Salary TDS is a projection problem: every month the employer must estimate the employee's tax for the whole financial year and deduct a proportionate slice. xMatix makes that projection explicit and persistent — a Monthly TDS Projection record per employee per payroll period — computed from configured tax rule tables and the employee's verified declarations, always under both regimes so the comparison is never guesswork, with the elected regime driving the actual deduction. The payroll run's TDS component then reads that record, so deduction and comparison come from one computation.
Where the records live
Open the Payroll app from the App Launcher. The rule tables — Tax regime rules, Salary tax slabs, Tax surcharge slabs and Tax deduction sections — are under Settings → Income tax rules. The employee records — Tax declarations and Monthly TDS projections — are under Income tax → Employee tax. The payslip's Print tax declaration button (a Form No. 12BB layout) is switched off in the standard setup.
Two tax screens read the projections. Payroll → Income tax → Tools → Tax computation lists every employee for a tax year: the applied and the recommended regime (highlighted when the employee is on the dearer one) and the annual saving, the projected annual gross, taxable income and annual tax as of the period you pick (the latest by default), then the TDS of each payroll period and the TDS to date, with a Total line, a Company filter when you run several companies, and Export to CSV. It shows the stored Monthly TDS Projection records and recomputes nothing — click an employee to open the projection behind the figures. The TDS Calculation Sheet tab on an Employee record, and the TDS calculation sheet page under Payroll → Income tax → Tools, show how one employee's figure is built — see The TDS work sheet below.
Regimes are data, elections are per employee
Everything that changes with a Budget lives in per-financial-year rule tables, one set per regime:
- Tax Regime Rules — the scalar parameters: standard deduction, the rebate's income ceiling and maximum, whether rebate marginal relief applies, the surcharge cap, the cess rate, the rounding unit, and what the regime allows at all (chapter deductions, house-property loss set-off and its cap). Both regimes need a rule for every year; entering them and what each figure does are covered in Tax regime rules.
- Salary Tax Slabs — the progressive bands and marginal rates, by regime and financial year. Entering them, how blank fields widen a slab's reach, and why gaps and overlaps go unnoticed are covered in Salary tax slabs.
- Tax Surcharge Slabs — the income thresholds and surcharge rates, capped per regime by the Tax Regime Rule's Surcharge Max Rate. Setting them up, the marginal relief and the pitfalls are covered in Tax surcharge slabs.
- Tax Deduction Sections — one row per declarable section: its ceiling, a senior-citizen variant where the law provides one, availability per regime, whether the employer may allow it against salary TDS, and membership of an aggregate-cap group for sections that share one combined ceiling. Setting them up, how a declaration line finds its section and why a claim can count for nothing are covered in Tax deduction sections.
Rule rows with no company (Partner Account blank) are shared by every legal entity. For a Tax Regime Rule, a company-specific row overrides the shared one. Slab and surcharge rows work differently: a company's computation uses the shared rows and its own rows together, so a company row adds to the shared ones rather than replacing them. Each employee elects a regime on the Employee record's Tax Regime field; where none is recorded, the New regime applies as the statutory default. A Tax Regime stored as Old Regime or New Regime (the picklist labels) is read the same as Old / New, on the Employee and on every rule row. One limitation to know: the projection has no date of birth to work from, so every employee is taxed in the general age band — senior-citizen slabs can be seeded but never apply.
Declarations: only verified amounts count
Employees' deductions and investments are entered as a Tax declaration per financial year — a header (Employee, Partner account, Financial year in the form 2026-27, Regime, Status) with a Tax declaration line per deduction section carrying the declared amount and, once proof is checked, the verified amount. A new declaration starts as Draft and moves to Submitted, Verified or Approved (or Rejected); the standard forms don't show Status, so an administrator adds it to the record page. Saving checks that the year has tax regime rules and that each line's section is in the catalogue and allowed in the declaration's Regime. The projection reads only Verified and Approved declarations whose Financial Year matches the period's year, and uses the verified amount when present, otherwise the declared one. Each line is capped at its section's ceiling on its own, so enter one line per section. A declaration sitting in Draft or Submitted contributes nothing — the safe direction: tax is over-deducted, not under-deducted, until proof arrives. The declaration's own Regime only limits which sections its lines may claim; the Employee's Tax Regime decides the regime applied. There is no employee self-service form; declarations are entered and verified by the payroll operator. The full procedure is in Tax declarations.
