What is TDS (Tax Deducted at Source)?

TDS full form refers to Tax Deducted at Source by an authorized deductor while paying any bill. It is an important part of the tax collection under the Indian Income Tax Act. It is remitted to the Central Government of India and is applicable to any income. There are 27 sections under TDS with different provisions of deduction and a threshold limit of exemption.

Under TDS, a certain percentage of tax is deducted by the payer and deposited with the government on behalf of the payee. TDS applies to various types of payments, including salaries, interest on fixed deposits, rent, professional fees, and more.

Team Digit

What is TDS Meaning?
Who can Deduct TDS?
TDS Rate Chart & How to Deposit?
TDS Return & How to File?
TDS Return Due Date
TDS Certificate & Steps to View
Penalty for Late or Non-Filing of TDS
Refund or Reduction TDS
Frequently Asked Questions

What is TDS in Income Tax?

TDS falls under the act of advanced Income Tax, 1961, and all organizations or individuals are liable to pay it. The TDS concept is a tool by the Government to minimize tax evasion and collect taxes at the income source. The source of income includes salary, interest, rent, brokerage, professional service, etc.

If TDS in a fiscal year exceeds income tax liability, the excess amount can be refunded by filing ITR and claiming TDS on the basis of Form 26AS/TDS certificate issued by the deductor. If a payee/deductee fails to give a PAN card, then it may incur higher TDS on the income. TAN and Pan are the two most important documents to deposit TDS.

Who Can Deduct TDS?

An organization (other than Individuals or HUFs) is liable to deduct TDS from certain payments, subject to threshold limits and pay it to the government by way of TDS challan. Individuals or HUFs can deduct TDS on certain payments if they carry a ‘business’ whose turnover or sales or receipts exceeds ₹1 crore (in case of ‘profession’, the limit is ₹50 lakhs.

The deductor should deposit the TDS in the Government account on or before the 7th day of every month. Different products and services have different rates of TDS deductions.

When Should TDS be Deducted?

TDS is to be deducted at the time when it becomes due or at the time of actual payment whichever is earlier. If an invoice is of May 2024 but payment is to be made in June 2024, TDS becomes due in May (the time of raising invoice) hence it should be deducted in May and paid by the 7th of June.

TDS Rate Chart for FY 2025-26 (AY 2026-27)

As per the revisions made by TDS new rules in Budget 2025, here is the updated TDS rate chart, which varies according to various sections. The changes in the TDS rates in specified payments, effective April 1, 2025, are as follows:

Section and Nature of Payment	Payer	TDS Limit from 1 April 2025 (in ₹)	Applicable TDS Rate
Section 192, Salary	Salaried individual	Income Tax Slab	Applicable Income Tax slab
Section 192A, Premature withdrawal of EPF	Individual	50,000	10% of the total sum (20% if no PAN)
Section 193, Interest amount on securities	Individual	10,000	10%
Section 194, Dividends	Domestic companies	10,000	10%
Section 194A, Interest on assets & securities	Individuals, except for taxpayers and HUF liable for audit	1 lakh for senior citizens, 50,000 for others, when the payer is a bank, cooperative society, or post office 10,000 in other cases	10%
Section 194B, Applicable on money earned through any competition or lottery	Individual	10,000 for a single transaction	30%
Section 194BB, Prize amount on winning horse race	Any individual	10,000 for a single transaction	30%
Section 194C, Contractors	Individuals, except for taxpayers and HUF liable for audit	30,000 per transaction or 1 lakh annually	1% for individuals and HUF, 2% for other taxpayers
Section 194D, Insurance commission	Insurance aggregator	20,000	2% (persons other than a company) 10% (companies)
Section 194DA, Life insurance policy	Individual	1 lakh	2%
Section 194E, Payments to a non-residential sportsperson	Individual	No threshold limit	20%
Section 194EE, Deposit under NSS	Individual	2,500	10%
Section 194G, Commission from the sale of a lottery ticket	Individual	20,000	2%
Section 194H, TDS on commission or brokerage earned	Individuals, except for taxpayers and HUF liable for audit	20,000	2%
Section 194I, TDS on rent	Individuals, except for taxpayers and HUF liable for audit	50,000 per month	2% (from machines or equipment) 10% (from land, buildings, and furniture)
Section 194IA, TDS on funds earned for transfer of immovable assets (except agricultural land)	Individual	50 lakh	1%
Section 194IB, Rent by individuals & HUF	Individuals except for taxpayers and HUF liable for audit	50,000 per month	2% (effective from 1st October 2024)
Section 194IC, Payment on agreement	Individual	No threshold limit	10%
Section 194J, Sum paid for professional services	Individuals, except for taxpayers and HUF liable for audit	50,000	10%
Section 194J, Fee paid for technical services, royalty	Individuals, except for taxpayers and HUF liable for audit	50,000	2%
Section 194K, Payment for mutual funds	Individuals, except for taxpayers and HUF liable for audit	10,000	10%
Section 194LA, Compensation for acquisition of an immovable asset	Individual	5 lakh	10%
Section 194LB, Income from infrastructure debt fund interest	Infrastructure debt funds	No threshold limit	5%
Section 194LBA, Income from units of a business trust	Business trusts	No threshold limit	10% for resident individuals and 5% for NRI
Section 194LBB, Income from units of investment funds	Investment funds	No threshold limit	10% for resident individuals 30% for NRIs 40% for foreign companies
Section 194LBC, TDS on income earned from investments of securitization trusts	Securitization trusts	No threshold limit	25% for individuals and HUF, and 30% for investors
Section 194LC, Income from an Indian company	Indian companies and business trusts	No threshold limit	5%
Section 194LD, TDS on income earned from certain Government securities and bonds	Individual	No threshold limit	5%
Section 194M - Payment of certain sums	Individual or HUF	50,000 per month	2% (effective from 1st October 2024)
Section 194-O - Payment of a certain sum to e-commerce participants	E-commerce Operators	No threshold limit	0.1% (effective from 1st October 2024)
Section 194F - Payment for repurchase of units by mutual funds or UTI	Individual	No threshold limit	Proposed to be omitted (effective from 1st October 2024)
Section 196B, Income from the offshore funds	Individual	No threshold limit	10%
Section 196C, Income from foreign current bonds	Individual	No threshold limit	10%
Section 196D, Income from foreign institutional investors	Individual	No threshold limit	20%

