Every month, a chunk of your salary disappears before it hits your account. Your FD interest comes in short. A client pays you less than the invoice amount. All of this is TDS – and most people have no idea how it actually works or whether they’re losing money because of it.
Tax Deducted at Source is one of those things the government quietly runs in the background. The person paying you deducts tax upfront and deposits it with the Income Tax Department on your behalf. The idea is simple: collect tax at the point of income, reduce evasion.
I work with salaried employees, freelancers, and small business owners regularly. TDS confusion is universal. People either don’t know what’s being deducted or – worse – they don’t know they’re entitled to a refund when too much has been cut. This guide covers everything: what TDS is, who deducts it, the 2026 rates, how to check your deductions, and how to get your money back when more than necessary was taken.
What is TDS – What Does It Mean?
TDS (Tax Deducted at Source) is a mechanism where the payer deducts income tax while making a payment to the payee and deposits it directly with the government. The payee receives only the remaining net amount.
When you receive a salary, the company deducts it. When an FD matures, the bank deducts it. When you complete a freelance project, the client deducts it. In every case, the deductor – meaning the one who is paying – is responsible for deducting tax at the correct rate and depositing it with the government within 7 days.
This deducted amount is linked to your PAN. Later, when you file your ITR, this amount is subtracted from your final tax liability. If extra TDS has been deducted, you get a refund. If less was deducted, you pay the remaining tax.
TDS Rates 2026 – How Much Will Be Deducted on Which Income?
Different sections and different rates apply to different income types. Some of the most important ones are below:
Salary (Section 192)
There is no fixed rate for salary. The employer calculates your estimated annual income, applies the applicable tax slab rate, and deducts monthly TDS accordingly. If you have declared investments (like 80C, 80D), your taxable income decreases, and less TDS will be deducted.
Important: Submit actual investment proofs in January-February. Otherwise, the employer will deduct higher TDS in March to recover the balance.
FD Interest (Section 194A)
The bank will deduct 10% TDS if your FD interest crosses ₹40,000 in a year (₹50,000 for senior citizens). If PAN is not provided, the rate jumps to 20%. If you have multiple FDs in the same bank, the combined interest is counted – not branch-wise.
Contractor / Sub-Contractor Payments (Section 194C)
TDS applies when a single payment is more than ₹30,000 or the yearly total exceeds ₹1 lakh. The rate is 1% for individuals and HUFs, and 2% for all others.
Professional / Technical Fees (Section 194J)
For freelancers, consultants, doctors, lawyers, and architects – if a company or firm is paying you more than ₹30,000 professionally, 10% TDS will be deducted. For purely technical services (call center, IT support), the rate is 2%.
Rent (Section 194I / 194IB)
TDS applies on rent exceeding ₹2.4 lakh per year. The rate is 2% on plant and machinery; 10% on land, building, and furniture. Individuals or HUFs who do not fall under a tax audit use Section 194IB – where 5% is deducted at source quarterly.
Property Purchase (Section 194IA)
If you buy any property for more than ₹50 lakh, the buyer has to deduct 1% TDS in the seller’s name. This surprises many people – the buyer is responsible for this deduction, not the seller.
General Rule: If you are an individual and tax audit is not applicable, deducting TDS is mostly compulsory only on larger amounts or specific sections. For businesses and companies, TDS applies to almost all payments.
How to Check TDS – Form 26AS and AIS
Form 26AS is a consolidated tax credit statement maintained by the Income Tax Department. It contains every TDS entry that deductors have deposited against your PAN.
Always check this first – before filing ITR, or in case of any confusion. If there is no entry in Form 26AS, it means the deductor has not deposited the tax. You will face problems getting a refund.
How to View Form 26AS
Log in to incometax.gov.in with your PAN.
Go to e-File → Income Tax Returns → View Form 26AS.
It will redirect to the TRACES portal – accept the terms and open.
Select the Assessment Year, download the PDF, or view it online.
Also check the Annual Information Statement (AIS) – it is even more detailed. It includes your salary, interest, dividends, mutual fund transactions, and property purchases. You will find it under Services → Annual Information Statement.
Note: If there is a discrepancy between AIS and Form 26AS, the AIS will typically be more updated. Check both.
Form 16 – TDS Certificate for Salary
Form 16 is the certificate that the employer gives to the employee every year by June 15. It contains the complete salary breakdown – gross salary, deductions, total TDS deducted, and the deposited amount.
There are two parts:
- Part A: Quarterly TDS deduction and deposit details. The employer generates it directly from the TRACES portal.
- Part B: Detailed salary breakup – HRA, allowances, perquisites, deductions claimed, and net taxable salary.
Part A is automatically generated from the TRACES portal. The employer manually creates Part B – mistakes can happen here. Always cross-check it with your salary slips.
Didn’t get Form 16? Ask your employer. If they do not issue it after the June 15 deadline, a ₹100 per day penalty applies to the employer. Receiving this certificate is your right.
How to Get a TDS Refund?
You get a TDS refund when more TDS has been deducted than your actual tax liability. There is only one way to get a refund – file your ITR and e-verify it.
Common Situations When a Refund is Issued:
- TDS was deducted on FD interest, but your total income is below the taxable limit.
- Your employer deducted more TDS on your salary because investments were not declared.
- Clients deducted 10% on your freelance income, but your actual net tax liability was lower.
