HRMS TDS Form 16 Income Tax India — Salary TDS Compliance 2026

HRMS TDS Form 16 Income Tax India — Salary TDS Compliance 2026

Every employer who pays salary is a Tax Deductor under the Income Tax Act 1961. Section 192 requires employers to compute estimated annual tax on each employee's salary and deduct it monthly from their salary. The deducted amount must be deposited with the government by the 7th of the following month. Quarterly TDS returns (24Q) must be filed, and Form 16 issued to each employee annually.

TDS non-compliance — incorrect deduction, late deposit, or non-filing of 24Q — results in interest at 1.5% per month, penalties up to Rs. 1 lakh per return, and disallowance of the expense in the employer's accounts.

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TDS on Salary — Key Requirements

Who is Subject to TDS
Employees whose estimated annual income (from salary) exceeds the basic exemption limit:
- Below 60 years: Rs. 3 lakh (New Tax Regime) or Rs. 2.5 lakh (Old Tax Regime)
- 60-80 years (senior citizen): Rs. 3 lakh (New) / Rs. 3 lakh (Old)
- Above 80 years: Rs. 5 lakh (New) / Rs. 5 lakh (Old)

New vs. Old Tax Regime
From FY 2023-24, the New Tax Regime is default. Employees must declare if they want to opt for Old Tax Regime. The regime affects deduction eligibility (80C, HRA, LTA are not available in New Regime).

Tax Computation Process
1. Estimate full-year income from all sources (salary + other income declared by employee)
2. Apply exemptions: HRA (if old regime), LTA, standard deduction (Rs. 75,000 in new regime)
3. Apply deductions: 80C (old regime only), 80D, 80G, 80E
4. Compute tax on net taxable income using the applicable slab
5. Add 4% Health and Education Cess
6. Divide annual tax by 12 months = monthly TDS deduction

Tax Deposit Deadline
- Monthly TDS deposit: 7th of following month (7th April for March salary)
- Government employees: 7th of following month for non-March months, 30 April for March

Quarterly 24Q Return
- Q1: April-June, due 31 July
- Q2: July-September, due 31 October
- Q3: October-December, due 31 January
- Q4: January-March, due 31 May

Form 16
- Part A: TDS deducted and deposited, TRACES-generated
- Part B: Salary details, deductions, income, tax computation — employer generated
- Issue deadline: 15 June after the financial year end

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MICS HRMS TDS Features

Investment Declaration (Form 12BB)
- Employee declares planned investments: 80C (PPF, ELSS, LIC), 80D (health insurance), HRA exemption computation, LTA, home loan interest
- Collection in April via employee portal or mobile app
- Actual proof collection in January for final computation
- Regime selection: employee declares New or Old tax regime

Annual Tax Computation per Employee
- Gross salary projection for full year (based on current salary structure)
- Other income declared by employee (bank interest, rental income)
- HRA exemption: minimum of (actual HRA, 50%/40% of basic, rent paid minus 10% of basic)
- Standard deduction: Rs. 75,000 auto-applied
- Chapter VI-A deductions: 80C, 80D, 80G, 80E from declaration
- Net taxable income computation
- Tax on net income per applicable slab (old or new regime as declared)
- Cess: 4% of tax
- Monthly TDS = annual tax / 12 (adjusted for months remaining in year)

Monthly TDS Adjustment
- If employee joins mid-year: tax for remaining months computed
- If salary revised: tax recomputed from revision month
- Year-end TDS adjustment: shortfall recovered in last months if projections were low
- Refund eligibility: if excess TDS deducted, advise employee to file return (employer cannot refund)

TDS Deposit
- Monthly challan computation: total TDS deducted from all employees
- ITNS 281 challan with TAN, assessment year, nature of payment
- Challan receipt archived

24Q Return Preparation
- Employee-wise quarterly data: PAN, salary paid, TDS deducted, challan details
- 24Q file in NSDL-prescribed format
- Validation using FVU (File Validation Utility) before submission
- Upload to TRACES portal
- Quarterly correction return if errors found post-filing

Form 16 Generation
- Part A: downloaded from TRACES (requires 24Q filing to be complete)
- Part B: generated by MICS with full salary breakup, deductions, and tax computation
- Merged Part A + Part B: complete Form 16 PDF
- Digital distribution: secure download from employee portal or email
- Bulk generation: all employees in one batch run

Form 12BA
For employees receiving perquisites (company car, club membership, ESOP) — Form 12BA details the value of perquisites for inclusion in Form 16.

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Pricing

- TDS and Form 16 module: included in full MICS HRMS subscription
- Standalone TDS compliance: Rs. 4,000/month for up to 100 employees

Free TDS compliance demo: +91 9355273535 | admin@mics.asia