What is TDS?
Tax Deducted at Source explained - salary, interest, and other income
What is TDS?
TDS (Tax Deducted at Source) is a method of collecting income tax where the payer deducts tax at the time of making payment to the payee. Instead of paying the full amount, a percentage is deducted as tax and deposited with the government.
For example, if your bank pays ₹50,000 as interest and TDS rate is 10%, they will deduct ₹5,000 as TDS and pay you ₹45,000. The ₹5,000 is deposited with the government as advance tax on your behalf.
💡 Key Point: TDS is advance tax payment. You can claim refund if TDS deducted is more than your actual tax liability.
Types of TDS
Salary TDS
- • Deducted by employer monthly
- • Based on projected annual income
- • Considers investments & deductions
- • Form 16 provided annually
- • Most common type of TDS
Interest TDS
- • On FD, savings account interest
- • 10% if interest > ₹40,000
- • Banks deduct automatically
- • Form 16A certificate issued
- • Can submit Form 15G/15H to avoid
Professional TDS
- • On freelance/consultant payments
- • 10% on payments > ₹30,000
- • Applicable to professionals
- • Section 194J of Income Tax
- • TDS certificate required
Other TDS Types
- • Rent TDS (10% if > ₹2.4L annually)
- • Commission TDS (5%)
- • Contractor TDS (1-2%)
- • Dividend TDS (varies)
- • Property sale TDS (1%)
Common TDS Rates
| Income Type | TDS Rate | Threshold | Section |
|---|---|---|---|
| Salary | As per slab | ₹2.5L | 192 |
| Interest (Bank) | 10% | ₹40,000 | 194A |
| Professional Fees | 10% | ₹30,000 | 194J |
| Rent | 10% | ₹2.4L/year | 194I |
| Commission | 5% | ₹15,000 | 194H |
| Contractor Payment | 1-2% | ₹30,000 | 194C |
TDS Certificates
Form 16 (Salary)
- • Annual salary TDS certificate
- • Issued by employer
- • Contains salary breakup
- • Shows investments claimed
- • Required for ITR filing
Form 16A (Others)
- • For non-salary TDS
- • Interest, rent, professional fees
- • Issued quarterly
- • Contains TAN of deductor
- • Verify with 26AS statement
Important Points
- • Always collect TDS certificates
- • Verify details in Form 26AS
- • Keep certificates for ITR filing
- • Check TAN number validity
- • Report discrepancies immediately
- • Download from TRACES portal
TDS Calculator
Avoid TDS
Form 15G
For individuals below 60
Form 15H
For senior citizens (60+)
Conditions
Total income below taxable limit
TDS Refund Process
Common Issues
❌ Wrong PAN
TDS at higher rate (20%)
❌ No TDS Certificate
Cannot claim in ITR
❌ Mismatch in 26AS
Verify with deductor
Frequently Asked Questions
Can I get TDS refund if I have no tax liability?
Yes, if your total income is below taxable limit, you can claim full TDS refund by filing ITR. The refund will be processed after verification.
What if TDS certificate has wrong details?
Contact the deductor immediately to issue a revised certificate. Wrong details can cause problems during ITR filing and processing.
Is TDS applicable on all types of income?
No, TDS applies only to specific types of payments as defined in Income Tax Act. Business income, capital gains, etc. may not have TDS.
How to check if TDS is deposited with government?
Check Form 26AS on income tax e-filing portal. It shows all TDS credits in your account. Verify quarterly to ensure proper credit.
What happens if employer doesn't deduct TDS?
You're still liable to pay tax. Pay advance tax quarterly or pay full tax while filing ITR. Employer may face penalties for non-compliance.
Can TDS be adjusted against other tax liabilities?
Yes, TDS is adjusted against your total tax liability. If TDS is more than tax due, you get refund. If less, you pay the balance.