Tax deducted at source (TDS) means the person making certain payments, such as salary, interest, rent, professional fees or contractor payments, deducts tax from the amount and deposits it with the government on the payee's behalf. The payee then claims credit for it when filing their return. From 1 April 2026 the Income-tax Act, 2025 applies, with the TDS provisions reorganised mainly under sections 392 and 393.
Facts checked: 9 October 2026. That the 2025 Act applies from 1 April 2026, with salary TDS under section 392 and most other TDS under section 393, is reported consistently by secondary tax guides; I could not open the Act's text on incometaxindia.gov.in. The Income Tax Department's own Form 138 FAQ describes Form 138 as the quarterly statement for salary TDS and Form 140 is reported as the successor to Form 26Q. Interest and late fee figures match our TDS due dates post, which also relied on secondary sources. The section numbers in this post are the long-standing 1961 Act numbers practitioners still use; confirm the 2025 equivalent before filing.
Who deducts and who is deducted from
The deductor is whoever makes the specified payment: an employer, a company, a firm, or an individual or HUF above a prescribed limit. The deductee is the recipient. The deductor needs a TAN, the 10-character Tax Deduction and Collection Account Number, to deposit tax and file statements. The deductee needs a PAN so the credit lands in the right account.
Key sections by payment type
| Payment | Section (1961 Act numbering) | Note |
|---|---|---|
| Salary | 192 | Average rate on estimated income for the year |
| Interest other than on securities | 194A | Thresholds differ by payer |
| Rent | 194I | Different treatment for land and buildings versus plant and machinery |
| Professional and technical fees | 194J | Rate depends on nature of fees |
| Contractors | 194C | Rate depends on payee type; single and annual limits apply |
| Commission and brokerage | 194H | See TDS on commission |
This is a map, not a rate chart. Rates and thresholds change with the Finance Act and are renumbered under the 2025 Act, so use the TDS rate finder for the current figure. For specific cases try the salary TDS calculator and the rent TDS calculator.
Forms and records
- Form 16: the annual TDS certificate an employer gives for salary.
- Form 16A: the TDS certificate for non-salary payments, issued quarterly.
- Quarterly statements: Form 24Q for salary and 26Q for other resident payments under the 1961 Act, reported as replaced from 1 April 2026 by Form 138 and Form 140.
- Form 26AS and AIS: the taxpayer's view of TDS credited to their PAN. Check them against your Form 16 or 16A before filing.
If a deductor deducted but did not deposit, or deposited under the wrong TAN, credit may be missing. See Form 26A and section 201 default relief.
Due dates
Tax deducted is deposited by the 7th of the following month, with a different date for March, and quarterly statements are filed after each quarter. Dates are in our TDS return due dates guide.
Interest and late fee
Interest runs at 1% per month or part month from the date tax was deductible to the date it was deducted, and 1.5% per month or part month from deduction to deposit. A late statement carries a fee of ₹200 per day, capped at the TDS in the statement, and a penalty for continued failure. Use the TDS interest and late fee calculator.
The no-PAN rule
If the deductee does not give a PAN, TDS is deducted at a higher rate, generally the higher of the normal rate, the rate in force or 20%, subject to the Act's wording. Collect PAN before the first payment and keep it on file.
Illustrative scenario
A company pays a consultant ₹1,00,000 and deducts TDS at the applicable professional fee rate. It pays ₹90,000 on the assumption of a 10% rate, deposits ₹10,000 by the 7th of next month, and issues Form 16A. If the consultant gave no PAN, deduction at 20% would leave ₹80,000 payable. These are invented figures to show the effect, not a rate recommendation.
Frequently asked questions
What is the full form of TDS?
Tax Deducted at Source.
Who needs a TAN?
Any person who deducts or collects tax at source. It is needed to deposit tax and file statements.
Is TDS an extra tax?
No. It is an advance collection of the payee's income tax, and the payee gets credit in the return.
Do the old section numbers still work?
The 2025 Act applies from 1 April 2026 and renumbers provisions, so use the new number on filings and confirm it on the portal.
For any rate you need, start with the TDS rate finder, and for tax audit linkage see the Form 3CD Clause 34 guide.
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error