How should an employer deduct TDS on salary when employees choose the new tax regime?

Under Section 192, the employer deducts TDS on estimated salary for the year using the slab rates of the regime the employee has opted for. Since FY 2023-24 the new regime under Section 115BAC is the default, so if an employee gives no declaration, TDS is worked out under the new regime.

An employee who wants the old regime should tell the employer in writing at the start of the year, with investment and deduction proofs where needed. In the new regime the employer allows the standard deduction (₹50,000) and the Section 87A rebate where income qualifies, but most Chapter VI-A deductions such as 80C and 80D are not available. The tax is spread over the months of the year and 4% cess is added.

The choice made for TDS is only for the employer's deduction; the employee can still pick the better regime when filing the return. Confirm the specifics for each employee with your CA or tax advisor.