Salaried Employees Face Changes with New TDS Rules Under ITA 2025

As the new Financial Year 2026-27 commences, salaried employees must be aware of significant changes in Tax Deducted at Source (TDS) rules that came into effect on April 1, 2026. These changes are part of the broader implementation of the Income Tax Act, 2025, which introduces revised section numbers, updated forms, and new compliance requirements.

TDS Computation Reset for the New Tax Year

A key update for salaried individuals is the mandatory reset of TDS computation by employers at the start of the new tax year. From April 1, 2026, employers are required to recalculate TDS based on projected income, declared deductions, and the tax regime opted for by the employee for Tax Year 2026-27. This reset could lead to slight adjustments in monthly tax deductions.

Default New Tax Regime for FY 2025–26

For Financial Year 2025–26, TDS on salary will be calculated under the new tax regime by default. Employees wishing to continue with the old tax regime will need to explicitly communicate their preference to their employer. This default shift aims to encourage adoption of the simplified new tax regime, though individuals retain the option to choose the old regime if it proves more beneficial for their specific financial situation.

Impact on Take-Home Salary

While the new rules primarily concern the methodology of TDS calculation and reporting, they may indirectly influence the monthly take-home salary. Employees are advised to review their income and deductions for the new financial year and communicate their tax regime preference to their employers to ensure accurate TDS deductions.