
After Q4 filing, employers must issue Form 16 to every employee from whom TDS was deducted. Part A is downloaded from TRACES and contains the TAN/PAN, quarterly challan summary, and deducted amounts. Part B is prepared by the employer and details the salary, exemptions and deductions used.
Common mistakes Indian employers make
- Missing the monthly deposit date (7th of next month) and attracting 1.5% interest per month under Section 201(1A).
- Not collecting employees' investment proof by the last month of the FY — leading to incorrect TDS.
- Forgetting to re-compute TDS when an employee switches between old and new tax regimes mid-year.
- Filing Form 24Q with incorrect PAN-BSR code-challan mappings, resulting in TDS mismatches in 26AS.
- Delaying Form 16 issuance past June 15 following FY — which triggers Section 272A(2)(g) penalty.
How Vergado automates Section 192 TDS
Vergado computes Section 192 TDS at every pay cycle using each employee's declared regime, exemptions and investment proofs. It generates and deposits challan ITNS 281 to the government automatically, files Form 24Q each quarter through the TRACES gateway, and issues Form 16 to employees without any manual intervention. Your finance team sees only a compliance dashboard — not a filing queue.