However, if you cannot submit a PAN card, it will be deducted at 20%.

How to Deposit TDS?

The TDS concept is to deduct the income at the source and remit it to the Government. Therefore, the deducting organization/individual is duty-bound to deposit it to the Government. The following is the process of depositing TDS:

Log in to NSDL’s website for e-payment.
Select Challan No ITNS 281 under the section TCS/TDS. Here you must enter TAN, assessment year, PIN code, and payment mode.
Next, select between TDS on regular assessment and TDS deducted or payable. Click on “Submit”.
A confirmation message will appear with TAN and the full name of the taxpayer according to the master data.
Now, this will take you to the payment page. Here, make your payment.
Upon successful payment, a counterfoil with CIN, payment confirmation, and bank details will come as payment proof. Now you have to know how to file a TDS return.

What is TDS Return?

When learning about the TDS meaning, individuals must also have knowledge about the TDS return. It is returning the excess amount deducted as TDS to a taxpayer.

Now you may wonder if TDS is a part of income tax, then even after paying it, why do individuals have an income tax liability at the end of every year?

Here, you must understand that TDS is tax deducted at the source of income to avoid payment delays. In case the total TDS paid in a year exceeds your tax liability, the Government will return the excess amount.

To get this return, you should ask your deductor how to get a TDS certificate. A TDS certificate is necessary while filing a TDS return.

When to File TDS Return?

You can do TDS filing within the specified date for separate transactions every quarter of the year. TAN, PAN of the deductee, payment type, and the amount deducted need to be furnished during filing.

The following are the TDS return due dates:

Form No.	TDS Deducted on Transaction Type	Due Dates of Return Filing
24Q/26Q	Salary	Q1 – 31st July, Q2 – 31st October, Q3 – 31st January, Q4 – 31st May
27Q	Any payment to non-residents (not salary)	Q1 – 31st July, Q2 – 31st October, Q3 – 31st January, Q4 – 31st May
26QB	Sale of property	30 days from the end of the month of TDS deduction
26QC	Rent	30 days from the end of the month of TDS deduction

How to File TDS Return?

To file a TDS return, follow these steps:

You have to log in to the website of Income Tax Department.
Click on “Upload TDS” under the TDS tab on the navigation bar.
Enter the following statement details and then validate:
- FVU version
- Financial year
- Form name
- Quarter
- Upload type
Now you have to upload the zip file of TDS. Now you have to attach a signature file or DSC. After choosing all files, then click on “Upload”.
An email on your given mail ID and an SMS on the given mobile number will come if the TDS is successfully filed.

You can now view the filed TDS return by clicking on View File TDS under the TDS tab on the navigation bar.

What is the Due Date to Deposit TDS?

The 7th day of the subsequent month is the TDS deposit due date. For example, if you have deducted TDS between 1st to 30th September, you must deposit it by 7th October. However, it differs in two cases:

If TDS is deducted in March, you can deposit it until 30th April of that calendar year.
TDS deducted on rent or purchase of any property can be deposited within 30 days from the end of the month you have deducted TDS.

What is a TDS Certificate?

By knowing the answer to the question of what a TDS certificate is, you can get the solution of all problems related to the deduction of TDS at different sources of income. It is a type of certificate issued by the entity deducting TDS to the person from whom TDS is deducted or the assessee. It serves as proof that the TDS deducted from you is deposited into the Government account.

TDS certificate is also useful to a deductee as it ensures that the amount deducted from your end is not forfeited and deposited with the Government. Therefore, you can claim a TDS return on time exhibiting this relevant document.

Another most important thing to know is what TDS certificate type is and what are the various types of TDS certificates you should ask for.

