TDS (tax deducted at source) explained:What it is, how rates apply on different incomes, and how to check and claim your refund

For many taxpayers, TDS (Tax Deducted at Source) is something that appears on their salary slip, bank statements, or Form 26AS, but they may not fully understand how it works. Knowing the rules of TDS is important because it directly affects how much money you receive and how much tax you eventually pay. If TDS is deducted correctly, it can help you avoid penalties, ensure proper tax planning, and even help you claim refunds when excess tax has been deducted. So, understanding TDS will help taxpayers to keep track of their income, check the tax deducted under their PAN, and file their Income Tax Return (ITR) smoothly. CA Ashish Niraj, Partner at ASN Company, Chartered Accountants, explains: “TDS is the tax deducted by a person (deductor) who is liable to make payment at the source of income. For example, if you are supposed to receive ₹1,00,000 from a source and the applicable TDS rate is 10%, the deductor will pay you only ₹90,000. “The deductor deposits the TDS of ₹10,000 with the government under your PAN. Once the deductor files the TDS return, it is reflected in your Form 26AS. The deductor also issues you a TDS certificate.” However, TDS rates vary depending on the nature of income, such as salary, rent, business or professional income, contractual income, capital gains, interest, etc., as specified in the Income Tax Act or the Finance Act. How the TDS rates apply on Different Incomes TDS rates are not the same for every type of income. They change depending on where the income comes from and who is receiving it. For example, salary TDS is based on a person’s tax slab and declared investments, while interest, dividends, professional fees, and rent attract different rates. Some incomes, like lottery or online gaming winnings, are taxed at a much higher rate. Important Points: · No TDS is required if payments do not exceed the threshold limit. · Higher TDS applies if PAN is not provided to the deductor. Determining Tax Liability CA Niraj explains that after the financial year ends, “You should calculate your total income and tax liability. TDS can be adjusted against your total tax liability: · If TDS is more than Tax Liability, you can claim a refund. · If total income is below taxable limit, full TDS can be claimed as a refund.” Filing Income Tax Return (ITR) Filing ITR is mandatory to claim a refund. Different ITR forms are applicable based on income type (ITR 1, ITR 2, ITR 3, ITR 4, etc.). Important Dates for FY 2024-25: · Original due date: 31st July 2025 (non-audit cases) · Extended dates: 15th September 2025 and 16th September 2025 · Last date for belated return: 31st December 2025 · ITR-U filing allowed up to 48 months from end of assessment year, but refunds cannot be claimed through ITR-U. Niraj emphasises that timely filing ensures correct adjustment of TDS and eligibility for refunds.