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(AKA: TDS, Tax Deducted at Source)

TDS (Tax Deducted at Source)

Executive Definition

A tax mechanism where tax is deducted directly at the point of income generation by the payer before disbursing the net amount to the receiver.

Tax Deducted at Source (TDS)

TDS (Tax Deducted at Source) is an indirect tax collection mechanism enforced by the Income Tax Department of India. Under TDS, the person or company making a payment (e.g. salary, rent, dividend, interest) deducts tax at specified percentages before transferring the remaining amount.

Common TDS Deductions

  • Section 192 (Salary): Deducted based on employee’s income tax slab.
  • Section 194A (FD Interest): 10% deducted if annual interest exceeds ₹40,000 (₹50,000 for senior citizens).
  • Section 194J (Professional Fees): 10% deducted on freelance/consultancy payments exceeding ₹30,000.

Form 26AS & AIS

All TDS deducted against your PAN is reflected in your Form 26AS and Annual Information Statement (AIS), which can be claimed as tax credits when filing your annual ITR.

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