Annual payroll & tax projection (TDS)

The new regime — s.202 of the 2025 Act (formerly s.115BAC), and the default unless the employee opts out — buys lower rates by removing almost every deduction: HRA, LTA, investments under s.123 (formerly s.80C), health insurance under s.126 (formerly s.80D), self-occupied home-loan interest, professional tax, the savings-interest deductions (formerly s.80TTA/TTB) and the rent deduction (formerly s.80GG) all go. The standard deduction actually rises to ₹75,000. This tool still accepts those inputs under the new regime and marks them as not allowed, because seeing the rupee value of what is being given up is the whole point of the choice.

The one real shelter left in the new regime is the employer’s NPS contribution — deductible up to 14% of Basic + DA under s.124(2), against 10% under s.124(1) in the old regime (both formerly s.80CCD(2)). Redirecting part of the special allowance into NPS lowers taxable income by the same amount. On Basic of ₹60,000 a month that is ₹1,00,800 a year received tax-free — provided the employer’s PF, NPS and superannuation contributions together stay within ₹7,50,000 a year; anything above that is taxed as a perquisite.

In April the employee declares on Form 124 (formerly Form 12BB) that ₹1,50,000 will go into s.123 investments, and the employer computes tax on that promise. Proofs are usually collected in January or February. Whatever cannot be evidenced is reversed, and the extra tax comes out of the last one to three payslips. That is where the “my March salary was halved” stories come from. The proofs card puts that number in front of you in advance.

An employee who changes jobs mid-year must declare the previous salary and TDS on Form 122 (formerly Form 12B). Without it both employers apply the standard deduction and the lower slabs, so far too little is withheld. The shortfall lands on the individual return the following July, with interest under s.424 and s.425 (formerly s.234B and s.234C). The same trap catches expatriates paid partly by an overseas parent company and partly locally.

An exit is the mirror image: the whole balance must be collected by the last month of service, so that payslip shrinks sharply. Gratuity (exempt up to ₹20,00,000) and leave encashment (exempt up to ₹25,00,000) are not included in this projection and need to be handled separately.

Strictly, s.392 spreads bonus tax across the remaining months. In practice many employers withhold the incremental tax in the bonus month itself. The annual figure is identical either way, but the monthly cash flow is not — so tell the employee first. Perquisites such as accommodation, a company car or ESOPs raise taxable income without any cash leaving, which is why take-home quietly falls.

From Tax Year 2026-27 perquisites are valued under Rule 15 of the Income-tax Rules, 2026 (formerly Rule 3), which raised the figures for cars. A company car used for both official and private purposes is now valued at ₹5,000 or ₹7,000 a month depending on engine size, plus ₹3,000 for a chauffeur — or ₹2,000 or ₹3,000 (plus ₹3,000 for a chauffeur) when the employee bears the running costs.

The Income-tax Act, 2025 and the Income-tax Rules, 2026 came into force on 1 April 2026 and renumbered nearly every section and form. FY 2025-26 (assessment year 2026-27) is still governed by the 1961 Act, so its paperwork keeps the old numbers — the salary TDS certificate for that year is the old Form 16, due by 15 June 2026. From Tax Year 2026-27 the quarterly salary TDS statement is Form 138 (formerly Form 24Q) from the first quarter, and the annual certificate is Form 130 (formerly Form 16), first issued by 15 June 2027. Choose the financial year in the calculator and every citation on screen and in the PDF follows it.

For Tax Year 2026-27 the slabs, the ₹75,000 and ₹50,000 standard deductions, the rebates and the deduction limits are unchanged. Two changes do move money. The 50% HRA limit now applies in eight cities — Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad and Bengaluru (Schedule III Table Sl.11 read with Rule 279) — instead of four; everywhere else it stays at 40%. And, as described above, Rule 15 of the Income-tax Rules, 2026 raised the taxable value of a company car.