TDS (Tax Deducted at Source) is income tax that the person paying you deducts at the time of payment and deposits with the government on your behalf.
The deductor deposits it by the 7th of the next month and files a quarterly return, and you claim credit for it through Form 26AS when you file your ITR.
This guide covers how TDS works, the FY 2026-27 due dates, returns, certificates, the Rs 200 a day late fee, and how to recover excess TDS.
Important Links
| Resource | Link |
|---|---|
| Income Tax Department (e-filing, Form 26AS, AIS) | incometax.gov.in |
| TRACES (TDS returns, certificates, corrections) | tdscpc.gov.in |
| Section-wise TDS rates and thresholds | TDS Rate Chart FY 2026-27 |
| Calculate the exact TDS on a payment | TDS Calculator |
What Is TDS (Tax Deducted at Source)?
TDS is a tax collection mechanism under the Income Tax Act where tax is deducted from specified payments at the time they are made, such as salary, interest, rent, commission and professional fees.
The government gets its tax early and the payer, not the recipient, carries the compliance load. The recipient simply receives the net amount and claims credit for the tax deducted.
How Does TDS Work? A Worked Example
The payer deducts tax at the prescribed rate, pays the balance to the recipient, deposits the tax with the government, and reports it on a quarterly return.
Take a company paying Rs 80,000 a month in office rent. Rent above Rs 50,000 a month attracts TDS at 10% under Section 194-I.
| Step | Amount |
|---|---|
| Gross rent | Rs 80,000 |
| TDS deducted at 10% | Rs 8,000 |
| Net paid to the landlord | Rs 72,000 |
| Income the landlord reports | Rs 80,000 (the gross amount) |
| Credit the landlord claims against final tax | Rs 8,000 |
The landlord adds the full Rs 80,000 to income and sets off the Rs 8,000 against the final liability. The company deposits the Rs 8,000 by the 7th of the following month.
On Which Payments Is TDS Deducted?
TDS applies to a long list of payments, and each has its own section, threshold and rate. The most common ones are below.
| Section | Payment | Typical rate |
|---|---|---|
| 192 | Salary | Slab rates |
| 194 | Dividend | 10% |
| 194A | Interest other than on securities | 10% |
| 194B | Winnings from lottery, games and gambling | 30% |
| 194C | Payments to contractors | 1% (individual/HUF), 2% (others) |
| 194H | Commission or brokerage | 2% |
| 194-I | Rent | 2% (machinery), 10% (land, building) |
| 194J | Professional and technical fees | 10% or 2% |
| 194N | Cash withdrawal above the limit | 2% or 5% |
Thresholds and the full list, including the 194T rule for partners, sit in the TDS rate chart for FY 2026-27. Contractor payments are explained in the Section 194C guide. The professional fees rules have their own Section 194J guide, and rent is covered in the Section 194I guide.
When Must TDS Be Deducted?
TDS must be deducted at the earlier of the date the amount is credited in the books or the date it is actually paid. For salary, it is deducted at the time of payment.
If the payee has not given a valid PAN, the deduction is at the higher of the normal rate or 20% under Section 206AA.
TDS Calculator
Pick the payment type, enter the amount and see the TDS to deduct and the net payout.
TDS Due Dates for FY 2026-27
TDS must be deposited by the 7th of the month following the month of deduction, and the quarterly return is due by 31 July, 31 October, 31 January and 31 May.
| Situation | Deposit due date |
|---|---|
| TDS deducted in April to February | 7th of the following month |
| TDS deducted in March | 30 April |
| TDS on property purchase (Form 26QB) | 30 days from the end of the month of deduction |
| TDS on rent by individuals (Form 26QC) | 30 days from the end of the month of deduction |
Some guides state that March TDS can be deposited by 31 May. That date is the Q4 return deadline, not the deposit deadline, and depositing in May would attract interest.
| Quarter | Period | Return due date |
|---|---|---|
| Q1 | April to June 2026 | 31 July 2026 |
| Q2 | July to September 2026 | 31 October 2026 |
| Q3 | October to December 2026 | 31 January 2027 |
| Q4 | January to March 2027 | 31 May 2027 |
Missing a due date attracts interest and a late fee. The ITR filing last date that applies to the recipient is a separate deadline.
