TDS Calculator

What is TDS (Tax Deducted at Source)?

TDS (Tax Deducted at Source) is a mechanism under the Indian Income Tax Act, 1961, where the payer deducts tax at a prescribed rate before making a payment to the payee. The deducted amount is deposited with the government on behalf of the payee, who can claim credit for it while filing their income tax return. TDS applies to various types of payments including salary, interest on fixed deposits, rent, professional fees, contractor payments, commission, lottery winnings, and EPF withdrawals. The system ensures a steady flow of tax revenue to the government and reduces the burden of lump-sum tax payment for the taxpayer at the end of the financial year.

TDS is governed by different sections of the Income Tax Act, each specifying the type of payment, the rate of deduction, and the threshold limit. For instance, Section 194A covers TDS on interest from banks and post offices at 10%, while Section 194J covers professional and technical fees at 10%. The deductor must obtain a TAN (Tax Deduction and Collection Account Number) and file quarterly TDS returns in Forms 24Q (salary) and 26Q (non-salary payments).

Key TDS Sections You Should Know

Section 192 (Salary): Your employer deducts TDS on salary based on your estimated total income and applicable tax slab rates for the financial year. You can submit investment proofs (Form 12BB) to reduce TDS through deductions under Section 80C, 80D, HRA, etc. Salary TDS is computed monthly but reconciled against the annual estimated liability.

Section 194A (FD Interest): Banks deduct 10% TDS if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). You can submit Form 15G (below 60 years) or Form 15H (senior citizens) if your total income is below the taxable limit to avoid TDS deduction. This is one of the most common sections affecting salaried individuals with bank deposits.

Section 194I (Rent): TDS on rent is deducted at 10% for land, building, and furniture (194I(b)) and 2% for plant and machinery (194I(a)) when annual rent exceeds ₹2,40,000. Individuals and HUFs not subject to audit must deduct TDS under Section 194-IB at 5% if monthly rent exceeds ₹50,000.

Form 26AS and TDS Refund

Form 26AS is your annual tax statement that consolidates all TDS deducted against your PAN during a financial year. It is available on the Income Tax e-filing portal and the TRACES website. Before filing your ITR, always verify that the TDS shown in Form 26AS matches your Form 16 (salary) and Form 16A (non-salary). Any mismatch can lead to demand notices from the Income Tax Department. Since 2021, the Annual Information Statement (AIS) has replaced parts of Form 26AS with more detailed transaction reporting.

If excess TDS has been deducted — for example, your total income falls below the taxable limit but TDS was deducted on FD interest — you can claim a TDS refund by filing your income tax return. The refund is processed by the Centralized Processing Centre (CPC) in Bengaluru, typically within 30-45 days of e-verification. Under Section 244A, you receive interest at 0.5% per month on the refund amount from the date of filing (or April 1 of the assessment year, whichever is later) until the date of the refund.

Section 206AA: Impact of Not Having PAN

Under Section 206AA, if the payee does not furnish their PAN to the deductor, TDS must be deducted at the higher of: the rate specified in the relevant section, 20%, or the rate in force. In practice, this means most payments without PAN attract 20% TDS instead of the standard rate. For example, FD interest would be taxed at 20% instead of 10%, and contractor payments at 20% instead of 1-2%. This provision was introduced to incentivize PAN compliance and ensure traceability of financial transactions. Use the PAN toggle in our calculator to see the exact difference for your payment type.