What is TDS (Tax Deducted at Source)? — Meaning, Definition & Example
Definition
TDS is a mechanism where tax is deducted at the source of income by the payer before crediting the amount to the recipient. It applies to salary, interest, rent, professional fees, and other specified payments. The deducted amount is deposited with the government and can be claimed as credit while filing ITR.
If your FD interest is ₹50,000 and TDS rate is 10%, the bank deducts ₹5,000 and credits ₹45,000 to your account.
🇮🇳 TDS (Tax Deducted at Source) in Hindi / हिंदी में
TDS (टैक्स डिडक्टेड एट सोर्स) — TDS एक प्रणाली है जिसमें आय के स्रोत पर भुगतानकर्ता द्वारा प्राप्तकर्ता को राशि देने से पहले कर काटा जाता है। यह वेतन, ब्याज, किराया, पेशेवर शुल्क पर लागू होता है।
TDS (Tax Deducted at Source) (Hinglish) — TDS ek system hai jisme income ke source pe hi tax kat jaata hai. Salary, interest, rent, professional fees pe lagta hai. Ye amount government ko jaata hai aur ITR file karte waqt credit milta hai.
The Idea in One Line (and the Misunderstanding in the Next)
TDS is pay-as-you-earn: the payer (bank, employer, tenant) cuts tax at source and deposits it against your PAN. The misunderstanding: TDS is NOT your final tax — it's an advance. Slab says you owe less? File ITR, take the refund. Owe more? Pay the difference. Every rupee cut shows up in your 26AS/AIS — reconcile before filing.
The Thresholds That Matter (Post-Budget-2025)
| Section | Payment | TDS Kicks In Above | Rate (with PAN) |
|---|---|---|---|
| 192 | Salary | Slab-based (no fixed threshold) | As per your slab |
| 194A | Bank FD/RD interest | ₹50,000/yr (₹1,00,000 for 60+) | 10% |
| 194 | Dividends | ₹10,000/yr | 10% |
| 194-IB | Rent paid by individuals | ₹50,000/month | 2% |
| 194-I | Rent (businesses) | ₹6,00,000/yr | 10% (building) |
| 194-IA | Property purchase | ₹50 lakh | 1% — the BUYER must deduct & deposit |
| 194C / 194J / 194H | Contractor / professional / commission | ₹30K-₹50K bands | 1-10% |
Most 194-series thresholds were raised in Budget 2025 (effective April 2025) — many sites still quote the old ₹40,000 FD figure; ours above are current.
The Two Self-Service Levers
Form 15G/15H: if your total income is below the taxable limit, submit 15G (15H if 60+) to the bank at the START of the FY and TDS stops — no waiting a year for a refund. PAN hygiene: no PAN = 20% flat (Sec 206AA); PAN not linked to Aadhaar = inoperative = double rates. Two minutes of paperwork protects real cash flow.
The One Everyone Misses: Buying Property
Buying a flat worth ₹50L+? YOU (the buyer) must deduct 1% of the price, deposit it via Form 26QB within 30 days, and give the seller Form 16B. Skip it and the penalty+interest lands on YOU, not the seller — this catches first-time buyers constantly. NRI seller? Rates jump steeply (LTCG-linked, ~12.5%+ with surcharge) and you need a TAN — take professional help for that one.
Refunds and Mismatches
TDS refunds come only through the ITR — average processing a few weeks post e-verification. Before filing, match employer/bank figures against 26AS; if a deductor cut TDS but didn't deposit or mis-reported your PAN, the credit won't show — chase the deductor to revise their TDS return, since the portal only honours what 26AS shows. Estimate your refund in our TDS refund estimator; full section-wise rates in the TDS calculator.
Rules and thresholds verified as of July 2026 (Budget-2025 TDS framework; PPF rate per Jul-Sep 2026 notification). Facts last checked: 15 July 2026 by Priyanka Dhawan.