The monthly projection
Project TDS on a payroll run computes a projection for every non-exited employee of the company whose TDS applicable flag is on (the run's Calculate action does this first, so the deduction always reads a fresh figure). For each employee it:
- Sums the financial year's already-calculated run details, excluding the current run — gross to date and TDS already deducted.
- Projects the annual gross: actuals to date plus a monthly figure for each month remaining in the year (April counts twelve, March one). The monthly figure is the average of the calculated months; an employee with no calculated months yet is projected from the CTC on their Resource Compensation, treated as a monthly amount.
- Builds the income facts — projected salary plus the verified declaration claims, each capped by its section's ceiling and by any shared aggregate ceiling its cap group imposes, and dropped if the regime does not allow the section.
- Computes the full-year tax under both regimes in the statutory order: slab tax, less rebate where income is at or under the ceiling, less rebate marginal relief where the regime provides it, plus surcharge with marginal relief at each threshold, plus cess, rounded to the configured unit.
- Applies the elected regime, spreads the remaining liability over the remaining months — monthly TDS is the annual tax less what is already deducted, divided by the months left — and persists the projection, replacing any earlier one for the same employee and period.
The record keeps the whole comparison: Taxable Income If Old / If New, Tax If Old Regime / If New Regime, Recommended Regime, Annual Saving, Applied Regime, and On Dearer Regime. On Dearer Regime is ticked only when the employee's elected regime really costs more, and the On A Dearer Regime list view gives HR a ready-made review list before proof season closes. The income facts are the projected salary and the declaration claims only: HRA and other section 10 exemptions, the professional-tax deduction, other income and house-property income or loss are treated as nil. If either regime's rule for the financial year is missing, Project TDS and Calculate refuse the run with a message naming the tax year and the missing regime — nothing is calculated, so no one is paid the TDS line's fixed Value by mistake. Add the year's rule pack (below) and calculate again. The Revised After Proof field exists but nothing sets it.
When the run calculates, a component whose statutory type is TDS takes the month's projection as its amount. Without such a component on the structure, the projection is computed and ignored. An employee with no projection for the period gets the TDS line's own Calculation Type and Value instead, so keep that Value at zero. Finding, reading and correcting projections step by step is covered in Monthly TDS projections.
Setting up a tax year: the rule pack
A tax year needs, for each regime, a Tax Regime Rule, its Salary Tax Slabs and its Tax Surcharge Slabs, plus the Tax Deduction Sections. For 2026-27 the platform ships a seed that adds the whole pack for every company that runs payroll and has none yet — it never adds rows next to a pack you already keyed, and a shared (no-company) row counts as yours. The values (Budget 2026 left them unchanged):
| New regime | Old regime | |
|---|---|---|
| Slabs | 0–4L nil · 4–8L 5% · 8–12L 10% · 12–16L 15% · 16–20L 20% · 20–24L 25% · above 24L 30% (every age) | under 60: nil to 2.5L · 2.5–5L 5% · 5–10L 20% · above 10L 30%; 60–79: nil to 3L; 80+: nil to 5L, then 20% / 30% |
| Standard deduction | 75,000 | 50,000 |
| Rebate (s.156, old s.87A) | up to 60,000 when taxable income ≤ 12,00,000, with marginal relief | up to 12,500 when taxable income ≤ 5,00,000 |
| Surcharge | 10% above 50L · 15% above 1cr · 25% above 2cr (capped at 25%) | as New, and 37% above 5cr |
| Cess | 4% | 4% |
| Deduction sections | 80CCD(2) only | 80C / 80CCC / 80CCD(1) within one 1,50,000 cap · 80CCD(1B) 50,000 · 80D 25,000 (50,000 senior) · 80DD · 80DDB · 80E · 80EEB · 80G (not via the employer) · 80TTA · 80U |
Ask your administrator to run the seed, or key the rows yourself under Payroll → Settings → Income tax rules. Do not add bands to a slab table that already has rows for that regime and age band: overlapping rows tax the same income twice.
