TDS - Tax Deducted at Source

Tax Deducted at Source (TDS) is a pay-as-you-earn mechanism under which the person making certain payments (the deductor) withholds income tax at a prescribed rate at the time the amount is paid or credited, and deposits it directly with the government against the recipient's (deductee's) PAN. It applies to payments such as salary, interest, rent, professional and technical fees, contractor payments, commission, and dividends, and lets the deductee claim the withheld amount as tax credit when filing their return.

Legal basis

TDS provisions historically sat in Chapter XVII-B of the Income-tax Act, 1961. From 1 April 2026 that Act was repealed and TDS now falls under the Income-tax Act, 2025 — Section 392 for salary (the old Section 192) and Section 393, a table of payment codes, for every other type of payment. Rates and thresholds carry over unchanged; the regime is administered by the CBDT and the Income Tax Department.

How compliance works

• A deductor must hold a TAN and deposit TDS by the 7th of the following month (TDS for March by 30 April).
• Quarterly TDS statements are filed — Form 24Q for salary, 26Q for resident non-salary payments, and 27Q for non-residents.
• Certificates are issued from TRACES: Form 16 (annual, salary) and Form 16A (quarterly, other payments); the deductee sees the credit in Form 26AS / AIS.
• Where the deductee gives no valid PAN, tax is deducted at the higher rate (generally 20%).

Common rates

Payment (former section)	Rate
Salary (192)	Slab rates
Interest (194A)	10%
Contractor (194C)	1% individual/HUF, 2% others
Professional / technical fees (194J)	10% / 2%
Rent (194I)	10% land & building, 2% plant & machinery
Commission or brokerage (194H)	2%