TDS

Full form: Tax Deducted at Source

Tax & Deductions

TDS is the mechanism where the payer of income deducts tax at source before payment and deposits it with the government. You receive income net of TDS. TDS is not your final tax liability -- it is an advance tax credit that you reconcile when filing your Income Tax Return.

In detail

Common TDS rates for individuals:
Salary: slab rate (deducted by employer based on projected annual income)
FD/RD interest: 10% when annual interest exceeds Rs 40,000 (Rs 50,000 for senior citizens)
Rent above Rs 50,000/month: 10% (deducted by tenant)
Property purchase above Rs 50L: 1% deducted by buyer
Contractor/professional fees: 10% above Rs 30,000

Key documents: Form 16 (salary TDS certificate from employer), Form 16A (non-salary TDS), Form 26AS and AIS (annual TDS statement against your PAN -- view at incometax.gov.in).

Avoid excess TDS: Submit Form 15G (under 60) or 15H (senior citizens) to payers if your total income is below the taxable limit -- prevents unnecessary TDS deduction.

Formula

TDS deducted = Income x Applicable rate Net received = Income - TDS Tax refund/due = Actual tax liability - Total TDS across all sources If Total TDS > Tax liability: you get a refund (file ITR to claim it)

Real-life example

🇮🇳 India example

Suresh has Rs 8L in FDs across two banks. Bank A: Rs 5L FD generating Rs 35,000 annual interest -- below Rs 40,000 threshold, no TDS. Bank B: Rs 3L FD generating Rs 21,000 interest -- also no TDS. But if consolidated at one bank: Rs 56,000 interest -- TDS at 10% = Rs 5,600. Spreading FDs across banks can avoid TDS.

Frequently asked questions

What happens if excess TDS is deducted? ▼
File your ITR -- the excess TDS appears as a credit in Form 26AS. The income tax department processes the refund typically within 3-4 months of filing. Since 2023, refunds are processed faster for returns filed early (April-July).
What is Form 15G and 15H? ▼
Form 15G: declaration by individuals below 60 years that their income is below taxable limit -- prevents TDS deduction on FD/RD interest. Form 15H: same for senior citizens above 60. Submit to each bank where you have FDs at the start of each financial year. Both forms are available on bank internet banking portals.