The TDS work sheet
The TDS Calculation Sheet tab on the Employee record and the TDS calculation sheet page (Payroll → Income tax → Tools, where you pick the employee) compute the employee's work sheet on the spot, read-only — exactly what Project TDS would write for the latest payroll period, without saving anything:
- four tiles: annual projected salary (months paid and to go), the current regime (elected or the default), the recommended regime and how much it saves a year, and the monthly TDS under the applied regime;
- Old vs New: projected salary, exemptions, standard deduction, professional tax, declarations allowed, taxable income, slab tax, rebate, surcharge, cess, tax for the year and monthly TDS, side by side — the Applied column is what payroll deducts, Cheaper marks the recommendation;
- Salary: each component paid so far, projected and for the year;
- Declarations: each line's declared and verified amounts, whether its status counts, and what each regime allows;
- Slabs: the bands the taxable income reaches under each regime.
Notices at the top say what is missing — no rule pack for the year, no active compensation, TDS Applicable unticked, declarations not yet verified — instead of showing zeros. To switch an employee's regime, change Tax Regime on the Employee record and recalculate the run. The header's TDS worksheet button runs the same computation but shows only "Action Executed"; use the tab.
Depositing and Form 16
The month's deducted TDS posts to the salary-TDS payable control and is deposited per period through Prepare TDS challan on the run — see Statutory deductions and challans.
Form 16 certificates are issued from the Tax Center's TDS return and certificate flow — see TDS and TCS. Print Form 16 on an employee's certificate prints Part B (salary, exemptions, deductions and the tax deducted and deposited for the year) from the certificate's Annexure II row; Part A comes from TRACES and is attached to the certificate as a file. The payroll run no longer carries a Form 16 button.
Common questions
Why did an employee's TDS jump mid-year?
The projection trues up every month: annual tax less what has already been deducted, spread over the months that remain. Anything that raises the annual estimate — a raise reflected in the monthly average, a declaration that failed verification and dropped out, rule tables corrected — lands entirely on the remaining months. The projection record shows the inputs, so the jump is explainable.
An employee never elected a regime — what deducts?
The New regime, as the statutory default. The election lives on the Employee record and can be changed; the next projection picks it up. The On Dearer Regime flag exists precisely to catch people defaulted onto a regime that costs them more.
Employees submitted declarations but tax didn't drop. Why?
Almost always status: only Verified or Approved declarations count. Check the status, that the Financial Year label matches the period's year exactly, that the section is one the elected regime allows (most chapter deductions do not apply under the New regime), and that the claim survived its section ceiling and any shared cap group.
Where do I see both regimes for an employee?
Two places. The TDS Calculation Sheet tab computes both regimes live, line by line. The Monthly TDS Projection record stores taxable income and annual tax under each regime, the recommended regime, the saving and which regime was applied — exactly what drove the month's deduction.
Calculate says "Payroll can't compute salary TDS for tax year …". What now?
The tax year has no rule pack (or only one regime's) for the run's company. Add it — see Setting up a tax year — and calculate again. Earlier versions deducted the TDS line's fixed Value in this case; the run now stops instead.
TDS is zero for one employee only.
Their TDS applicable flag is off, they have no active Resource Compensation to project from, or their annual estimate falls under the rebate ceiling. Open their projection record — if none exists for the period, the first two apply.