TDS (Tax Deducted at Source)
TDS is income tax an employer withholds from salary each month and pays to the government on the employee's behalf, rather than the employee paying it in a lump sum at year end.
Also known as: tax deducted at source, TDS on salary, TDS meaning
The employer estimates the employee's annual tax liability at the start of the financial year, based on their salary and declared investments, and deducts roughly a twelfth of it each month. As declarations firm up and proofs arrive, the estimate is revised, which is why TDS often rises sharply in the last quarter for anyone who declared investments they did not make.
The employee's regime choice drives the calculation. Under the old regime, declared investments and exemptions such as HRA reduce taxable income; under the new regime most of those do not apply and the slabs differ. Collecting that choice early matters, because switching it mid-year forces a recalculation of everything deducted so far.
At year end the employer issues Form 16, which summarises salary paid and tax deducted, and is what the employee files their return against.
Statutory note
Slabs, regime rules and thresholds are set by the Income Tax Act and change with each Finance Act. Confirm current values for the relevant assessment year rather than carrying last year's figures forward.
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Form 16
Form 16 is the certificate an employer issues each year summarising the salary paid to an employee and the tax deducted from it, used to file an income tax return.
Net Salary (Take-Home)
Net salary is what actually reaches an employee's bank account — gross earnings for the period less every deduction and recovery.
HRA (House Rent Allowance)
HRA is a salary component paid towards rented accommodation, part of which is exempt from income tax under the old regime if the employee actually pays rent.
CTC (Cost to Company)
CTC is the total annual cost an employer bears for an employee — salary, allowances, employer contributions and benefits combined — not the amount the employee receives.