The TDS full form is Tax Deducted at Source: the person making a payment cuts a slice of tax from it, pays that slice to the government, and the person receiving the money gets credit for it in their own return. A company paying a consultant ₹1,00,000 deducts 10%, sends ₹90,000 to the consultant and deposits ₹10,000 against the consultant's PAN.
TDS is not an extra tax. It is an advance payment of the receiver's own income tax, collected early so that income cannot go unreported. This hub explains the idea, the main sections and rates, the deductor's duties, how a taxpayer uses TDS credit, and what changed when the Income-tax Act, 2025 took over from 1 April 2026.
Quick facts
Full form
Tax Deducted at SourceWho deducts
The payer: employer, bank, business, tenant or buyer in some casesDeposit
By the 7th of the next month; 30 April for MarchReturns
Quarterly: 31 July, 31 October, 31 January, 31 MayNo PAN
20% or the normal rate, whichever is higherCredit shown in
Form 26AS and AISUnder the 2025 Act
Salary in section 392; other payments in section 393
What is TDS deduction in income tax
TDS meaning in tax is simple: tax is taken at the point where income is paid, not later when the earner files a return. The law lists the kinds of payments where this happens: salary, interest, rent, professional fees, contract work, commission, property purchase and many more. For each, it fixes a rate and usually a threshold below which nothing is deducted.
Three people are involved. The deductor pays and deducts. The deductee receives the net amount. The government receives the tax and records it against the deductee's PAN. At the year end, the deductee adds the full income to the return, claims the TDS as tax already paid, and either pays the balance or claims a refund.
TDS full form in other fields
The same three letters mean different things outside tax, which is why searches mix them up.
| Field | TDS stands for | Meaning |
|---|---|---|
| Income tax and banking | Tax Deducted at Source | Tax cut from a payment such as interest or salary |
| Water and chemistry | Total dissolved solids | Minerals and salts dissolved in water, measured in parts per million |
Everything else on this page is about the tax meaning.
Main TDS sections and rates, FY 2025-26
| Section | Payment | Rate | Threshold |
|---|---|---|---|
| 192 | Salary | Slab rates on estimated yearly income | Above the exemption limit |
| 194A | Interest other than securities | 10% | ₹50,000 bank interest (₹1,00,000 seniors); ₹10,000 others |
| 194C | Contract work | 1% individual or HUF, 2% others | ₹30,000 per bill or ₹1,00,000 per year |
| 194H | Commission | 2% | ₹20,000 |
| 194I | Rent | 2% machinery, 10% land or building | ₹50,000 a month |
| 194IA | Immovable property purchase | 1% | ₹50 lakh or more |
| 194J | Professional or technical fees | 10% or 2% | ₹50,000 |
| 194Q | Purchase of goods | 0.1% | Above ₹50 lakh |
The full list, with all thresholds, sits in the TDS rate chart.
TDS deduction example
Fixed deposit interest. Kavita, aged 45, earns ₹72,000 interest in FY 2025-26 from deposits at one bank. That is above the ₹50,000 limit for bank interest, so the bank deducts 10%: ₹7,200. She gets ₹64,800.
- Her other income is a salary; total income after deductions is ₹15,72,000 in the new regime.
- She shows the full ₹72,000 interest under income from other sources.
- Her tax works out on the full income, and the ₹7,200 is subtracted as tax already paid.
If her total income were below the taxable limit, she could have given the bank Form 15G to stop the deduction, or she could claim the ₹7,200 back as a refund.
Duties of the person who deducts
- Get a TAN (tax deduction account number). Individuals deducting only on property purchase or high rent do not need one.
- Deduct at the time of credit or payment, whichever is earlier.
- Deposit within seven days after the month ends, or by 30 April for March, using Challan 281.
- File the quarterly TDS statement by 31 July, 31 October, 31 January or 31 May.
- Issue certificates: Form 16 for salary and Form 16A for other payments.
Late deduction costs interest at 1% a month; late deposit costs 1.5% a month. A late statement costs ₹200 a day under section 234E, up to the TDS amount.
How a taxpayer uses TDS credit
Your TDS shows up in Form 26AS and in the Annual Information Statement on the e-filing portal, usually after the deductor files its quarterly statement. Before filing your return, match each entry with your payslips, interest certificates and invoices. If an amount is missing, ask the deductor to correct its statement; the credit follows the statement, not the money cut from your payment. Where TDS is more than your final tax, the excess is refunded after the return is processed.
