Salary TDS and Direct Payment of Income Tax: Current Section 392 and Legacy Sections 191 and 192

Tax on salary is ordinarily collected through tax deduction at source by the employer. Where tax is not deducted as required, the employee's direct tax liability and the deductor's statutory consequences must be considered separately. From 1 April 2026, salary TDS is governed by Section 392 of the Income-tax Act, 2025.

Section 392 of the Income-tax Act, 2025: TDS on salary

Section 392 is the principal current provision for deduction of tax at source from income chargeable under the head "Salaries". It replaces the salary-TDS framework previously contained in Section 192 of the Income-tax Act, 1961.

Multiple or successive employers

An employee who has salary from more than one employer during the same tax year may furnish prescribed details of salary from the other employer or employers and tax already deducted. The chosen employer can take those particulars into account while computing the appropriate salary TDS.

Other income, house-property loss and tax already deducted or collected

The current framework permits an employee to furnish prescribed particulars relevant to salary-TDS computation, including eligible other income, loss under the head "Income from house property", and tax deducted or collected. The employer must apply the statutory limitations while taking those details into account.

Perquisites and profits in lieu of salary

The employer must comply with the prescribed reporting requirements for perquisites, benefits, amenities and profits in lieu of salary. Under the Income-tax Rules, 2026, Form No. 123 replaces old Form No. 12BA for the prescribed statement of perquisites and related items.

Current employee information form

Form No. 122 under the Income-tax Rules, 2026 replaces the earlier Forms 12B and 12BAA for prescribed employee information relevant to Section 392. It can cover salary from another employer, eligible other income, house-property loss and tax deducted or collected during the tax year.

Salary TDS certificate and quarterly statement from 2026-27

For the new Act framework, Form No. 130 replaces old Form No. 16 as the annual TDS certificate for salary and specified covered income. Employers reporting salary TDS use Form No. 138 as the quarterly statement corresponding to the earlier Form No. 24Q, subject to the Income-tax Rules, 2026.

Transition from Section 192 to Section 392

Legacy Section 191: Direct payment

The section also contained special timing rules for direct payment of tax on specified employee stock or sweat-equity perquisites allotted or transferred by an eligible start-up referred to in old Section 80-IAC. The relevant trigger was the earliest of the statutory events specified in Section 191(2).

Section 191 further clarified the interaction between the employee's direct payment obligation and the deductor's default. Where a person required to deduct or pay tax failed to do so and the assessee also failed to pay that tax directly, the deductor could be treated as an assessee in default under old Section 201, without prejudice to other statutory consequences.

Legacy Section 192: Salary

Section 192 of the Income-tax Act, 1961 required the person responsible for paying salary to deduct income-tax at the time of payment at the average rate computed on the basis of the rates in force, using the employee's estimated salary income for the financial year.

Non-monetary perquisites

Under Section 192(1A), an employer could opt to pay tax on the whole or part of a non-monetary perquisite instead of deducting that tax from salary. Section 192(1B) prescribed the average-rate basis for computing that tax.

Eligible start-up perquisites

Section 192(1C) contained deferred deduction or payment rules for specified security or sweat-equity perquisites provided by an eligible start-up. The tax became deductible or payable within the statutory period following the earliest specified event.

Salary from more than one employer

Section 192(2) allowed an employee with simultaneous or successive employers to furnish salary and TDS details from other employers to a chosen employer, which then took those details into account for TDS computation.

Relief and other income

Section 192 contained provisions enabling prescribed information concerning eligible relief, other income and house-property loss to be considered in salary-TDS computation. It also required prescribed evidence or particulars for claims and permitted adjustment of excess or deficiency in deductions during the financial year.

Provident fund, superannuation fund and foreign-currency salary

The old section also contained rules for deduction from certain accumulated recognised provident-fund balances, approved superannuation-fund payments, and conversion of foreign-currency salary into rupees at the prescribed exchange rate.

Practical points for employers and employees

Related Income Tax provisions

Past firm assessments, deduction at source and advance payment: Sections 189A and 190

Accumulated employee balance and interest on securities: Sections 192A and 193

Interest other than interest on securities: Section 194A

Always identify the date of salary payment and relevant tax year before applying the 1961 Act or the 2025 Act.