Section 392 · Collection & recovery
Section 392 of the Income-tax Act, 2025 — TDS on Salary and Accumulated PF Balance
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XIX
📜 What the law says — Section 392, Income-tax Act 2025
392. (1) Any person responsible for paying any income chargeable under the head
“Salaries” shall deduct income-tax on the amount payable and this deduc-
tion shall be made at the time of such payment at the average rate of income-tax
computed on the basis of the rates in force for the tax year in which the payment
is made, on the estimated income of the assessee under this head for such year.
(2)(a) Without prejudice to the provisions of sub-section (1), the person responsible
for paying any income in the nature of a non-monetary perquisite chargeable to
tax under section 17(1), may pay, at his option, tax on the whole or part of such
income without making any deduction therefrom, at the time when such tax was
deductible under sub-section (1);
(b) the tax under clause (a) shall be determined at the average rate as per sub-sec-
tion (1), on the income chargeable under the head “Salaries” including the income
referred to in the said clause, and shall be construed as if it were a tax deductible at
source from the income under the head “Salaries”, and be subject to the provisions
of this Chapter.
(3) Any person, being an eligible start-up referred to in section 140, responsible for
paying any income of the nature specified in section 17(1)(d) in any tax year, shall
deduct or pay, as the case may be, tax on such income, on the basis of rates in force
for the tax year in which the specified security or sweat equity share is allotted or
transferred, within the time as specified for the payee in section 289(3).
(4)(a) The person responsible for making payment under sub-section (1), shall take
into account the following particulars furnished by the assessee, at his option, in
such form and verified in such manner as may be prescribed, for the purpose of
making deduction under the said sub-section and such particulars shall have an
effect of increasing or decreasing the tax to be deducted:—
(i) any income under the head “Salaries” due or received by the assessee,
from any other employer or employers during the tax year;
(ii) any relief allowable under section 157, where the assessee being a Gov-
ernment servant, or an employee in a company, co-operative society, local
authority, university, institution, association or body is entitled for such
relief;
(iii) any loss under the head “Income from house property” for the same tax
year;
(iv) any income chargeable under any other
In plain language
What Section 392 is about
Section 392 of the Income-tax Act, 2025 is the single "TDS on salary" provision. It applies from 1 April 2026 (Tax Year 2026-27) and consolidates two old sections of the Income-tax Act, 1961 — Section 192 (TDS on salary) and Section 192A (TDS on premature EPF withdrawal) — into one place. So whether you are a salaried employee or someone withdrawing your provident fund early, this is the governing section.
TDS on salary (the core rule)
- Who must deduct: Any person (employer) responsible for paying income chargeable under the head "Salaries" must deduct tax at the time of actual payment.
- Rate: There is no flat rate. The employer deducts at the employee's average rate of income-tax, computed on the estimated total salary for the whole year using the slab rates in force. This spreads TDS evenly across 12 months.
- Regime: The default is the new tax regime slabs. Under the new regime for 2026-27, income up to ₹4,00,000 is nil, ₹4–8 lakh at 5%, ₹8–12 lakh at 10%, rising to 30% above ₹20 lakh. An employee can opt for the old regime by informing the employer.
Special situations built into Section 392
- Non-monetary perquisites [392(2)]: The employer may choose to pay the tax on non-cash perks (like a company car or rent-free accommodation) itself, instead of deducting it from the employee's salary.
- ESOPs of eligible start-ups [392(3)]: Tax on shares allotted under an ESOP by an eligible start-up can be deferred; TDS is triggered later (on sale, exit, or 5 years), at the rate in force then.
- Employee declarations [392(4)]: An employee can report other income and a loss from house property so the employer factors it in. Importantly, the employer can only reduce TDS for a house-property loss and prior TDS — other reported income can increase, but not decrease, the deduction.
- Reconciliation [392(5)]: The employer must furnish a statement of perquisites, collect proof of deduction claims, and adjust any excess or shortfall in deduction within the same tax year.
- Salary in foreign currency [392(8)]: Converted at the prescribed rate for TDS purposes.
TDS on accumulated PF balance [Section 392(6) and 392(7)]
This is the old Section 192A rule. When the trustees of a recognised provident fund pay out an employee's accumulated balance, they must deduct TDS if the withdrawal is taxable — chiefly where the employee has not completed 5 years of continuous service.
- Threshold: No TDS if the aggregate payment is less than ₹50,000.
