What is TDS? Tax Deducted at Source — Explained Simply

Updated: 3 June 2026

TDS (Tax Deducted at Source) means the payer deducts a percentage of tax from your payment before it reaches you, and deposits it with the government. Your employer does it on salary. Your bank does it on FD interest. You get a credit for this deducted tax when filing your ITR — if more was deducted than your actual tax, you get a refund.

26AS

Always verify your TDS credits in Form 26AS and AIS on incometax.gov.in before filing your ITR. Mismatches can cause notices or delayed refunds.

How TDS Works — Step by Step

1. Payment is due: Your employer, bank, or client is about to pay you — salary, FD interest, professional fees, rent, commission, etc.

2. Tax is deducted: The payer (called the "deductor") withholds the applicable TDS percentage from your payment before crediting it to you.

3. TDS is deposited: The deductor deposits the TDS with the government by the 7th of the following month (employer: 30 April for March TDS).

4. TDS return is filed: The deductor files a quarterly TDS return (Form 24Q for salary, Form 26Q for others) with details of payments and TDS deducted.

5. Your credit appears: The TDS reflects in your Form 26AS and AIS on the income tax portal against your PAN.

6. You claim credit in ITR: When you file your ITR, you claim the TDS already paid as advance tax. Net payable = Total tax liability minus TDS already deducted. If negative, it is a refund.

Common TDS Sections, Rates and Thresholds

Section	Nature of Payment	TDS Rate	Threshold (Annual)
192	Salary	As per slab rate	Above basic exemption limit
194A	FD/savings interest (banks)	10%	₹40,000 (₹50,000 for senior citizens)
194C	Contractor/sub-contractor payment	1% (individual) / 2% (company)	₹30,000 single / ₹1,00,000 aggregate
194H	Commission or brokerage	5%	₹15,000
194I	Rent (land, building, plant)	10% (land/building) / 2% (plant)	₹2,40,000
194J	Professional / technical fees	10% (professional) / 2% (technical)	₹30,000
194-IA	Purchase of immovable property	1%	Purchase price ≥ ₹50 lakh
194N	Cash withdrawal from bank	2% / 5%	₹1 crore (or ₹20L for non-filers)
194Q	Purchase of goods (buyer)	0.1%	₹50 lakh

If PAN is not provided: TDS is deducted at 20% or the applicable rate — whichever is higher (Section 206AA). Non-filers of ITR face higher TDS under Section 206AB.

TDS Certificates — Form 16, 16A, 16B

Certificate	Issued By	Covers	Due Date
Form 16	Employer	TDS on salary (Section 192)	15 June of the following FY
Form 16A	Bank / company / client	TDS on non-salary (FD interest, professional fees, rent, etc.)	15 days from TDS return due date
Form 16B	Property buyer	TDS on purchase of immovable property (Section 194-IA)	15 days from deposit of TDS

TDS vs TCS vs Advance Tax

Concept	Who pays?	When?	Example
TDS — Tax Deducted at Source	Payer deducts from payment	At the time of payment	Employer deducts from salary
TCS — Tax Collected at Source	Seller collects from buyer	At the time of sale	Car dealer collects 1% TCS on sale above ₹10L
Advance Tax	Taxpayer pays directly	Quarterly (Jun, Sep, Dec, Mar)	Business owner or investor with high income pays quarterly

Frequently Asked Questions

What is TDS and how does it work?

TDS stands for Tax Deducted at Source. It is a mechanism where the payer of income deducts a specified percentage of tax at the time of making payment and deposits it with the government on behalf of the recipient. For example, when your employer pays you a salary, they deduct TDS (based on your estimated tax liability for the year) before crediting the net salary. Similarly, banks deduct TDS at 10% on interest paid on fixed deposits if the annual interest exceeds ₹40,000 (₹50,000 for senior citizens). The TDS credit appears in your Form 26AS and AIS, and you claim it when filing your ITR — if excess, it becomes a refund.

Who is responsible for deducting TDS?

TDS is deducted by the "deductor" — the entity making the payment. This includes: employers (deduct TDS on salary under Section 192); banks and financial institutions (TDS on interest under Section 194A); companies making payments for professional services (Section 194J); businesses paying contractors (Section 194C); companies paying rent above threshold (Section 194I); buyers of immovable property above ₹50 lakh (Section 194-IA at 1%). Individuals and HUFs are generally not required to deduct TDS on service payments unless they are liable for tax audit under Section 44AB.

How do I check TDS deducted from my salary?

You can check TDS deducted from salary through multiple methods: (1) Form 16 — your employer must issue this by 15 June of the following year; it shows total salary, deductions claimed, and TDS deducted. (2) Form 26AS — available on the income tax portal (incometax.gov.in > e-File > Income Tax Returns > View Form 26AS); it consolidates all TDS deducted against your PAN from all deductors. (3) AIS (Annual Information Statement) — on the tax portal under e-File > Income Tax Returns > View AIS; more comprehensive than 26AS. Always cross-check these before filing your ITR to ensure all TDS credits are reflected correctly.

Can TDS be refunded if more was deducted than my actual tax liability?

Yes, excess TDS is refunded by the Income Tax Department after you file your ITR. The refund process: file your ITR claiming the TDS credit (auto-populated from Form 26AS/AIS); the ITR is processed and the excess TDS (TDS deducted minus actual tax liability) is refunded to your bank account linked with PAN on the portal. Refunds are typically credited within 4–12 weeks of ITR processing. Interest at 6% per annum (Section 244A) is also paid if the refund exceeds 10% of the tax liability. Ensure your bank account is pre-validated on the portal for smooth refund credit.

What Is Tds Near You

Expert CA/CS assistance for what is tds across India. Click your city for local details.

→ New Delhi → Mumbai → Bengaluru (Bangalore) → Hyderabad → Chennai → Kolkata → Pune → Ahmedabad → Noida (UP) → Gurgaon (Gurugram) → Jaipur → Lucknow → Chandigarh → Surat → Kochi (Cochin) → Faridabad → Ghaziabad → Greater Noida → Panipat → Sonipat → Manesar (IMT) → Dharuhera → Mathura → Palwal → Agra → Kosi Kalan → Aligarh → Khair → Jewar (Noida International Airport) → Kanpur → Varanasi (Kashi) → Prayagraj (Allahabad) → Meerut → Bareilly → Moradabad → Gorakhpur → Firozabad → Saharanpur → Muzaffarnagar → Bulandshahr → Hapur → Karnal → Kurukshetra → Ambala → Hisar → Rohtak → Yamunanagar → Rewari → Bhiwani → Jodhpur → Udaipur → Kota → Ajmer → Bikaner → Ludhiana → Amritsar → Jalandhar → Patiala → Mohali (SAS Nagar) → Bathinda → Dehradun → Haridwar → Rudrapur → Shimla → Solan (Baddi-Barotiwala-Nalagarh) → Bhopal → Indore → Gwalior → Jammu → Srinagar → Panchkula

Ask Veda