Tax Deducted at Source (TDS) is the government’s mechanism for collecting income tax at the point of income generation. Understanding TDS rates, when it applies, and how to claim refunds for excess deductions ensures you are neither overpaying nor underpaying taxes throughout the year.
TDS on Salary (Section 192)
Your employer deducts TDS from salary based on your estimated annual income and declared tax-saving investments. The employer calculates tax for the full year, subtracts declared deductions (80C, 80D, HRA, etc.), and deducts 1/12th of the annual tax from each month’s salary. If you do not submit investment proofs on time, the employer may deduct higher TDS in the last few months. Submit your investment declarations at the start of the year and proofs by January to ensure even TDS distribution.
TDS on Fixed Deposits (Section 194A)
Banks deduct 10% TDS on FD interest exceeding ₹40,000 per year (₹50,000 for senior citizens) across all FDs in that bank. If your total income is below the taxable limit, submit Form 15G (or 15H for senior citizens) to the bank to avoid TDS deduction. TDS is deducted when interest is credited or at year-end, whichever is earlier — even if the FD has not matured. This is important for multi-year FDs where interest accrues annually but TDS is deducted on accrued interest.
TDS on Property Sale (Section 194-IA)
When you buy property above ₹50 lakh, you must deduct 1% TDS from the payment to the seller and deposit it with the government using Form 26QB. This applies to all property purchases: residential, commercial, and land. The buyer is responsible for deduction and deposit. Failing to deduct attracts 1% per month interest plus a penalty equal to the TDS amount. The seller can claim this TDS credit while filing their ITR.
TDS on Rent (Section 194-IB)
If you pay rent exceeding ₹50,000 per month, you must deduct 5% TDS and deposit using Form 26QC. This applies even if you are a salaried individual without a TAN — you can use your PAN to deposit. The deducted TDS appears in the landlord’s Form 26AS. Many tenants are unaware of this obligation, which can lead to penalties during assessment.
How to Claim TDS Refund
If TDS deducted exceeds your actual tax liability (common for those with multiple FDs or when employers over-deduct), file your ITR to claim a refund. The refund amount is the difference between TDS deducted (visible in Form 26AS/AIS) and actual tax payable. Refunds are processed within 3-6 months of filing and credited directly to your bank account linked on the e-filing portal.
What if TDS is deducted but not deposited by the deductor?
If TDS is deducted from your income but not deposited with the government, it will not appear in your Form 26AS. Contact the deductor (employer, bank, tenant) to rectify. Under Section 205, the tax department cannot recover such tax from you — the liability is on the deductor. However, you may need to follow up and raise a grievance on the e-filing portal.