What is TDS and how does it affect me?

CA Vijay R Singh, FCA
Chartered Accountant · ICAI M.No. 153926 · FRN 136869W

Short answerTDS (Tax Deducted at Source) is tax collected upfront by whoever pays you — your employer, bank or a buyer — and deposited against your PAN. It is not an extra tax: it is an advance towards your final tax, which you reconcile when you file, getting back any excess as a refund.

What TDS is

TDS is the system of collecting tax at the point of payment. When you receive salary, interest, rent, professional fees or the proceeds of a property sale, the payer deducts a set percentage and deposits it against your PAN. It then shows in your Form 26AS / AIS.

Why it isn't an extra tax

TDS is an advance against your eventual liability, not a separate charge. When you file your return, you add up all your income, compute the tax, and credit the TDS already deducted. If TDS exceeds your tax, the excess is refunded; if it falls short, you pay the balance. Rates vary by payment type — confirm the applicable section.

A worked example

Example: a bank deducts 10% TDS on ₹1 lakh of fixed-deposit interest (₹10,000). If your slab rate is 5%, your actual tax is ₹5,000, so you reclaim ₹5,000 by filing. If your rate is 30%, you pay an extra ₹20,000. Either way the TDS is just a part-payment. Checking your 26AS before filing ensures every deduction is credited. Our team can reconcile it.

Income Tax

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This answer is general information for taxpayers, not tax advice. Tax rates, thresholds and forms change with each Finance Act — please confirm the current position for your own facts, or speak to us, before acting.