A sixty-year-old Act was replaced on 1 April. Most of what a small employer does month to month is unchanged. The parts that changed are the ones your forms, references and software settings depend on.
The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961 for the tax year 2026-27 onwards. For an employer, the rates and regime are the same as before: the new regime is the default, the slabs run nil to ₹4 lakh and then 5% to 30% above ₹24 lakh, the standard deduction for salaried employees under the new regime is ₹75,000, and the rebate makes tax nil on taxable income up to ₹12 lakh. What changed is the scaffolding: "previous year" and "assessment year" are replaced by a single tax year; salary TDS moved from Section 192 to Section 392 of the new Act; and the annual certificate and quarterly statement are reported as new forms (Form 130 replacing Form 16, Form 138 replacing 24Q — confirm against the CBDT notification before filing). Every employee's TDS computation was to be reset from 1 April 2026. Facts checked 14 October 2026; this is a payroll guide, not tax advice.
For a 20-person company where most salaries sit under ₹12.75 lakh, the practical consequence is still: a handful of people have TDS, and the work is getting their regime choice and declarations right once a year.
| Item | Under the 1961 Act | Under the 2025 Act |
|---|---|---|
| Period | Previous year + assessment year | Tax year (single term) |
| Salary TDS provision | Section 192 | Section 392 |
| Annual TDS certificate | Form 16 | Reported as Form 130 — verify |
| Quarterly salary TDS statement | Form 24Q | Reported as Form 138 — verify |
| Deductions (old 80C etc.) | Chapter VI-A sections | Re-numbered schedules and sections |
| TDS computation | Carried through the year | Reset from 1 April 2026 for the new tax year |
Secondary sources disagree on some of the new form and section numbers, which is itself the lesson: do not hard-code them into your templates. Reference the CBDT notification and let your filing software carry the numbers.
Keep this on the same compliance calendar as PF and PT; the dates interlock.
The TDS line on the payslip is the employee's evidence that tax was deducted, and your evidence that it was deducted correctly against the declared regime. Show the monthly deduction, and make the annual figure reconcilable to the certificate. See what a payslip must include for the full block list — nothing in the 2025 Act changed the payslip itself.
| In force | 1 April 2026, tax year 2026-27 onwards |
|---|---|
| Replaces | Income-tax Act, 1961 |
| Salary TDS | Section 392 of the 2025 Act (was Section 192) |
| Default regime | New regime; employee may opt out each year |
| Standard deduction | ₹75,000 (new regime, salaried) |
| Rebate | Tax nil up to ₹12 lakh taxable income |
| Deposit due | 7th of the following month; 30 April for March |
| Annual certificate | New form number under the 2025 rules (reported as Form 130); verify before issuing |
No. The new Act re-enacted the law without changing the rates. For the tax year 2026-27 the new-regime slabs remain nil to ₹4 lakh and 5% to 30% above ₹24 lakh, with a ₹75,000 standard deduction for salaried employees and a rebate that makes tax nil up to ₹12 lakh of taxable income. Confirm any later Finance Act changes with your CA.
The single twelve-month period from 1 April to 31 March that the 2025 Act uses in place of the old 'previous year' and 'assessment year' pair. Income earned in tax year 2026-27 is taxed as tax year 2026-27, which simplifies declarations and certificates.
The annual salary TDS certificate continues, but under the rules made for the 2025 Act it carries a new form number — widely reported as Form 130 in place of Form 16, with Form 138 replacing the quarterly 24Q. Verify the numbers against the CBDT notification or your filing software before issuing.
Section 392 of the Income-tax Act, 2025 for salary paid from 1 April 2026. Salary paid up to 31 March 2026 remains under Section 192 of the 1961 Act.
Yes, at the start of each tax year. The new regime applies by default; an employee who wants the old regime must opt for it, and the TDS computation for 2026-27 was to be reset from 1 April 2026 regardless of what applied in the previous year.
Update the declaration form and any templates that cite section numbers or 'assessment year', confirm your filing software has moved to the new forms, collect regime choices for the new tax year, and otherwise keep the same monthly deduct-deposit, quarterly file, annual certificate routine.
Merik's payroll gives the TDS routine the inputs it needs: a monthly payslip per employee computed from recorded attendance, with earnings lines (basic, HRA, other allowance, incentive, overtime, arrears) and deduction lines (professional tax by state slab, loss of pay and other deductions). Monthly TDS is entered on the deductions side and appears on the payslip the employee downloads from their own login, and the stored slips give the annual figure the certificate has to match.
Merik does not compute income tax, hold investment declarations, or file TDS statements — that stays with your CA or filing software. What it removes is the re-typing between attendance, salary and payslip that produces the wrong gross in the first place. See the payroll module.
Free, set up for you, every module included — see what the free workspace includes
Every monthly, quarterly and annual statutory date, with the thresholds that apply.
The line items a payslip needs so an employee can check their own pay.
A practical monthly process for founders and office managers.
Request your free company workspace and bring employees, attendance, leave, payroll and tasks together.