Withholding Tax

Full form: TDS / Tax Deducted at Source

Tax & Deductions

Withholding tax (TDS in India) is tax deducted by the payer before transferring income. Banks deduct TDS on FD interest, companies on salary, buyers on property purchase. TDS is not the final tax -- you reconcile actual tax liability in ITR and claim refund if TDS exceeds your tax.

In detail

Common TDS rates:nFD interest above Rs 40K (Rs 50K for seniors): 10% TDSnSalary: TDS at effective income tax ratenRent above Rs 50K/month: 10% TDS by tenantnProperty purchase above Rs 50L: 1% TDS by buyernFreelance income (Section 194J): 10% TDSnDividend above Rs 5,000/year: 10% TDSnnTDS vs actual tax:nIf TDS > actual tax liability: file ITR, get refundnIf TDS < actual tax: pay balance via advance tax or self-assessment taxnnForm 26AS: annual tax credit statement showing all TDS deducted against your PAN. Download from income tax portal.

Formula

Tax payable = Income tax computed on total income - TDS already deductednPositive: pay balance. Negative: refund from IT department.

Real-life example

🇮🇳 India example

Sunita's TDS deductions in FY24: Employer Rs 1.5L (salary TDS) + Bank Rs 12K (FD interest TDS) + Property buyer Rs 10K (sold flat) = Total TDS Rs 1.62L. Actual tax liability (after deductions in ITR): Rs 1.45L. Refund: Rs 17,000. She files ITR by July 31: refund credited in 2-3 months. Form 26AS confirmed all deductors filed correctly.