TDS — Frequently Asked Questions
What is TDS and how does it work?+
TDS (Tax Deducted at Source) is a mechanism where the payer deducts income tax before making payment. The deducted amount is deposited with the government on the payee's behalf. The payee can claim credit for TDS deducted while filing their income tax return. If excess TDS is deducted, the payee gets a refund. TDS must be deposited by the 7th of the following month (March: by April 30).
How can I avoid TDS on FD interest?+
Submit Form 15G (for individuals below 60 with no taxable income) or Form 15H (for senior citizens) to your bank. This tells the bank not to deduct TDS. Note: you still have to pay tax on the interest while filing ITR if your total income is taxable. Form 15G/H is a declaration, not an exemption — misuse attracts penalty.
What happens if TDS is not deducted?+
If the deductor fails to deduct TDS: (1) Disallowance of 30% of the expense under Sec 40(a)(ia), (2) Interest at 1% per month from date TDS was deductible to date actually deducted, (3) Penalty under Sec 271C equal to the TDS not deducted, (4) Prosecution in serious cases. If TDS is deducted but not deposited: interest at 1.5% per month.
How do I claim credit for TDS deducted from my income?+
TDS deducted on your behalf is reflected in Form 26AS and the Annual Information Statement (AIS), both accessible via the income tax e-filing portal. When you file your ITR, you report your total income and total tax liability, then claim credit for TDS already deducted — if TDS exceeds your actual liability, you get a refund; if it's less, you pay the balance as self-assessment tax.
What is a TDS certificate (Form 16 / Form 16A)?+
Form 16 is issued by employers annually, summarizing salary paid and TDS deducted under Section 192. Form 16A is issued by other deductors (banks, clients, tenants) for non-salary TDS under sections like 194A, 194C, or 194J. Both serve as proof of tax already deducted and are essential documents when filing your income tax return.
TDS Calculator India 2026 — How Tax Deducted at Source Works
TDS (Tax Deducted at Source) is India's pay-as-you-earn mechanism, requiring the payer — whether an employer, bank, or client — to deduct a percentage of tax before making payment and deposit it directly with the government. This spreads tax collection across the year rather than concentrating it at filing time, and creates a paper trail the tax department can cross-verify against your return.
Worked Example: ₹1 Lakh FD Interest Payout
If a bank pays you ₹1,00,000 in FD interest in a financial year (above the ₹40,000 threshold for non-seniors under Section 194A), it deducts 10% TDS = ₹10,000 and credits you the remaining ₹90,000, while depositing the ₹10,000 with the government under your PAN. At return-filing time, this ₹10,000 shows up as tax already paid — if your actual tax liability on that interest (based on your slab) is higher, you pay the difference; if lower, you get a refund.
Why the PAN Matters So Much
Failing to provide your PAN to a deductor triggers Section 206AA, which forces TDS at a flat 20% regardless of the payment's normal rate — often more than double the standard rate for many payment types. This is one of the most common, avoidable TDS mistakes: always ensure your PAN is on file with your bank, employer, and clients to avoid this higher deduction.