TDS Return Forms: 24Q, 26Q, 27Q, 26QB and 26QC
A TDS return is a quarterly statement listing the TAN, the tax deducted, the nature of payment and each deductee's PAN, filed on TRACES or the e-filing portal. The form depends on what was paid.
| Form | Reports | Due date |
|---|---|---|
| Form 24Q | TDS on salary | Quarterly: 31 Jul, 31 Oct, 31 Jan, 31 May |
| Form 26Q | TDS on all payments except salary, to residents | Quarterly: 31 Jul, 31 Oct, 31 Jan, 31 May |
| Form 27Q | TDS on payments to non-residents except salary | Quarterly: 31 Jul, 31 Oct, 31 Jan, 31 May |
| Form 26QB | TDS on sale of property | 30 days from the end of the month of deduction |
| Form 26QC | TDS on rent | 30 days from the end of the month of deduction |
From FY 2026-27, the Income-tax Rules, 2026 introduce new form numbers, with the salary return becoming Form 138 and the main non-salary return Form 140. The older names remain the ones most deductors and software still use, so confirm the number on TRACES before you file.
TDS Certificates: Form 16, 16A, 16B and 16C
A TDS certificate is the document the deductor gives you to prove the tax they deducted and deposited, and Form 16 is the one salaried employees receive.
| Form | Certifies | Frequency | Due date |
|---|---|---|---|
| Form 16 | TDS on salary | Yearly | 15 June after the financial year |
| Form 16A | TDS on non-salary payments | Quarterly | 15 days from the due date of the return |
| Form 16B | TDS on sale of property | Every transaction | 15 days from the due date of the challan-cum-statement |
| Form 16C | TDS on rent | Every transaction | 15 days from the due date of the challan-cum-statement |
The Form 16 guide covers download, password and issue date. Under the Income-tax Act, 2025 the salary certificate is Form 130 and the non-salary one is Form 131. Use the certificate to cross-check the TDS in Form 26AS before you file your income tax return.
How to Check TDS Credit in Form 26AS and AIS
Form 26AS is the consolidated statement of all tax credited against your PAN, and you can claim TDS credit in your ITR only for amounts that appear in it or in the AIS.
Reconciling before filing prevents a mismatched claim and the notices that follow. This matters most for businesses whose several clients each deduct TDS.
Late Fee and Penalty for TDS Defaults
A late fee of Rs 200 a day applies under Section 234E for filing a TDS return after the due date, capped at the total TDS amount in that return. The fee must be paid before the return is filed.
| Default | Consequence |
|---|---|
| Return filed late | Rs 200 a day under Section 234E, up to the TDS amount |
| Return not filed within a year, or incorrect | Penalty of Rs 10,000 to Rs 1,00,000 under Section 271H |
| TDS not deducted | Interest at 1% a month, and 30% of the expense disallowed |
| TDS deducted but deposited late | Interest at 1.5% a month |
| TDS not deposited at all | Prosecution risk, and the deductor is treated as in default |
Interest is charged per month or part of a month, so a one-day delay costs a full month. The full interest and penalty rules are in the TDS rate chart.
TDS vs Income Tax vs Advance Tax
TDS is a way of collecting income tax in advance, while income tax is the final amount due on your total income, so TDS is simply credited against it.
| Basis | TDS | Income tax | Advance tax |
|---|---|---|---|
| What it is | Tax deducted at the time of payment | Final tax on total income | Tax you pay yourself during the year |
| Who pays | The payer deposits it for you | You, on your total income | You, in instalments |
| Who files | Deductor files TDS returns | You file the ITR annually | Reported in your ITR |
| Treatment | Credited against final liability | Final liability after credits | Credited against final liability |
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How to Avoid Excess TDS or Claim a Refund
You can stop TDS before it happens by submitting a nil-tax declaration, and recover any excess afterwards by filing your ITR.
A declaration cannot undo TDS already deducted. It works only for future payments, so submit it before the interest is credited or the payment is made.
How to Deposit TDS Online
The deductor deposits TDS through Challan 281 on the e-filing portal and notes the CIN for the quarterly return. The steps are laid out in the TDS rate chart guide on paying TDS online.
Partnership firms also owe TDS on payments to their partners, covered in the partner's remuneration guide.
Frequently Asked Questions: TDS
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Disclaimer: This article explains TDS for general informational purposes and is not tax advice. Rates, thresholds, due dates and form numbers can change through notifications, and the Income-tax Act, 2025 renumbers sections and forms from 1 April 2026. Verify the current position on the Income Tax Department website or with a chartered accountant before deducting, depositing or filing. Figures reflect the law as of the date above.