What Is TDS (Tax Deducted at Source)?
TDS (Tax Deducted at Source) is income tax collected at the point a payment is made — your employer, bank or others deduct a portion of payments like salary, interest or rent and deposit it with the government on your behalf. It is credited against your final tax liability when you file your return.
Why TDS matters
TDS is why your in-hand salary is less than your gross salary, and why your FD interest arrives slightly reduced. Understanding it explains those gaps and ensures you get credit for tax already paid.
It also matters at filing time: if too much TDS was deducted — common when your actual tax is lower — you claim the excess back as a refund. If too little was deducted, you pay the balance.
How TDS works
When certain payments are made to you, the payer deducts tax at a prescribed rate and deposits it with the government against your PAN. Your employer deducts TDS on salary based on your estimated annual tax; banks deduct TDS on FD interest above a threshold; TDS also applies to rent, professional fees and more. All the TDS deducted against your PAN appears in your Form 26AS and Annual Information Statement (AIS). When you file your income-tax return, this TDS is credited against your total tax — you pay any shortfall or claim any excess as a refund.
A real Indian example of TDS
Aisha’s bank deducts ₹4,000 TDS on her FD interest, and her employer deducts TDS on salary through the year. When she files her return, she finds her total tax due is less than the TDS already deducted — because she claimed deductions the deductors did not account for. The excess is refunded to her bank account. Had she not filed, she would have lost that refund.
Benefits
Common mistakes
Best practices
Frequently asked questions about TDS
What is the full form of TDS?
TDS stands for Tax Deducted at Source — income tax withheld from certain payments (like salary, interest and rent) by the payer and deposited with the government on your behalf, against your PAN.
How do I check how much TDS was deducted?
View your Form 26AS and the Annual Information Statement (AIS) on the income-tax portal. They show all TDS deducted against your PAN, which you reconcile with your income when filing.
Can I get a TDS refund?
Yes. If the TDS deducted exceeds your actual tax liability, you claim the excess as a refund when you file your income-tax return. Not filing means forfeiting that refund.
How can I avoid TDS on FD interest?
If your total income is below the taxable limit, submit Form 15G (or 15H for senior citizens) to your bank so it does not deduct TDS. Otherwise, the TDS is adjusted against your final tax when you file.
Related terms
Related guides
How BudgetAnalyzer uses this
BudgetAnalyzer helps you track your income sources through the year, so at filing time you have a clear picture to reconcile against the TDS shown in your Form 26AS.
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