Every year around August, the same message circulates in office WhatsApp groups: "Don't bother with the declaration form, just let them deduct — you'll claim it all back when you file." It sounds harmless. It costs salaried employees, and especially NRIs who moved mid-year, real money in blocked cash flow for eight to eighteen months. And from Tax Year 2026-27, the default regime rule means silence no longer means "old regime with my usual deductions" — it means the new regime with almost nothing.

What the law actually says

TDS on salary was governed by Section 192 of the Income-tax Act, 1961. Under the Income-tax Act, 2025, the same obligation now sits at Section 392. Salary paid on or before 31 March 2026 was deducted under Section 192 of the 1961 Act; salary paid on or after 1 April 2026 is deducted under Section 392 of ITA 2025. The mechanics did not change — the section number and the vocabulary did.

Three things the section actually requires, none of which are optional for the employer:

1. Deduction at the average rate, not a flat rate. The employer must estimate your total salary income for the whole tax year, compute the tax on that estimate, and divide it across the remaining months of the year. This is the 12-month projection method. It is not a slab-wise monthly deduction and it is not a flat percentage. If your estimated annual tax is Rs.1,20,000 and twelve months remain, Rs.10,000 comes out each month. If you join in October with six months remaining, the same annual tax is compressed into six deductions of Rs.20,000.

2. Deduction at the time of payment, not accrual. Section 392 (Section 192 under ITA 1961) requires deduction at the time of payment, not when salary is credited or becomes due. A bonus declared in February but paid in April falls in the next tax year's TDS computation.

3. The new regime is the default. From Tax Year 2026-27, the employer must apply the new regime slabs unless you file a written intimation choosing the old regime. Under the new regime the basic exemption is Rs.4,00,000 and the standard deduction on salary is Rs.75,000, giving an effective nil-tax salary of Rs.12,75,000 after the rebate. But the old-regime deductions — housing loan interest, 80C investments, HRA exemption — are not available. If you intended to claim them and said nothing, your employer computed your TDS as though they did not exist.

Note the vocabulary shift: ITA 2025 uses "Tax Year" throughout. "Previous Year" and "Assessment Year" are gone. Tax Year 2026-27 is the twelve months from 1 April 2026 to 31 March 2027. Your Form 16 will say Tax Year. Your Form 26AS is now Form 168 under ITA 2025 — same TDS ledger, new name.

Form 12BB remains the prescribed declaration through which you tell your employer about deductions and allowances you intend to claim. It covers house rent paid (with the landlord's PAN where annual rent exceeds Rs.1,00,000), interest on a housing loan (with the lender's PAN), leave travel concession, and Chapter VI-A deductions. Without a valid Form 12BB on file, the employer is not permitted to reduce your estimated income by those amounts, even if the employer personally knows you pay rent.

Practical implications

Scenario 1 — the silent employee. Ravi earns Rs.18,00,000. He pays Rs.3,00,000 in home loan interest, has Rs.1,50,000 in 80C, and pays Rs.4,80,000 in rent. Under the old regime with a full Form 12BB, his taxable income drops meaningfully and his annual TDS is materially lower. He filed nothing. His employer applied the new-regime default: Rs.18,00,000 less Rs.75,000 standard deduction = Rs.17,25,000 taxable, no HRA exemption, no 80C, no housing interest. The difference is deducted from his salary every month and sits with the government until he files his return and waits for a refund. That is a working-capital loss of roughly a year on a five-figure sum — and it is entirely self-inflicted.

Scenario 2 — the mid-year joiner. Priya joins a new employer in November. She does not report her previous employer's salary in Form 12B. Her new employer projects only the salary it will pay — five months' worth — computes tax on that lower base, and deducts accordingly. In July she discovers her actual liability is far higher, because the two salaries stack into a higher slab. She now owes the balance plus interest under the advance tax provisions. The employer did nothing wrong. She withheld the information the projection method depends on.

