What HR Teams Need to Communicate to Employees — and When

The new tax regime became the default in India from FY 2023-24. That one change created an ongoing communication responsibility for HR that most teams are still not handling well — either because they don’t know what to say, they don’t know when to say it, or they’re afraid of giving tax advice.

This article is not tax advice for employees. It’s a guide for HR teams on what to communicate, when to communicate it, what happens operationally when employees choose different regimes, and what to do when employees want to switch mid-year. All of it actionable, none of it crossing into advice about which regime employees should choose.

Part 1: What HR Must Understand Before Communicating Anything

You cannot communicate this well if the underlying mechanics aren’t clear in your own head first.

The default regime and what it means for TDS

• From FY 2023-24 onwards, the new tax regime is the default. If an employee does not declare a regime choice, their TDS is calculated under the new regime.
• This means the old regime — with all its deductions (80C, HRA, LTA, standard deduction etc.) — is now opt-in, not opt-out.
• An employee who does nothing gets new regime TDS. An employee who wants old regime benefits must actively declare it.
• If an employee fails to declare and their TDS is calculated under the new regime but their actual tax liability (computed at year-end with old regime deductions) is lower, they will get a refund when filing ITR — but they will have had higher TDS deducted throughout the year.

The two regimes — key differences

HR’s role is not to recommend a regime. HR’s role is to ensure every employee understands the declaration timeline, knows what to submit, and doesn’t default into a regime by inaction when a different choice would better suit them.

Part 2: The Tax Regime Communication Calendar

HR needs to communicate on this topic at four distinct points in the year. Getting the timing wrong creates TDS errors, employee frustration, and a surge of ITR-related queries in June.

Part 3: Mid-Year Regime Switches — What HR Must Know

Employees ask this question every year: “Can I switch from old to new regime (or vice versa) mid-year?” The honest answer has two parts.

For salaried employees (no business income):

• Yes, they can switch regimes — but only once per financial year, at the time of filing their ITR, not during the payroll year.
• For TDS purposes, the regime declared to the employer at the start of the year determines how TDS is calculated throughout. A salaried employee cannot instruct their employer to change TDS mid-year to reflect a different regime.
• If an employee declared new regime to HR but decides old regime is better when filing ITR, they can file under old regime and claim a refund for excess TDS.
• If an employee declared old regime to HR, submitted investment declarations, and received lower TDS — they cannot switch to new regime when filing ITR to avoid submitting proof.

For employees with business income:

• Different rules apply. Employees with income from business or profession can switch to new regime and back only once in their lifetime.
• HR teams typically do not need to manage this complexity — it is the employee’s own compliance responsibility. But if an employee with a side business asks HR to change their TDS regime mid-year, flag it to your payroll team or CA rather than making the change directly.

The most common HR mistake on tax regime: applying the old regime default to everyone (habit from pre-FY24) without sending a declaration form, then processing incorrect TDS all year. By June, employees whose TDS was wrong file ITR and either demand a refund process explanation or lodge HR complaints about incorrect Form 16.

Part 4: What HR Should Say — and What Not To

HR’s communication responsibility is process and deadline clarity. It is not tax advice. This table maps the boundary.

HR’s role is to provide facts and process clarity — not advice. The moment HR tells an employee “you should choose X regime,” HR has crossed into giving tax advice and becomes liable if the recommendation is wrong for that employee’s specific situation.

Part 5: The Operational Setup HR Must Have in Place

• A signed tax regime declaration form or ESS-based digital declaration for every employee — collected at start of FY and for every new joiner.
• A clear record of which regime each employee is on — accessible to payroll without having to ask the employee again.
• The April payroll run must not process before regime declarations are collected. An undeclared new joiner’s first payroll should flag a missing declaration, not silently default.
• Investment declaration window: October to November, with a hard deadline before the November payroll cut-off.
• Proof submission window: January 15 to February 15, with documented proof uploaded or submitted — not just verbally stated.
• Any employee whose proof falls short of their declaration gets a catch-up TDS adjustment in February and March — communicate this proactively so it’s not a surprise on the payslip.