TDS

How it works

TDS means that whoever pays you certain kinds of income — your employer, bank, tenant, or a client — deducts a slice as tax *before* paying you, and deposits it with the government against your PAN. The idea is to collect tax at the point income is generated rather than waiting for year-end, improving compliance and giving the government steady revenue. The amount deducted is credited to you and shown in your Form 26AS / Annual Information Statement (AIS).

Where it applies

Common cases in India: salary (deducted as per your slab), bank interest on FDs/RDs above the annual threshold, dividends above a limit, rent above a monthly threshold, professional/contractor fees, and property purchase (the buyer deducts TDS on high-value transactions). Different sections of the Income Tax Act prescribe different TDS rates for each type.

Why it matters

TDS is not an extra tax — it's an *advance* against your final liability. When you file your Income Tax Return (ITR), you total your actual tax due and subtract the TDS already deducted. If too much was withheld, you get a refund; if too little, you pay the balance. Submitting Form 15G/15H lets eligible low-income individuals avoid TDS on interest.

Common mistakes

People forget that TDS on bank interest is often deducted at a flat rate that may be *less* than their actual slab — so they still owe the difference and must report all interest income, not just what TDS was cut on. Others miss claiming TDS credit because they don't check Form 26AS/AIS before filing. And not filing a return when TDS exceeds your liability means forfeiting a refund you're owed. Also remember TDS is deducted against your PAN, so keeping it linked and updated everywhere ensures you actually get the credit. Always reconcile your Form 26AS and AIS before filing, report all income honestly (not just the part TDS was cut on), and file on time to claim every rupee of TDS credit and any refund due.