What is TDS?
TDS (Tax Deducted at Source) is the income tax the payer deducts from your payment and deposits with the government on your behalf, before you receive the net amount. It's the Indian government's pay-as-you-earn mechanism — much of your annual tax is already paid via TDS by the time you file your ITR. You then claim it as a credit against your final tax liability.
Who deducts TDS?
- Employers — TDS on salary under Section 192
- Banks — TDS on interest under Section 194A (above ₹40k / ₹50k for senior citizens)
- Companies — TDS on contractors (194C), professional fees (194J), commission (194H), rent (194I)
- Property buyers — TDS on immovable property purchase (194IA, 1% on sale value > ₹50 lakh)
- Mutual funds — TDS on capital gains and dividends (194K)
- E-commerce platforms — TDS on payments to merchants (194O)
Compliance deadlines
- Deposit: By the 7th of the next month. (For TDS deducted in March: by 30 April.)
- Quarterly return: Form 24Q (salaries), 26Q (non-salary residents), 27Q (non-residents) by end of next month after each quarter.
- Form 16 (salary): Issued by employer by 15 June each year.
- Form 16A (non-salary): Issued within 15 days of the quarterly TDS return due date.
Late deposit penalty: 1% per month interest. Late return: ₹200/day under Section 234E. Failure to deduct: 1% per month from when it should have been deducted to actual deposit, plus disallowance of the related expense in your IT return.
Section 206AA — missing PAN penalty
If the deductee doesn't furnish PAN, TDS is deducted at the higher of: (a) rate prescribed in the relevant section, (b) rate in force, or (c) 20%. Always furnish PAN to your payer to avoid this penalty rate.
FAQs
What is TDS?▼
TDS (Tax Deducted at Source) is income tax that the payer deducts from your payment and deposits with the government on your behalf, before you receive the net amount. It's the government's pay-as-you-earn mechanism — by the time you file your annual ITR, much of your tax is already paid via TDS. You can claim TDS already deducted as a credit in your ITR.
Which TDS rate applies if I don't furnish PAN?▼
Section 206AA: TDS is deducted at the higher of (a) the rate prescribed under the relevant section, (b) the rate in force, or (c) 20%. So missing-PAN almost always means a higher TDS rate. Always furnish PAN to your payer (employer / contractor / bank) when entering into a transaction.
When is TDS deposited and what return is filed?▼
TDS deducted in any month must be deposited with the government by the 7th of the next month (30 April for March). Quarterly return Form 24Q (salaries) / 26Q (non-salary residents) / 27Q (non-residents) by end of next month after each quarter. Late payment: 1% interest per month. Late return: ₹200/day fee under Section 234E + possible penalty under 271H.
Is the TDS chart same for FY 2024-25 and FY 2025-26?▼
Largely yes — most TDS rates and thresholds are stable across recent FYs. Budget 2024 changed a few thresholds (e.g. Section 194T introduced for partner remuneration). Always verify with the latest CBDT notification for any specific section before deducting. Errors cost more than verification time.