TDS on Salary Entry in Tally — Accounting Entries & Setup

Recording TDS on salary correctly in your books (and in Tally) keeps your payroll, TDS payable and Form 24Q return in sync. This guide shows the accounting entries for salary with TDS deducted under Section 192, the payment and TDS-deposit entries, and how to set them up in Tally.

The concept

Under Section 192, an employer deducts income tax (TDS) from an employee’s salary based on the employee’s estimated annual tax on the chosen regime, and deposits it with the government. The gross salary is an expense; the TDS deducted is a liability (TDS payable) until deposited; the net is paid to the employee.

Accounting entries

1. Booking salary for the month (gross, with TDS deducted):

Salary A/c    Dr   [Gross salary]
    To TDS Payable (Section 192) A/c   [TDS amount]
    To Salary Payable / Bank A/c   [Net salary]

2. Paying net salary to employees (if not paid directly above):

Salary Payable A/c   Dr   [Net salary]
    To Bank A/c   [Net salary]

3. Depositing TDS with the government:

TDS Payable (Section 192) A/c   Dr   [TDS amount]
    To Bank A/c   [TDS amount]

How to do it in Tally

1. Create ledgers: Salary (under Indirect/Direct Expenses), TDS Payable – Section 192 (under Duties & Taxes), Salary Payable (under Current Liabilities).
2. Pass the salary booking as a Journal voucher using the entry above.
3. Pass the net-salary and TDS-deposit payments as Payment vouchers from Bank.
4. If using Tally’s TDS feature, enable TDS in Features (F11), tag the nature of payment as salary (Section 192) so Tally tracks it for reporting.

Don’t forget the return

TDS on salary is reported quarterly in Form 24Q, with the annual salary breakup in Annexure II of Q4. TAXAJ handles 24Q TDS filing and payroll processing.

Frequently asked questions

Under which section is TDS on salary deducted?

Under Section 192 of the Income-tax Act, on the estimated tax liability of the employee for the year.

Which ledger group is TDS Payable under in Tally?

Create the TDS Payable ledger under Duties & Taxes.

Which return reports salary TDS?

Form 24Q, filed quarterly, with the annual salary details in the Q4 annexure.

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Related guides: TAN & TDS · 24Q TDS filing · Payroll & HR