Scenario 3 — the NRI who returned mid-year. Anand worked in Singapore until August 2026 and joined an Indian employer in September. His Indian employer deducts under Section 392 on Indian salary from September. But his residential status for Tax Year 2026-27 must be tested under Section 6 — the residency section carries the same number in both the 1961 Act and ITA 2025. If his stay crosses the thresholds, he is resident for the full tax year, and his Singapore salary for April to August may enter his Indian return. His employer's TDS covers only the Indian salary. The gap is his to fund through advance tax, and if he ignores it, interest accrues.

Scenario 4 — the NRI drawing Indian salary abroad. Meera is on an Indian company's payroll but works from Dubai. Salary for services rendered outside India is not automatically Indian-sourced, but where the employer treats it as Indian salary and deducts under Section 392, she must either establish the correct position with the employer or claim treaty relief in her return with a Tax Residency Certificate and Form 10F. Waiting for a refund is the expensive route; correcting the withholding is the cheap one.

Step-by-step: what to do

Decide your regime in writing before the first payroll of the tax year. Run both computations on your actual numbers — old regime with your deductions versus new regime with the Rs.75,000 standard deduction. Whichever wins, put it in a signed intimation to payroll. Silence elects the new regime.
File Form 12BB in April, not in January. Most payroll teams open the declaration window at the start of the tax year and a proof-submission window in December or January. Declaring in April spreads the benefit across twelve deductions. Declaring in January compresses it into three.
Collect the PANs you will need. Landlord's PAN if annual rent exceeds Rs.1,00,000. Lender's PAN for housing loan interest. Without these, the employer must disallow the claim regardless of your rent receipts.
If you changed jobs, give your new employer Form 12B. It reports salary drawn and TDS deducted from the previous employer. This lets the new employer project your full-year income correctly and deduct the right amount from the first month.
Reconcile Form 168 (formerly Form 26AS) every quarter. After each quarter's TDS return cycle, check that the tax your employer deducted actually appears against your PAN. Deducted-but-not-deposited TDS is the single most common cause of a mismatch notice, and it is far easier to fix in September than in the following July.
If your TDS is under-deducted, pay advance tax. Do not wait for the return. The quarterly instalment dates are 15 June, 15 September, 15 December and 15 March. Interest for deferment runs on the shortfall for every quarter you skip.
If your TDS is genuinely over-deducted and the year is not over, fix it forward. Submit the missing declaration now. The employer recomputes the annual projection and adjusts the remaining months downward. You do not have to wait for a refund for tax that has not been deducted yet.

FAQ

Q: I forgot to declare the old regime and my employer applied the new regime. Can I still claim old-regime deductions?
Yes — the regime you choose in your return governs your final liability, and a salaried person without business income can choose the old regime at filing even if TDS was deducted under the new one. The deductions are not lost. What is lost is the use of your money for the intervening months, and the refund only arrives after your return is processed.

Q: My employer deducted TDS but it is not showing in Form 168. What now?
Raise it with payroll in writing immediately and ask for the TDS return acknowledgement and challan for that quarter. The credit appears only after the employer files the quarterly TDS return correctly against your PAN. If you file your return claiming credit that does not appear in Form 168, expect a mismatch notice. Push the employer to file a correction statement — that is the fix, not a note in your return.

Q: I am an NRI on an Indian payroll. Does my employer still deduct under Section 392?
If the salary is chargeable to tax in India, yes. Residential status does not switch off the employer's withholding obligation. If you believe the income is not Indian-sourced or is protected by a treaty, take it up with the employer before payroll runs, supported by a Tax Residency Certificate and Form 10F. Silence means deduction, and deduction means a refund cycle.

Q: Does Form 12BB cover NPS, health insurance, and education loan interest?
Form 12BB covers Chapter VI-A deductions as a category, which includes those items, alongside the specific fields for HRA, LTC and housing loan interest. But every one of them is an old-regime deduction. If you are on the new-regime default, declaring them changes nothing — the regime election has to come first, and only then does Form 12BB do any work.

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