TDS Calculator India

What Is Tax Deducted at Source (TDS)?

Tax Deducted at Source (TDS) is a mechanism introduced by the Income Tax Department of India to collect tax at the point of income generation rather than at the point of final assessment. Under this system, the person or entity making a payment (the deductor) is required to deduct a prescribed percentage of tax before making the payment to the recipient (the deductee). The deducted amount is then deposited with the government on behalf of the recipient and is credited against their total tax liability. TDS covers a wide range of payments including salaries, interest on fixed deposits, rent, professional fees, contractor payments, commissions, and many other types of income specified under the Income Tax Act, 1961.

The TDS system serves multiple purposes for the Indian tax administration. It ensures a steady flow of tax revenue to the government throughout the financial year rather than in lump sums during the assessment season. It widens the tax net by capturing income at multiple points in the economy. It also reduces the burden of tax compliance on individual taxpayers by collecting tax at source. The TDS rates vary depending on the nature of the payment, the status of the deductee (individual, company, or trust), and whether the deductee has furnished a valid Permanent Account Number (PAN). If PAN is not available, TDS is deducted at the higher rate of 20% instead of the normal applicable rate.

TDS on Salary (Section 192)

TDS on salary is unique because it is deducted based on the estimated total income and applicable tax slab of the employee, rather than a flat percentage. The employer calculates the employee's estimated annual income including all allowances and perquisites, allows deductions under Chapter VI-A (such as Section 80C, 80D, etc.), and determines the total tax liability for the financial year. This annual tax is then divided by the number of remaining months to arrive at the monthly TDS amount. Employees can submit their investment declarations at the beginning of the year to optimize the monthly TDS deduction. This calculator uses a simplified slab-based calculation for salary TDS estimation.

TDS on Interest Income (Section 194A)

Banks and financial institutions are required to deduct TDS at 10% on interest income from Fixed Deposits, Recurring Deposits, and other interest-bearing instruments when the total interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens aged 60 and above). This threshold applies per bank, not per deposit. If your total income is below the taxable threshold, you can submit Form 15G (for individuals below 60) or Form 15H (for senior citizens) to the bank to avoid TDS deduction. The interest income is still taxable, but submitting these forms prevents the bank from deducting TDS at source, helping you avoid the hassle of claiming a refund.

TDS on Rent (Section 194I)

TDS on rent is applicable when the annual rent paid to any single landlord exceeds ₹2,40,000 per year. The deductor must deduct TDS at 10% for rent of land, building, or furniture, and 2% for rent of plant and machinery. Individual and HUF tenants who are not subject to tax audit are required to deduct TDS at 5% under Section 194IB if the monthly rent exceeds ₹50,000. The deducted TDS must be deposited with the government within the prescribed time limits, and the deductor must file quarterly TDS returns. Failure to deduct or deposit TDS on time attracts interest and penalties under the Income Tax Act.

Example Calculations

TDS Return Filing and Compliance

Deductors are required to file quarterly TDS returns using the prescribed forms: Form 24Q for salary TDS, Form 26Q for non-salary TDS payments, Form 27Q for payments to non-residents, and Form 27EQ for TCS (Tax Collected at Source). The due dates for filing are 31st July, 31st October, 31st January, and 31st May for the four quarters respectively. Late filing attracts a fee of ₹200 per day under Section 234E, subject to a maximum of the TDS amount. The deductor must also issue TDS certificates (Form 16 for salary, Form 16A for non-salary) to the deductees within the prescribed timelines.

How to Claim TDS Credit

The TDS deducted from your income is credited to your PAN and reflected in your Form 26AS (Annual Tax Statement) and AIS (Annual Information Statement) available on the Income Tax portal. When filing your Income Tax Return, you can claim credit for all TDS deducted during the financial year against your total tax liability. If the TDS deducted exceeds your actual tax liability, you are entitled to a refund of the excess amount. It is essential to verify your Form 26AS before filing your return to ensure all TDS credits are correctly reflected. Any discrepancies should be resolved with the deductor by requesting them to file a correction return.