TDS Guide 2026: Rates, Sections, Thresholds & How to Claim It Back

TDS — Tax Deducted at Source — is the mechanism by which the Indian government collects income tax as money moves, rather than waiting for you to file a return. Someone paying you salary, rent, fees or interest withholds a slice and deposits it against your PAN.

It is not an extra tax. It is an advance instalment of the tax you were going to owe anyway. Getting that distinction straight is what turns TDS from an annoyance into something you can plan around, and it is where most confusion starts.

How TDS actually works

Three parties are involved in every deduction:

• The deductor — whoever is paying you. They deduct, deposit and file a quarterly return.
• The deductee — you. You get the payment net of tax, plus a credit against your PAN.
• The department — which now has the tax months before you would have paid it, and a record of the transaction.

That last point explains why the system exists at all. TDS is as much a reporting mechanism as a collection one: every deduction creates a data trail linking a payment to a PAN, which is why the Annual Information Statement can show transactions you had forgotten about.

The sections you will actually meet

The Income Tax Act runs to dozens of TDS sections. For most people, a handful cover everything:

Section	Payment	How the rate is set
192	Salary	At your average effective slab rate, estimated across the year
194A	Interest (other than securities)	Flat rate above a threshold; bank FD interest is the common case
194C	Contract payments	Lower flat rate; differs for individual/HUF vs company payees
194H	Commission or brokerage	Flat rate above a threshold
194I	Rent	Separate rates for plant/machinery vs land, building or furniture
194J	Professional or technical fees	Flat rate — the one freelancers meet constantly
194IA	Purchase of immovable property	The buyer deducts, above a value threshold

Rates and thresholds are revised in most Finance Acts, so use the TDS calculator for a current figure and confirm anything you are actually depositing against the official portal. The structure above is stable; the numbers are not.

Why salary TDS is different

Section 192 is the odd one out and deserves its own explanation, because it is the one most people experience monthly.

Every other section applies a flat percentage. Salary TDS instead estimates your total annual tax and spreads it across the remaining months. That is why your monthly deduction changes during the year — your employer is continuously re-estimating.

It also means your declared investments genuinely matter. When you submit proofs under 80C, HRA or a home loan interest certificate, your employer recomputes and the monthly deduction falls. Miss the declaration window and you do not lose the deduction — you claim it in your return instead — but you have given the government an interest-free loan for the rest of the year.

Two practical consequences:

1. Declare early and accurately. An optimistic declaration you cannot support with proofs produces a painful deduction in the final quarter, when it is all recovered at once.
2. Tell your employer which regime you have chosen. The old and new regimes produce different deductions, and the default may not be the one that suits you. Run both through the income tax calculator before you decide — see the slab comparison.

Why too much TDS gets deducted

Excess deduction is normal rather than an error, and it happens for a structural reason: the deductor does not know your circumstances.

A bank deducting on your fixed deposit interest has no idea whether you are a retiree with no other income or a high earner. It applies the flat rate either way. A client deducting under 194J does not know your business expenses. The system is deliberately blunt at the point of deduction and precise at the point of filing.

Common situations where you will be over-deducted:

• Freelancers and consultants. Tax is deducted on your gross receipts, but you are taxed on profit after expenses. Over-deduction is close to guaranteed. See the freelancer tax guide.
• Multiple employers in one year. Each computes as if it were your only employer, so exemptions get counted twice and the total falls short — this one usually goes the other way and leaves you owing tax at filing.
• Interest income below the taxable limit. Fixed by filing Form 15G/15H with the bank, not after the fact.
• Deductions not declared in time. Recoverable at filing, but you wait for it.

Reconciling with Form 26AS and AIS

Before you file anything, check what the department thinks was deducted. Two documents matter:

• Form 26AS — the consolidated tax credit statement for your PAN. This is what you can actually claim. See the step-by-step download guide.
• AIS (Annual Information Statement) — the wider transaction view, including interest, dividends and high-value transactions reported against you.

Reconcile both against your own records. The failure mode to watch for is tax that was deducted from your payment but never deposited by the deductor — it will simply be absent from 26AS, and you cannot claim credit for money the department never received. Chase the deductor to file a corrected return; there is no route around it from your side.

Claiming excess TDS back

There is no special refund application. The mechanism is your income tax return:

1. Compute your actual liability on total income after all deductions.
2. Total the credit in Form 26AS across every deductor.
3. File the return. If credit exceeds liability, the excess is refunded; if it falls short, you pay the balance.
4. Verify the return. Refunds are not processed on unverified returns, and this is the step people forget.
5. Make sure your bank account is pre-validated on the portal and linked to your PAN, or the refund cannot be credited.

Refunds also carry interest from the department in defined circumstances — small, but it exists. The ITR filing guide walks through the process end to end.

If you are the one deducting

Businesses, and increasingly individuals buying property, sit on the other side. The obligations are tighter than most first-time deductors expect:

• Deduct at the right time — generally at payment or credit to the payee's account, whichever is earlier. "I will sort it at year end" is not available.
• Deposit by the due date. Late deposit attracts interest per month or part month.
• File the quarterly return. Late filing attracts a daily fee, and until you file, your payee cannot see the credit.
• Issue the certificate — Form 16 for salary, Form 16A otherwise.
• Get a TAN. Deductors need a Tax Deduction Account Number, separate from PAN — though property buyers deducting under 194IA are an exception.

The disallowance risk is the one that hurts a business most: expenses on which TDS should have been deducted and was not can be partially disallowed, so a missed deduction costs you both the tax and the deduction on the expense.

Planning around TDS

You cannot avoid TDS, but you can stop it being a cash-flow problem:

• Submit investment declarations early and back them with proofs on time.
• File 15G/15H at the start of the year if your income is genuinely below the taxable limit — not in March.
• If you are consistently over-deducted, look into a lower or nil deduction certificate for your situation rather than financing the government all year.
• Reconcile 26AS quarterly, not at filing time. A deductor's error found in July is fixable; the same error found in December is a scramble.
• Keep every certificate. Form 16 and 16A are your evidence if a credit goes missing.

Run a specific payment through the TDS calculator to see the deduction, and the income tax calculator to see whether that deduction is more than you will actually owe.