📘 What is Tax Deducted at Source (TDS)?
TDS stands for Tax Deducted at Source—a mechanism introduced under the Income Tax Act, 1961 to collect tax at the very source of income generation. The person making the payment (deductor) is responsible for deducting tax and depositing it with the government.
🔹 Purpose: Prevent tax evasion, ensure timely collection of taxes.
🔹 Applies to: Salaries, interest, rent, commissions, professional fees, dividends, etc.
🧮 How Does TDS Work?
When a payment (above a prescribed limit) is made, the payer deducts a fixed percentage of tax before making the payment. This amount is deposited with the government under your PAN.
🖼️ Example:
If ₹1,00,000 is paid as professional fees with a 10% TDS rate → ₹10,000 will be deducted and ₹90,000 will be paid to the recipient. The deducted ₹10,000 goes to the government against the recipient’s PAN.
📑 Key TDS Sections, Thresholds & Rates (FY 2025–26)
| Section | Nature of Payment | Threshold Limit | TDS Rate (%) | Applicability To |
|---|---|---|---|---|
| 192 | Salary | As per slab rates | As per slab | Individuals |
| 194A | Interest (bank/others) | ₹5,000 / ₹40,000* | 10% | Residents |
| 194C | Contractor Payment | ₹30,000 (single)/₹1L | 1%/2% | Individuals & HUFs |
| 194H | Commission/Brokerage | ₹15,000 | 5% | Residents |
| 194I | Rent (land/building) | ₹2,40,000 | 10% | Tenants |
| 194J | Professional Fees | ₹30,000 | 10% | Professionals |
| 194Q | Purchase of Goods | ₹50,00,000 | 0.1% | Buyers (turnover >10Cr) |
*₹50,000 for senior citizens.
📊 TDS by Income Type
📈 **Pie Chart Data:**
- Salaries – 10-35%(as per salary structure)
- Professional Fees – 10%
- Rent – 10%
- Commission – 5%
- Interest – 5%
- Other – 20%
📆 Due Dates for TDS Payments & Returns
| Activity | Due Date |
|---|---|
| Monthly TDS deposit | 7th of following month |
| March TDS deposit | 30th April |
| TDS Return (Form 24Q/26Q) | Quarterly (15th of next month) |
| TDS Certificate (Form 16) | By 15th June |
🕑 Late Filing Penalty: ₹200/day under Section 234E
🔐 PAN-Aadhaar Link & TDS
If PAN is not linked with Aadhaar, higher TDS (up to 20%) may apply under Section 206AA.
❗ Always provide correct PAN to avoid excess deduction.
✅ TDS Refund & Claim in ITR
If more TDS is deducted than your actual tax liability:
- File ITR before due date.
- Refund is issued after return processing.
- Track using Form 26AS or AIS.
🔎 Read: How to View Form 26AS?
🔍 Common Mistakes to Avoid
❌ Missing TDS deductions for small payments.
❌ Quoting wrong PAN.
❌ Delayed TDS deposit or return filing.
❌ No deduction from payments to non-residents when required.
📚 Summary Table for Beginners
| Term | Meaning |
|---|---|
| Deductor | Person who pays and deducts TDS |
| Deductee | Person receiving payment |
| TAN | Tax Deduction Account Number |
| Form 16 | TDS certificate for salaried individuals |
| Form 26AS | Annual tax credit statement from Income Tax Dept. |
| 24Q/26Q | Quarterly TDS returns for salary/other payments |
📈 TDS Growth Trend
Years: 2020, 2021, 2022, 2023, 2024
TDS Collection* (₹ Crore): 6.2L, 7.0L, 8.1L, 9.3L, 10.5L
*TDS Collection Trend Over Years
📌 Tips to Stay Compliant
✅ Verify threshold before deduction
✅ Use correct section and rate
✅ File returns and issue TDS certificates on time
✅ Cross-check Form 26AS for mismatches
📤 External Link
For official TDS circulars and updates, refer to:
🌐 Income Tax India Website
🔗 Internal Links
❓ FAQs on TDS
1. What is the full form of TDS?
TDS stands for Tax Deducted at Source.
2. How do I get a refund for excess TDS?
By filing your Income Tax Return (ITR). Refund is credited after processing.
3. Is TDS applicable on cash withdrawals?
Yes, under Section 194N if withdrawals exceed ₹1 crore.
4. Can I avoid TDS deduction?
Only if your total income is below taxable limit. Submit Form 15G/15H to your deductor.
5. What happens if I don’t file TDS returns on time?
Penalty of ₹200/day and potential disallowance of expenses.
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