TDS (Tax Deducted at Source)

TDS stands for Tax Deducted at Source.

It is a mechanism introduced by the Income Tax Department of India whereby the person making a payment is required to deduct a certain percentage of tax at the time of making the payment and remit it to the government. The recipient receives the net amount after tax deduction. TDS is not an additional tax — it is an advance payment of income tax that gets adjusted against the final tax liability when filing the ITR. What is TDS? Whenever you earn income — whether salary, interest, rent, professional fees, or commissions — the payer may deduct TDS before paying you. For example, if you earn ₹50,000 in interest from your bank FD in a year, the bank deducts 10% TDS (₹5,000) and pays you ₹45,000. You can claim this ₹5,000 back when you file your ITR if your total taxable income is below the tax exemption threshold. TDS rates are prescribed by the Income Tax Act for different types of income. Section 192 covers salary (based on income slab), Section 194A covers interest (10% if PAN is provided, 20% if not), Section 194C covers contractor payments (1% for individuals, 2% for others), Section 194H covers commission/brokerage (5%), and Section 194J covers professional fees (2% or 10% depending on the type). These are all subject to the threshold limits specified in the Act. Form 26AS is the consolidated tax statement that shows all TDS deducted on your PAN during a financial year across all payers — your employer, banks, tenants, clients, and anyone else who deducted TDS on payments to you. You can download Form 26AS from the Income Tax e-filing portal (incometax.gov.in) and it is the ultimate reference for all TDS credits you can claim. If your total income is below the taxable limit (₹3 lakhs for individuals below 60, ₹3.5 lakhs for senior citizens, ₹5 lakhs for very senior citizens under the new tax regime), you can submit Form 15G (for individuals below 60) or Form 15H (for senior citizens) to the payer to request that no TDS be deducted on interest income. However, you must still include this income in your total income when filing the ITR. TDS deducted is not the final tax. If your total taxable income including the TDS-ed income exceeds the exemption limit, you must pay the balance tax when filing the ITR. Conversely, if total TDS exceeds your tax liability, you are entitled to a refund. Always verify TDS entries in Form 26AS against your Form 16 and against actual certificates issued by deductors. Discrepancies should be resolved with the deductor before filing the ITR to avoid IT department notices.