Mumbai: As the income tax return (ITR) filing season for Assessment Year (AY) 2026-27 begins, many salaried taxpayers are finding that the tax deducted from their salaries was not enough to cover their total tax liability.
For several employees, take-home salaries dropped sharply during the January-March 2026 quarter as employers increased Tax Deducted at Source (TDS) to recover earlier shortfalls.
Now, while filing their returns, many are also discovering additional self-assessment tax liabilities, along with interest charges.
Why TDS Shortfalls Happen?
Under tax rules, employers deduct TDS based on the estimated taxable income of employees.
However, this estimate depends largely on the information and documents submitted by employees during the year.
If details about other income, previous employment, exemptions or deductions are not provided on time, employers may calculate lower TDS initially and recover the shortfall later, often in the final quarter.
Employees can submit Form No. 122 to disclose income from other sources, salary from previous employers, house property losses, TDS and TCS details.
Similarly, Form No. 124 is used to claim exemptions and deductions such as HRA, leave travel concession, housing loan interest and other eligible tax benefits.
Bigger Issue: Self-Assessment Tax
The problem becomes more serious when employees earn income beyond salary, such as bank interest, dividends, rent, freelance income or professional fees.
Even if TDS is deducted on these incomes, the deduction rate may not be enough to meet the final tax liability.
As a result, taxpayers may have to pay additional tax and interest while filing their ITR.
Five Ways to Avoid Tax Shocks
Submit Form No. 122 Early: Disclose previous salary income and other earnings to your employer as early as possible.
Avoid Inflated Tax Declarations: Claim only those investments and deductions that you genuinely plan to make.
Submit Proofs on Time: Provide documents supporting HRA, housing loan interest and other deductions before payroll deadlines.
Estimate Total Income Regularly: Review your annual income before advance tax due dates to identify any tax shortfall early.
Monitor Form 26AS and AIS: Regularly check tax records and reported transactions to spot errors or missing income entries.
TDS Alone May Not Be Enough: Tax experts say salaried employees should no longer assume that TDS will automatically cover all tax obligations.
Regular income tracking, timely disclosures and advance tax planning can help avoid sudden salary reductions, large tax demands and interest penalties during the return filing season.
