Money Basics · Taxes & 80C

TDS

TDS stands for Tax Deducted at Source. Instead of collecting taxes at year-end, the Indian government requires payers (your employer, banks, mutual fund companies) to deduct tax and deposit it with the government on your behalf.

How TDS on salary works

Your employer estimates your total annual income, subtracts declared deductions (80C, HRA, home loan), projects your tax liability for the year, and divides that amount by 12. That much TDS is deducted from your salary every month.

> This is why you should submit your investment declarations to HR between April and June. It reduces your TDS throughout the year so you don't overpay.

Common TDS rates

SalaryAs per income tax slab

FD interest above ₹50,000/year10% TDS (₹1,00,000 for senior citizens)

Mutual fund income above ₹10,000/year10% TDS

Freelance/contract income above ₹50,00010% TDS (Section 194J)

Rent above ₹50,000/month2% TDS (Section 194-IB)

TDS is not your final tax

TDS is an advance payment. When you file your ITR, you calculate the actual tax owed. If TDS was more than your actual tax → you get a refund. If TDS was less → you pay the difference.

Form 26AS and AIS

These are your tax credit statements on the Income Tax portal. They show every TDS deducted against your PAN throughout the year. Salary TDS, bank TDS, contractor payments. Always cross-check before filing ITR.

Avoiding unnecessary TDS

If your total income is below the taxable limit, submit Form 121 to your bank to prevent FD interest TDS deduction. It replaced Forms 15G and 15H from 1 April 2026, one form now, whatever your age, and it has to be filed fresh each tax year.

Takeaway. TDS is advance tax collected by your employer and banks. Submit investment declarations to HR to reduce monthly TDS. Excess TDS comes back as a refund when you file ITR.