Form	Certificate for Type of Payment	Frequency & Due Date
Form 16	Salary payment	Yearly, 31st May
Form 16 A	Non-salary payments	Quarterly, 15 days from the TDS filing date of the return
Form 16 B	Sale of property	Every transaction, 15 days from the due date of filing the return
Form 16 C	Rent	Every transaction, 15 days from the due date of filing the return

How to View TDS Certificate?

You may ask for the TDS certificate from the deductor or find it online using the following steps:

Visit the official portal of TRACES. Enter the Captcha code and hit “Proceed”.
Provide documents, including:
- TAN of the deductor
- PAN of payer
- TDS certificate number
- Financial year
- Source of income
- TDS amount as per the certificate
Click on “Validate”.
To download the TDS certificate again, provide data regarding:
- PAN
- TAN
- Fiscal year
- Quarter
- Type of Return
Now click on “Go to downloads”.

What is the Penalty for Late or Non-Filing of TDS?

1. For Late filing of return

Not filing taxes is a punishable offence; however, late payment incurs a penalty. The late fine is ₹200 for each day starting from the due date of payment until you file it. If the late fine exceeds the total payable amount, the late fine will be equal to the TDS payable amount.

For instance, your TDS payable amount is ₹5000, and the due date is 20th May. You filed the return of quarter 1 on 24th November. So, you are late by 105 days.

₹200 x 105 Days = ₹21000

However, your payable TDS amount is ₹5000, which is lower than ₹21000. Therefore, you just have to pay ₹5000 as a penalty.

2. For Late Deposit of TDS

If TDS is deducted on time but not paid within the due date of deposit of TDS, then interest @1.5% per month is levied on the TDS amount up to the actual date of TDS payment.

If TDS is not deducted at all, interest @1% per month is levied from the date when TDS was required to be deducted to the actual date of deduction.

When Can Taxpayers Claim Refund or Reduction of Applicable TDS?

Here are some common circumstances when taxpayers can claim a TDS refund or reduction:

The total income is not within the income tax payable slab.
TDS paid is more than the tax payable liability.
The taxpayer has a loss of income in the current month.
The previous year's loss carried forward into the present year.
The taxpayer is eligible for tax exemption.

You may avoid TDS deduction by submitting Form 15G/15H. Form 13 can be submitted for claiming a refund or non-reduction of TDS.

Each taxpayer should thoroughly know what TDS is, TDS full form, and why it is deducted to file the return and get maximum benefits. It is a payee-friendly act to justify the income tax payment seamlessly.

FAQs about TDS

All

What is the rate chart of TDS on salary?

TDS on salary varies as per the income tax slab and is used for TDS calculation for salary. The applicable rate is effective on salary, including cess.

Who is eligible for TDS?

Any individual, HUF, firm and NRI is eligible for Tax Deduction at Source provided that any payment made under the five heads of income or as specified under the Income Tax Act requires you to deduct TDS.

Is filing TDS return mandatory?

Yes, you need to file TDS return mandatorily in a quarter if your tax is deducted. However, if tax is not deducted, it is not necessary to file TDS return.

What is TDS Form 16?

TDS Form 16 is a TDS certificate that is issued by the employer as evidence of salary earned. It serves as valid proof that income tax on an employee's salary has been deducted and deposited with the government.

At what rate will TDS be deducted if I do not submit a PAN card?

As per Section 206AA, if you do not submit your PAN, then TDS will be deducted at a higher rate than the prescribed rate or at 20%.

Can I avoid paying TDS on salary?

Yes, you can avoid TDS on salary by filing Form 15G or 15H. Form 15H is to be submitted by pensioners if there is no tax on the income. Form 15G is for everyone except NRIs.

Who is eligible to apply for a TDS certificate?

Individuals and firms who have been subject to tax deductions on their fixed deposit interest are eligible to apply for a TDS certificate.

Is TDS effective on the CTC amount of salary?

Income tax is applicable on basic and dearness allowance components of your salary. TDS is dependent on your slab of tax liability. Therefore, in turn, TDS is not effective on CTC.

What are the types of income for TDS?

Here are some common income sources that qualify for TDS:

Salary
Commission payments
Sale of house
Insurance commission
Interest on securities
Interest other than interest on securities
House rent payment
Professional fees
Online gaming
Win amount from games like a lottery, crossword puzzle, etc.

How can I check the TDS amount?

You can check the TDS amount by downloading Form 26AS from the Income Tax e-filing portal.

What happens to the TDS deducted by the employer?

TDS deductions linked to the PAN will be available in Form 26AS. You can use it to claim tax credit against the total tax liability while filing the annual income tax returns.

Can I get a TDS refund?

Yes, you can get a TDS refund if excess tax is deducted at source, it can be refunded by filing the Income Tax Return.

What is the penalty for not submitting a TDS certificate?

The penalty for not or delay in furnishing TDS certificate is ₹100 per day after the due date, u/s 272A(2). However, the penalty cannot exceed the amount of TDS.