- Rate: 10% if PAN is furnished; 20% (maximum marginal rate) if PAN is not furnished.
- Form 15G/15H: No TDS if the employee files Form 15G (or 15H for seniors) declaring total income below the taxable limit.
- No TDS cases: Transfer of PF from one account to another on job change; withdrawal after 5 years of continuous service; and termination due to ill-health, employer's business closure, or reasons beyond the employee's control.
Practical implications
- If total tax withheld exceeds your liability (e.g., you invested in 80C late), you claim a refund by filing your ITR — the employer will not refund it after year-end.
- Give your employer your full declaration (rent, home-loan interest, other TDS) early so monthly TDS is accurate and your take-home is not over-deducted.
- Withdrawing EPF before 5 years is generally taxable and attracts TDS; transferring the balance to a new employer avoids both tax and TDS.
💡 Example
Example 1 — Salary TDS (average rate): Ravi's estimated salary for 2026-27 is ₹14,00,000 under the new regime. His annual tax (before cess) works out to roughly ₹90,000; adding 4% health & education cess makes about ₹93,600. The employer divides this by 12, so about ₹7,800 is deducted as TDS each month. If Ravi later declares a ₹2,00,000 home-loan interest loss from house property, the employer recomputes and lowers his monthly TDS.
Example 2 — Premature EPF withdrawal: Meena resigns after 3 years and withdraws an EPF balance of ₹1,80,000. Because she has not completed 5 years and the amount exceeds ₹50,000, TDS applies. With PAN on record, TDS is 10% = ₹18,000. Had she not given her PAN, it would be 20% = ₹36,000. If instead she transferred the balance to her new employer's PF, there would be no TDS and no tax.
A relatable story: Arjun switched jobs and, needing cash for a bike, withdrew his ₹90,000 PF after just 2 years. He was surprised to see ₹9,000 deducted as TDS. His CA explained that Section 392(7) treats early withdrawal as taxable, and had he simply transferred the PF to his new company, he would have kept the full amount and let it keep growing tax-free. Lesson learnt: transfer, don't withdraw.
| Payment | Condition | Threshold | TDS Rate |
|---|
| Salary [392(1)] | Income under "Salaries" | Above basic exemption (est. income) | Average rate (slab-based) |
| EPF withdrawal [392(7)] | <5 yrs service, PAN furnished | ₹50,000 or more | 10% |
| EPF withdrawal [392(7)] | <5 yrs service, no PAN | ₹50,000 or more | 20% (MMR) |
| EPF withdrawal | Amount below limit | Less than ₹50,000 | Nil |
| EPF withdrawal | Form 15G/15H filed / transfer / 5+ yrs | Any | Nil |
Related sections
Section 393 — TDS on payments other than salary Section 394 — Tax collection at source (TCS) Section 16 — Heads of income / what salary includes Section 202 — New regime slab rates Schedule XI, Part A — Recognised provident fund rules Section 157 — Relief for salary arrears (old 89)
Forms under this section
Income-tax forms (2025) prescribed under Section 392:
Frequently asked questions
What does Section 392 of the Income-tax Act, 2025 replace?
It replaces Section 192 (TDS on salary) and Section 192A (TDS on premature EPF withdrawal) of the Income-tax Act, 1961, merging them into one section effective 1 April 2026.
At what rate does my employer deduct TDS on salary?
There is no fixed rate. Your employer estimates your annual salary and deducts tax at your average rate based on the slabs in force, spreading it across the 12 months of the year.
Is TDS deducted on EPF withdrawal?
Yes, if you withdraw before completing 5 years of continuous service and the amount is ₹50,000 or more. The rate is 10% with PAN and 20% without PAN.
How can I avoid TDS on my provident fund?
Complete 5 years of continuous service, keep the amount below ₹50,000, transfer the PF to your new employer instead of withdrawing, or file Form 15G/15H if your total income is below the taxable limit.
Can my employer reduce my TDS if I have a home loan?
Yes. Under Section 392(4) you can declare a loss from house property (such as home-loan interest), and the employer must factor it in to lower your monthly TDS.
What form replaces Form 16 under the new Act?
Reports indicate the salary TDS certificate is being reissued as Form 130 and the employee declaration (old Form 12BB) as Form 124, though you should confirm the final notified forms with the department.
If too much TDS is deducted, how do I get it back?
If the tax withheld exceeds your actual liability, claim the excess as a refund when you file your income-tax return; the employer cannot refund it after the year ends.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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