What is TDS? A Complete Beginner's Guide to Tax Deducted at Source

The basic idea behind TDS

Tax Deducted at Source requires the person making certain payments — salary, rent, professional fees, contractor payments, interest and more — to deduct tax before paying you, and deposit it with the government on your behalf. It's a pay-as-you-earn mechanism designed to collect tax closer to the point of income rather than only at year-end.

Who deducts, and who's liable to deposit it

The payer (deductor) is responsible for deducting at the applicable rate, depositing it with the government by the prescribed due date, and filing a quarterly TDS return (24Q for salary, 26Q for others) that reports the deduction against the deductee's PAN.

Claiming credit for TDS already deducted

TDS deducted from your income shows up in your Form 26AS and AIS once the deductor files their return, and you claim it as a credit against your final tax liability when filing your ITR — it isn't a separate tax, just tax collected in advance.

What if too much TDS was deducted

If your total TDS for the year exceeds your actual tax liability — common for freelancers with 10% TDS deducted under 194J regardless of their actual slab — the excess is refunded after you file your return, provided the numbers reconcile cleanly.

If you're the one deducting TDS

Running payroll or paying vendors means you're a deductor too, with your own compliance calendar for deposit and quarterly returns — something our annual compliance package handles for businesses that don't want to track this manually.

FAQs

Is TDS applicable to freelancers and consultants? Yes — payments for professional or technical services are subject to TDS under Section 194J, typically at 10%.

What happens if my TDS doesn't show in Form 26AS? It usually means the deductor hasn't filed their TDS return yet — follow up with them directly, since only their filing populates your 26AS.