What is TDS?

Also called: Tax Deducted at Source

TDS is tax collected at the moment income is paid rather than at the end of the year — the payer withholds a percentage and deposits it against the recipient's PAN.

Rates vary by payment type: 10% on professional fees over ₹30,000 a year under section 194J, 10% on rent over ₹2,40,000 under 194I, and slab rates on salary under 192. Where the recipient has not given a PAN, section 206AA forces the rate up to 20%.

Deducted tax must be deposited by the seventh of the following month, and a quarterly return filed. Late deposit carries interest of 1.5% a month.

Why it matters

TDS is not an extra tax — it is a prepayment. If too much was deducted, the excess comes back as a refund when you file, but only if you file.

A worked example

A company pays a professional ₹1,00,000 for consultancy in a year and deducts TDS under section 194J.

Illustrative figures. Your own numbers will differ — that is what the quote is for.
Invoice	₹1,00,000
Section 194J threshold	₹30,000 a year
Rate for professional services	10%
TDS deducted	₹10,000
Paid to the professional	₹90,000
Deposited with the government by the 7th of the next month	₹10,000

The professional's income is still ₹1,00,000, not ₹90,000. The ₹10,000 appears in their 26AS as tax already paid, and it is set off against their final liability when they file — producing a refund if their total tax is lower.

The statutory position

Each figure with the provision it comes from, so it can be checked.
What	Position	Source
Deposit due date	7th of the following month; 30 April for March deductions	Rule 30, Income-tax Rules 1962
Quarterly return due dates	31 July, 31 October, 31 January and 31 May	Rule 31A, Income-tax Rules 1962
Interest for late deduction	1% per month	Section 201(1A)(i), Income-tax Act 1961
Interest for late deposit	1.5% per month	Section 201(1A)(ii), Income-tax Act 1961
Late filing fee	₹200 per day, capped at the TDS in the return	Section 234E, Income-tax Act 1961

Not to be confused with

These get used interchangeably, including by tools that should know better. They are different things.

TCS

Tax collected at source is added by a seller to what the buyer pays, on specified goods. TDS is subtracted by a payer from what the recipient receives. Opposite direction, different sections.

Advance tax

Advance tax is paid by you on your own income in four instalments. TDS is deducted by someone else from a payment they make to you. Both count towards the same final liability.

Questions people ask

Can I avoid TDS if my income is below the taxable limit?

Yes, in some cases. Form 15G, or 15H for senior citizens, is a declaration that your total income will not be taxable, and it stops the deduction at source on interest. For other payments, a lower-deduction certificate under section 197 does the same job.

TDS was deducted but I owe no tax. Where does it go?

It becomes a refund, claimable only by filing a return. There is no automatic repayment — the money sits with the department until a return asks for it.

What usually goes wrong

Deducting under the wrong section — 194C at 1% or 2% where 194J at 10% applied
Depositing on time but filing the return late, leaving the deductee with no visible credit
Missing the threshold rule that once crossed, TDS applies to the whole year's payments and not just the excess
Failing to deduct at all, and losing 30% of the expense to section 40(a)(ia)