The government’s decision that salary up to ₹12 lakh TDS will be deducted at source (TDS) will be dropped from the taxation is a very welcome relief to taxpayers. But it is important to note that the move does not mean workers in this bracket will not have to pay income tax.
The exemption from TDS simply means that employers will not deduct tax at the time of salary disbursement for individuals earning up to ₹12 lakh. However, the tax is still to be calculated and paid by the taxpayer. This is because the income tax liability is determined by the slabs and exemptions under the Income Tax Act, not by the TDS threshold.
For instance, under the new tax regime applicable in FY 2026‑27, individuals earning above ₹7 lakh annually are liable to pay tax, unless they claim rebates or deductions. So a person earning ₹10 lakh or ₹12 lakh will still have to pay tax when filing their Income Tax Return (ITR), even if no TDS was deducted during the year.
Tax experts stress that taxpayers need to be vigilant about their obligations. If no TDS is deducted, they should pay advance tax or self‑assessment tax to avoid penalties and interest under Sections 234A and 234B. Failure to do so could result in notices from the Income Tax Department.
The government’s reasoning behind raising the TDS threshold is to ease cash flow for middle-income earners and reduce administrative burden on employers. But this does not change the basic tax liability. Salaried people must reconcile their income with Form 26AS and the Annual Information Statement (AIS) before filing returns to ensure compliance.
Finally, the absence of TDS on salaries up to ₹12 lakh is not a blanket tax exemption. Taxpayers have to calculate the liability as per slabs, claim for their tax deduction, and pay taxes accordingly. Filing accurate returns should always be a priority to avoid penalties and maintain financial credibility.
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