Salary is one of the most common sources of income in India, and employers are required to deduct Tax Deducted at Source (TDS) before paying salaries to employees where applicable.
TDS Code 1002 generally applies to:
- Salaries paid by private sector employers
- Salaries paid by companies
- Salaries paid by LLPs and firms
- Salaries paid by non-government employers
Many employers, payroll teams, and employees search for TDS Code 1002 to understand how salary TDS works under the new Income Tax Act and how it relates to the earlier Section 192.
In this guide, we explain:
- What TDS Code 1002 means
- Its connection with Section 192
- How salary TDS is calculated
- Employer responsibilities
- Practical examples
- Common compliance mistakes
Quick Summary of TDS Code 1002
| Particulars | Details |
|---|---|
| TDS Code | 1002 |
| Earlier Section | 192 |
| Nature Of Payment | Salary |
| Applicable To | Non-Government Employees |
| Fixed TDS Rate | No |
| Basis Of Deduction | Applicable Income Tax Slab |
Old Section vs New TDS Code
| New TDS Code | Earlier Section | Nature |
|---|---|---|
| 1002 | 192 | Salary Paid To Employees Other Than Central and State Government Employees |
Users searching for:
- New code for Section 192
- Salary TDS code
- TDS Code 1002
are generally referring to salary TDS deducted by private sector employers and other non-government entities.
What is TDS Code 1002?
TDS Code 1002 corresponds to:
Section 192 of the earlier Income Tax Act.
Under the new code structure, TDS Code 1002 applies to salary payments made by employers to employees other than Central Government and State Government employees.
Unlike many other TDS sections, salary TDS is not deducted at a fixed percentage.
Instead, employers estimate the employee’s taxable income for the financial year and deduct tax based on the applicable income tax slab.
Is There a Fixed TDS Rate Under Code 1002?
No.
Unlike contractor payments, professional fees, rent, or commission payments, TDS under Code 1002 is not deducted at a fixed rate such as 2% or 10%.
Instead, TDS is calculated based on:
- Estimated annual salary
- Applicable tax regime
- Eligible deductions and exemptions
- Income tax slab rates
- Rebate and surcharge provisions
This makes salary TDS more dynamic than most other TDS categories.
How Salary TDS Is Calculated
Employers generally follow these steps:
Step 1: Estimate Annual Salary
Include:
- Basic salary
- Dearness allowance
- Bonuses
- Incentives
- Taxable allowances
- Perquisites
Step 2: Reduce Eligible Exemptions
Where applicable:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Other eligible exemptions
Step 3: Consider Deductions
Depending on the tax regime and employee declarations.
Step 4: Compute Tax Liability
Apply the relevant income tax slab rates.
Step 5: Deduct TDS Monthly
The estimated annual tax liability is spread across the remaining months of the financial year.
Practical Example of Salary TDS
Suppose an employee earns:
- Annual salary: ₹14,00,000
After considering eligible exemptions and deductions:
- Taxable income: ₹13,25,000
The employer calculates the estimated annual tax liability based on the applicable tax regime and deducts TDS proportionately every month.
The monthly TDS amount may vary depending on employee declarations and salary structure.
Difference Between TDS Code 1001 and 1002
Many users get confused between these two salary-related codes.
| TDS Code | Applicable To |
|---|---|
| 1001 | State Government Employees |
| 1002 | Employees Other Than Central and State Government Employees |
For most private businesses, companies, LLPs, and firms, salary TDS will generally be reported under Code 1002.
Employer Responsibilities Under Code 1002
Employers are responsible for:
- Obtaining employee tax declarations
- Estimating taxable salary correctly
- Deducting TDS accurately
- Depositing TDS within prescribed timelines
- Filing TDS returns
- Issuing Form 16
Failure to comply may result in interest, penalties, and notices.
Common Mistakes Businesses Make
Businesses often make mistakes such as:
- Incorrect salary projections
- Ignoring employee declarations
- Incorrect tax regime selection
- Delayed TDS deposits
- Errors in PAN reporting
- Incorrect TDS return filing
These mistakes can create compliance issues for both employers and employees.
TDS Return Reporting for Code 1002
TDS deducted under Code 1002 must be reported in the applicable TDS return.
Employers should ensure:
- Correct employee PAN details
- Accurate salary reporting
- Timely return filing
- Proper reconciliation with payroll records
Correct reporting helps ensure that employees receive proper tax credit.
Why TDS Code 1002 Is Important
TDS Code 1002 is one of the most frequently used TDS codes because it applies to salary payments across most private sector businesses.
Every employer running payroll must ensure:
- Accurate salary computation
- Correct TDS deduction
- Timely deposit of taxes
- Proper return filing
This helps avoid compliance risks and employee grievances.
Frequently Asked Questions
What is TDS Code 1002?
TDS Code 1002 applies to salary payments made to employees other than Central and State Government employees and corresponds to the earlier Section 192.
What is the TDS rate under Code 1002?
There is no fixed TDS rate. Tax is deducted based on the employee’s estimated taxable income and applicable tax slab.
What is the new code for Section 192?
For non-government employees, the new TDS code is 1002.
Does TDS apply on every salary payment?
TDS is generally deducted when the employee’s estimated taxable income results in tax liability under the applicable provisions.
What is the difference between 1001 and 1002?
Code 1001 applies to State Government employees, while Code 1002 applies to other employees.
Final Thoughts
TDS Code 1002 is the new code corresponding to Section 192 for salaries paid to employees other than Central and State Government employees.
Unlike most TDS sections, it does not operate on a fixed rate or threshold. Instead, tax is deducted based on the employee’s estimated annual taxable income and applicable tax slab rates.
Employers should ensure accurate payroll processing, timely TDS deduction, and proper reporting to remain compliant.
Need Help With Payroll and TDS Compliance?
If you need assistance with:
- Salary TDS calculations
- Payroll processing
- TDS return filing
- Form 16 generation
- Employer compliance
Our team can help simplify payroll and TDS compliance for your business.