What changed for TDS under the 2025 Act
From 1 April 2026, TDS for tax year 2026-27 follows the Income-tax Act, 2025. Salary TDS sits in section 392. The other deductions are gathered into tables under section 393, with payments to residents and non-residents in separate parts. Collection at source (TCS) is in section 394. Rates and limits largely carried over. Form 16 becomes Form 130 for tax year 2026-27, and Forms 15G and 15H become Form 121. Deductions made in FY 2025-26 are still reported under the old section numbers.
All TDS pages on this site
| Page | What it answers |
|---|---|
| TDS rate chart | All sections, each with its rate and threshold, in one table |
| TDS payment, Challan 281 | Paying deducted tax to the government online |
| TDS payment and return due dates | The monthly deposit and quarterly filing calendar |
| How to file a TDS return | Preparing and uploading the quarterly statement |
| TDS late payment interest | Interest at 1% and 1.5% a month, with a calculator |
| TDS calculator | Tax to cut from a given payment, with or without PAN |
| TDS certificate, Form 16A | The certificate a payee gets for non salary TDS |
| TRACES guide | Downloading certificates, statements and defaults |
| TDS refund | Getting back tax deducted in excess of your liability |
| TDS on salary (192) | How an employer spreads your yearly tax over twelve months |
| 194A TDS on interest | Interest other than on securities, with bank limits |
| TDS on FD interest | Deposit interest, the ₹50,000 and ₹1 lakh limits |
| Form 121 (15G/15H) | Declaring that your income falls under the taxable limit |
| 194C TDS on contractors | Contract work, labour supply and freight |
| 194J professional fees | Doctors, lawyers, consultants and technical services |
| 194H TDS on commission | Agents and brokers paid commission |
| 194I TDS on rent | Businesses paying rent for premises or machinery |
| TDS on property purchase | 1% when buying property worth ₹50 lakh or more |
| TDS on property from NRI | Buying from a seller who lives abroad |
| 194Q purchase of goods | Large buyers deducting 0.1% on purchases |
| 194N cash withdrawal TDS | Banks deducting on large cash withdrawals |
| 194O e-commerce TDS | Online marketplaces deducting from sellers |
| 194R business benefits | Gifts and perks given to business contacts |
| 194S TDS on crypto | Transfer of virtual digital assets |
| 194T partner payments | Firms paying partners salary, interest or commission |
| Other TDS sections | Dividends, lottery, insurance and the rarer sections |
| Higher TDS for non-filers (206AB) | What happened to the non-filer rule |
| TDS vs TCS | Deduction by the payer versus collection by the seller |
| TDS under GST | The separate 2% deduction under GST law |
TDS mistakes and fixes
| Problem | Fix |
|---|---|
| Payee did not give PAN, so 20% was cut | Give PAN to the payer; for past deductions claim credit in your return |
| TDS cut but not visible in Form 26AS | Have the deductor file or correct its quarterly statement |
| Deducting on the GST amount | Work out TDS on the value excluding GST where GST is shown separately |
| Paying TDS late to save cash flow | Interest at 1.5% a month quickly costs more than it saves |
This hub explains TDS in general terms; your deduction depends on the facts of each payment. Before acting on it, please confirm the rule on the department's own websites or with a chartered accountant.
Sources we checked
- Income-tax Act, 1961, Chapter XVII-B
- Income-tax Act, 2025, sections 392, 393 and 394
- Income-tax Act, 1961, sections 201(1A), 206AA and 234E
- Income-tax Rules, 2026
Frequently asked questions
TDS full form: what does it stand for?
In full, TDS means Tax Deducted at Source. The payer deducts tax from a payment and deposits it with the government in the receiver's name.
What does TDS mean in a salary slip?
It is the income tax your employer has deducted from your salary for the month, based on your estimated tax for the whole year.
What is TDS in a bank?
The TDS full form in banking is the same, Tax Deducted at Source. Banks deduct TDS on interest from deposits once interest crosses ₹50,000 in a year, or ₹1,00,000 for senior citizens, for FY 2025-26. They also deduct on large cash withdrawals under 194N.
Is TDS an extra tax?
No. It is an advance part of your own income tax. You claim it when you file your return, and any excess is refunded.
Where can I check TDS deducted on my PAN?
Open Form 26AS or the Annual Information Statement once you have signed in to the e-filing portal. Deductors can also see and download records on TRACES.