TDS Basics Explained: Rates, Certificates, and How to Claim Credit in Your ITR

Tax Deducted at Source (TDS) is how the government collects tax as income is earned, rather than waiting until you file your return. Understanding how it actually works — and verifying it — prevents both overpayment and mismatch notices later.

How TDS Works

Whoever pays you (employer, client, bank, tenant) deducts a percentage of the payment as tax before paying you the balance, then deposits that amount with the government and reports it against your PAN. This deducted amount is later credited against your total tax liability when you file your ITR.

Common TDS Rates You'll Encounter

• Salary (Section 192): Based on your applicable slab rate, computed and deducted by your employer across the year based on your declared investments
• Professional/technical fees (Section 194J): 10% for most professional services
• Interest on fixed deposits (Section 194A): 10% if interest exceeds ₹40,000/year (₹50,000 for senior citizens) from a single bank
• Rent (Section 194-I): 10% for land/building if annual rent exceeds ₹2.4 lakh; individuals paying rent above ₹50,000/month must also deduct TDS under Section 194IB even without a TAN
• Contractor payments (Section 194C): 1% (individual/HUF) or 2% (others), if single payment exceeds ₹30,000 or aggregate exceeds ₹1 lakh in a year
• Sale of property (Section 194-IA): 1% of consideration if the property value exceeds ₹50 lakh, deducted by the buyer

Certificates You Should Receive

• Form 16: From your employer, issued annually, detailing salary paid and TDS deducted
• Form 16A: From any other deductor (bank, client, tenant), issued quarterly, for non-salary TDS
• Form 16B: Issued by the buyer to the seller for TDS on property sale

You're not strictly dependent on receiving these certificates to file your return — Form 26AS and the Annual Information Statement (AIS), both available on the income tax portal, show all TDS credited against your PAN regardless of whether the deductor sent you a physical certificate.

How to Claim TDS Credit Correctly

1. Download Form 26AS and AIS before filing — these are the authoritative record of what's been deducted and deposited against your PAN
2. Cross-check every TDS entry against your own records (salary slips, invoices, interest certificates) — deductors occasionally quote the wrong PAN or amount
3. Claim the exact TDS amount reflected in 26AS/AIS in your ITR — claiming more than what's reflected is a common cause of processing delays and notices
4. If a discrepancy exists, contact the deductor to correct their TDS return before filing your own — trying to claim un-credited TDS rarely resolves cleanly

What If Too Much TDS Was Deducted?

This is common — a bank might deduct 10% TDS on FD interest even if your actual tax liability is lower (or nil, if your total income is below the exemption limit). File Form 15G/15H with the bank in advance to prevent unnecessary deduction if you genuinely have no taxable income; otherwise, claim the excess as a refund when you file your ITR.

Why 26AS/AIS Reconciliation Matters More Than You Think

The income tax department's automated scrutiny increasingly cross-checks your declared income and claimed TDS directly against AIS. A mismatch — even an honest one caused by a deductor's filing error — routinely generates an automated notice. Reconciling before you file, not after receiving a notice, is the difference between a smooth refund and a stressful correction process.

If you have TDS from multiple sources — salary, freelance client payments, bank interest, rent received — and want to make sure everything reconciles before filing, our CA team checks this as a standard part of every ITR filing engagement.