TDS — Tax Deducted at Source

TDS is income tax that a payer — such as your employer or bank — deducts before paying you, then deposits with the government and credits against your PAN.

What it is

Instead of collecting tax only at year-end, the government has certain payers deduct a slice of tax at the moment they pay you and deposit it on your behalf. Common examples are salary (deducted by your employer), interest on fixed deposits (by your bank), rent above a threshold, and professional fees. Each deduction is reported under your PAN, so it shows up as a tax credit you can claim.

Why it matters

The TDS already deducted reduces what you still owe when you prepare your return. If total TDS plus advance tax exceeds your final liability, the excess comes back as a refund. You see TDS summarised in Part A of your Form 16, and you should confirm it matches your Form 26AS and AIS on the portal — a mismatch can mean you lose credit for tax that was actually deducted.

Example Illustrative

Suppose your employer deducts ₹40,000 of TDS on your salary across the year and your bank deducts ₹2,000 on FD interest. ₹42,000 then appears against your PAN in Form 26AS. If your final tax works out to ₹38,000, you have paid ₹4,000 too much and can claim it as a refund. Figures are illustrative only.