If you’ve ever received a salary, professional payment, or interest from a financial institution, you might have noticed that a certain amount gets deducted before the money reaches you. This deduction is called TDS — one of the most important concepts in India’s taxation system. In this beginner’s guide, we’ll break down what TDS means, why it’s deducted, and how it affects you.
What is TDS?
TDS (Tax Deducted at Source) is a system introduced by the Income Tax Department to collect tax at the time income is generated rather than at a later stage.
In simple words, the payer (also called the deductor) deducts a certain percentage of tax from the payment made to the receiver (the deductee) and deposits it directly with the government on behalf of the receiver.
For example:
If a company pays ₹50,000 to a consultant and the applicable TDS rate is 10%, it will deduct ₹5,000 and pay ₹45,000 to the consultant. The ₹5,000 is then deposited with the government.
Why Was TDS Introduced?
The TDS system ensures that:
- The government receives tax revenue throughout the year rather than waiting for year-end returns.
- Tax evasion is reduced, as the deduction happens at the time of payment.
- It simplifies compliance for taxpayers, as part of the tax is already paid.
Who Deducts TDS?
TDS can be deducted by:
- Employers paying salaries
- Banks paying interest on deposits
- Tenants paying rent
- Companies or individuals making payments to contractors, professionals, or consultants
Basically, anyone making specific types of payments listed under the Income Tax Act is responsible for deducting TDS before making the payment.
Common TDS Sections and Rates
Here are some commonly used TDS sections and rates (as per the Income Tax Act, 1961):
| Section | Nature of Payment | TDS Rate |
| 192 | Salary | As per the applicable income tax slab |
| 194A | Interest (other than securities) | 10% |
| 194C | Payment to contractors/sub-contractors | 1% (individual/HUF), 2% (others) |
| 194H | Commission or brokerage | 2% |
| 194I | Rent | 10% (land/building), 2% (plant/machinery) |
| 194J | Professional or technical fees | 10% (Professional),2%(Technical) |
Note: Rates may vary based on PAN availability and government amendments.
How is TDS Deposited and Reported?
After deducting TDS, the deductor must:
- Deposit the deducted tax with the government by the 7th of the following month. However, for tax deducted in the month of March, the due date for deposit is 30th April.
- File quarterly TDS returns (Form 24Q, 26Q, 27Q, 27EQ)
- Issue TDS certificates (Form 16 for salary, Form 16A for others) to deductees.
These certificates help the receiver claim credit for the tax deducted while filing their Income Tax Return (ITR).
How Can You Check Your TDS?
You can view your TDS details anytime using the TRACES portal or the Income Tax e-filing portal under:
- Form 26AS, or
- Annual Information Statement (AIS)
These statements show all taxes deposited on your behalf, including TDS, advance tax, and self-assessment tax.
When Can You Claim a Refund?
If your total taxable income is below the threshold limit or TDS has been deducted in excess, you can claim a refund while filing your income tax return. The Income Tax Department will verify your claim and refund the excess amount directly to your bank account.
Conclusion
TDS is not an extra tax — it’s just a method of tax collection. It helps the government collect revenue efficiently and ensures smoother tax compliance for taxpayers.
As a responsible taxpayer, you should always check your TDS statements, ensure correctness, and claim credit while filing your return.
