TDS on Salary Under New Tax Regime 2025 — How Employer Calculates
- New regime: no 80C, 80D, HRA exemption, home loan deduction
- To switch to old regime, declare it to employer in April
- Employer calculates TDS monthly and deducts from salary
- If no declaration — employer deducts as per new regime
- Final choice of regime made at time of ITR filing
Since FY 2023-24, the New Tax Regime has become the default for TDS calculation on salary. Your employer will automatically use the new regime unless you tell them otherwise. Here's how it all works.
New Tax Regime Slabs — FY 2025-26
| Income Range | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Plus 4% Health & Education Cess on tax amount.
Standard Deduction Under New Regime
From FY 2024-25 (Budget 2024), salaried employees and pensioners get a standard deduction of ₹75,000 under the new regime (increased from ₹50,000). This is the only major deduction available in the new regime.
Gross salary: ₹13,50,000
Less standard deduction: ₹75,000
Net taxable income: ₹12,75,000
Tax on ₹12,75,000 (after rebate u/s 87A for income ≤ ₹12L): Nil
But income above ₹12L — rebate not available, full tax applies
Section 87A Rebate — New Regime
Under the new regime, if your net taxable income is ≤ ₹12,00,000, you get a full tax rebate under Section 87A — effectively zero tax. This is the key advantage of the new regime for incomes up to ₹12.75L (after standard deduction).
How Employer Calculates TDS
- Employer asks employee for regime preference at start of FY (April)
- If no declaration — new regime is applied by default
- Employer estimates annual salary, applies standard deduction (₹75,000), computes tax under new regime slabs
- Monthly TDS = annual tax ÷ 12 months (deducted each month)
- End of year: employer issues Form 16 showing all TDS
How to Tell Employer You Want Old Regime
- Submit investment declaration to HR/payroll team at the start of financial year (April)
- Declare 80C investments, 80D premium, home loan interest, HRA details
- HR recalculates TDS under old regime with your declared deductions
- Submit actual proofs by January/February to finalize
The regime you tell your employer is for TDS calculation only. At ITR filing time, you can switch — the final choice is made in the ITR itself. If your final tax is less than TDS, you'll get a refund.
What's Not Available in New Regime
- Section 80C — PF, PPF, LIC, ELSS, home loan principal
- Section 80D — health insurance premium
- Section 24b — home loan interest
- HRA exemption
- LTA exemption
- Leave encashment exemption (partial)
Only standard deduction of ₹75,000 and a few other employer reimbursements (transport, food) are available.
Old vs New Regime — Which is Better for You?
Tell Mulazim AI your salary, investments, and deductions — we'll calculate both regimes and tell you which saves more.
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