- You had more than one employer during the year, and the tax slab rate shifted on your combined income.
Refund Process Step by Step
1. File your ITR using the correct form (ITR-1, 2, 3, or 4 depending on your income).
2. E-verify it with an Aadhaar OTP or net banking – within 30 days.
3. The return will be processed on the portal and an intimation under Section 143(1) will arrive.
4. The refund will be credited directly to your pre-validated bank account.
Timeline: 15-45 days for straightforward returns. Complex cases or scrutiny may take longer.
Refunds haven’t arrived after 45 days? Check: has the return been processed, is the bank account pre-validated, and is there any outstanding tax demand. You will find the status at incometax.gov.in → e-File → Income Tax Returns → View Filed Returns.
Form 15G and 15H – The Legal Way to Save TDS
If your total income is below the taxable limit, you can submit Form 15G (or 15H for senior citizens) to the deductor so they do not deduct TDS.
Conditions:
- Form 15G: Under 60 years of age. Total income must be less than the basic exemption limit (₹3 lakh in the new regime). Total net tax liability should be zero.
- Form 15H: 60 years or older. Total net tax liability should be zero – there is no gross income limit.
You can submit these forms for FD interest, EPF withdrawal, rent, and certain other payments. Submit them at the start of every financial year – submitting it once won’t cover the next year.
Submitting a false Form 15G – meaning your income was actually higher but you submitted the form – is considered tax evasion. Only submit when you are actually eligible.
5 TDS Mistakes People Make – And How to Avoid Them
1. Not Providing PAN: Didn’t give your PAN to the deductor? The rate doubles or jumps to 20% – whichever is higher. Link your PAN everywhere – salary, bank account, FDs. It’s a one-time job to avoid repeated losses.
2. Filing ITR Without Checking Form 26AS: If the deductor hasn’t deposited the TDS and you file your ITR claiming that credit, the department will send you a notice. First, confirm the entry in Form 26AS. If it’s not there, follow up with the deductor for a correction on TRACES.
3. Not Declaring Investments by January: The employer adjusts whatever hasn’t been declared by January-February in the month of March. Heavy TDS will be deducted in your last 2 months of salary. Submit proofs in January itself – PPF, LIC, ELSS receipts, etc.
4. Ignoring Multiple Form 16s: Changed jobs during the year? Form 16 will come from both employers. You have to file your ITR by combining both incomes. People often just look at the new employer’s form
5. Calculating: combined income can push you into a higher slab rate, causing a tax demand.
6. Freelancers Missing TDS Credit: When clients deduct 10% TDS and pay, they send a Form 16A or it becomes available on TRACES. You must claim this credit in your ITR. If you don’t, you won’t get your refund – the money will just stay with the government.
Understand the Connection Between TDS and ITR Filing
TDS and ITR are directly connected to each other. TDS is deducted throughout the year – acting like advance tax. Your actual tax liability is calculated when you file your ITR.
- TDS > Actual Tax: You will get a refund.
- TDS < Actual Tax: You will have to pay the remaining amount (Self-Assessment Tax).
- TDS = Actual Tax: No movement/zero balance.
That’s why filing ITR is strictly necessary – not just for legal compliance, but for financial accuracy too. Without filing an ITR, you don’t get a TDS refund, no matter how much extra tax has been deducted.
Read the complete guide about ITR filing here – for salaried, freelancers, and business owners alike.
Conclusion
Understanding TDS is actually not very complicated. The payer deducts, deposits, and you claim the credit in your ITR. Just do these three things consistently: keep your PAN linked everywhere, check Form 26AS every year, and file your ITR on time.
If more TDS has been deducted – which is highly common for salaried employees and FD holders – the refund is your legal right. Just file your ITR and e-verify. The tax portal does the rest of the work.
Frequently Asked Questions
Q1. What is the full form of TDS?
The full form of TDS is Tax Deducted at Source. It is an income tax collection mechanism where the person or entity making the payment deducts a certain percentage of tax before making the payment and deposits it with the Income Tax Department.
Q2. Who deducts TDS on salary?
The employer deducts it. The company or firm calculates your monthly TDS based on your estimated annual salary, deducts it from your pay, and deposits it with the government. The record of this deduction is found in Form 16.
Q3. What can I do to avoid TDS on FD interest?
If your total income is below the taxable limit, submit Form 15G (or Form 15H if your age is 60+) at your bank branch. The bank will then stop deducting TDS. This form has to be submitted at the start of every financial year.
Q4. In how many days does the TDS refund come?
Once you file and e-verify your ITR, a straightforward return usually processes a refund in 15-45 days. You can check the status on incometax.gov.in by navigating to e-File → Income Tax Returns → View Filed Returns.
Q5. What to do if the employer hasn’t deposited the TDS?
Check your Form 26AS. If there is no entry, follow up with the employer and ask them to file a correction on TRACES. The Income Tax Department has now delinked the employer’s liability and the employee’s credit in some instances – but to be completely safe, you can raise the issue while filing your ITR or contact your assessing income tax officer.
Q6. What should freelancers do about TDS?
Clients will provide a Form 16A or a TRACES certificate which will contain your TDS details. Claim this TDS credit while filing your ITR-3 or ITR-4. If your actual tax liability is lower than what was deducted, you will get the difference back as a refund. Make sure to verify every client’s TDS entry in Form 26AS before filing.
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