TDS India 2026:
Rates, Sections and How to Claim Refund

TDS, Tax Deducted at Source, is the government's primary mechanism for collecting income tax at the point where income is generated. Most Indians encounter it every month in their salary slip, every quarter when FD interest is credited, and every year when they wonder why their FD interest is lower than stated. Understanding TDS is not optional for anyone who earns income in India. This guide covers everything: what it is, the current rates for every major category, the recent changes, and precisely how to get your money back if too much was deducted.

1. What Is TDS and How Does It Work?

TDS stands for Tax Deducted at Source. The concept is simple: instead of waiting for a taxpayer to pay tax at year-end, the government requires the person making the payment to deduct a portion of tax before releasing it, and deposit that amount directly with the Income Tax Department on the recipient's behalf.

Two parties are involved in every TDS transaction. The deductor is the person or entity making the payment, your employer, your bank, your tenant. The deductee is the recipient of the payment, you. The deductor deducts TDS from the payment, deposits it with the government by the 7th of the following month (30th April for March deductions), and issues a TDS certificate to the deductee. The deductee claims this TDS as tax already paid when filing their annual ITR.

2. Key TDS Changes for FY 2025-26 and 2026-27

Several significant TDS changes took effect from April 1, 2025, which apply to FY 2025-26 and continue into FY 2026-27. Every taxpayer should be aware of these, especially the rent threshold change which affects millions of landlords and tenants.

3. TDS Rate Chart: Section-Wise Rates and Thresholds

Rates for FY 2026-27. These are the main sections affecting individual taxpayers, the complete rate chart under the Income Tax Act 2025 contains 40+ sections. Use the TDS Calculator for specific payment types and amounts.

4. TDS on Salary: How Employers Calculate It

Salary TDS is deducted by employers under Section 192 every month based on the employee's estimated annual tax liability. The employer calculates the projected full-year income (including all components of salary), deducts estimated eligible deductions and exemptions declared by the employee (80C investments, HRA, LTA, 80D, and so on), applies the applicable slab rates, and divides the resulting annual tax by 12 to arrive at the monthly TDS amount.

Why salary TDS changes during the year

Employers recalculate salary TDS every month to reflect updated projections. TDS is typically lower in April to October when the year has just started and declared investments may not yet be confirmed. It rises in November to February as the employer factors in actual investment proofs submitted. It may spike in March if the projected year-end computation shows under-deduction in earlier months. Employees should submit their investment declarations (under Section 80C, 80D, HRA, home loan interest, and so on) at the start of the financial year and submit actual proofs by January to avoid unexpected spikes in February-March TDS.

5. TDS on FD Interest: What Banks Deduct

Banks deduct TDS on FD interest under Section 194A when the total interest paid or credited in a financial year across all branches of the same bank exceeds the threshold. The threshold is Rs 40,000 per year for individuals below 60 years and Rs 1,00,000 per year for senior citizens aged 60 and above (raised from Rs 50,000 effective April 2025).

The TDS rate is 10 percent. Without PAN, TDS jumps to 20 percent. Interest on post office savings accounts, NSC, and KVP is exempt from TDS. Interest on savings accounts is covered by Section 80TTA (Rs 10,000 deduction for below 60) or 80TTB (Rs 50,000 deduction for senior citizens) and not directly subject to TDS by banks.

A common trap: FDs across multiple banks

The Rs 40,000 threshold applies per bank, not per individual across all banks. If you have Rs 5 lakh in FDs at three different banks earning Rs 35,000 interest at each, no single bank crosses the threshold and no TDS is deducted, but your total interest is Rs 1,05,000, which is taxable at your slab rate. You must declare all interest in your ITR and pay the applicable tax even though no TDS was deducted. Failure to declare results in notices and penalties. The AIS (Annual Information Statement) now captures interest income reported by all banks, so the income tax department has visibility into total interest across banks even without TDS.

6. TDS on Rent: New Rs 6 Lakh Threshold

One of the most significant TDS changes of 2025 is the increase in the rent TDS threshold under Section 194I from Rs 2,40,000 per year (Rs 20,000 per month) to Rs 6,00,000 per year (Rs 50,000 per month). This change was effective from April 1, 2025.

The practical implication is substantial. Landlords receiving rent below Rs 50,000 per month are now entirely exempt from TDS compliance requirements on the payer's side. Tenants paying rent below Rs 50,000 per month to a landlord no longer need to deduct TDS, maintain TDS records, or file TDS returns. This eliminates significant compliance burden for the large majority of rental transactions in India, where average rents in most cities remain below Rs 50,000 per month.

7. TDS on Professional Fees and Contractor Payments

TDS under Section 194J applies to fees paid to professionals including doctors, lawyers, chartered accountants, engineers, architects, interior designers, and any technical services. The rate is 10 percent if the total payment in a financial year exceeds Rs 30,000. This threshold applies per payee, if you pay three different consultants Rs 25,000 each, no TDS is required since no individual payment exceeds Rs 30,000.

Contractor payments fall under Section 194C at lower rates: 1 percent for individuals and HUFs, 2 percent for companies and firms. The threshold is Rs 30,000 per payment or Rs 1,00,000 in aggregate during the year to the same contractor. This covers payments for work including construction, printing, advertising, catering, and transport.

Freelancers and consultants receiving professional fees

If you are a freelancer, consultant, or professional receiving fees from companies or other entities required to deduct TDS, you will receive payments after 10 percent TDS deduction. This deducted amount is credited to your PAN. When you file your ITR, you declare the gross professional income (before TDS) and claim the TDS deducted as advance tax paid. If your actual tax liability is lower than TDS deducted, which is common for professionals with significant business expenses, the excess is refunded. Always collect Form 16A from every client who deducts TDS on your professional fees, and cross-verify with Form 26AS before filing ITR.

8. New Section 194T: TDS on Partner Payments

Section 194T is a new TDS provision introduced effective April 1, 2025 that significantly affects partnership firms and their partners. Under this section, any partnership firm making the following payments to its partners must deduct TDS at 10 percent if the total payments in a financial year exceed Rs 20,000: salary, remuneration, bonus, commission, and interest paid to partners.

This does not apply to drawings (withdrawals of share of profit) or capital repayments. However, it does apply to interest paid on capital or loans borrowed from partners. The introduction of Section 194T closes a long-standing gap in TDS coverage, previously, firms could pay substantial amounts to partners without any TDS deduction, making it difficult for the income tax department to track partner income. Partners who receive such payments must declare them in their ITR and can claim the TDS deducted as tax credit.

9. What Happens If You Do Not Give PAN

Under Section 206AA, if a deductee fails to furnish their PAN to the deductor, TDS must be deducted at 20 percent, regardless of the normal applicable TDS rate. This applies to all TDS sections. A bank FD that normally attracts 10 percent TDS becomes 20 percent without PAN. Professional fees that normally attract 10 percent TDS become 20 percent without PAN.

Always provide your PAN to every bank, employer, client, and tenant who may make payments to you. If excess TDS was deducted at 20 percent due to non-furnishing of PAN, you can still claim the full credit for the amount deducted when filing your ITR, and receive a refund if the 20 percent deducted exceeds your actual tax liability. The excess deduction does not disappear, it is credited to your PAN once the deductor files their TDS return with your correct details.

10. Form 15G and 15H: How to Avoid TDS on FD

If your total income for the financial year is below the basic taxable limit and you have no tax liability, you can submit a self-declaration to your bank to prevent TDS deduction on your FD interest. Form 15G is for individuals below 60 years. Form 15H is for senior citizens aged 60 and above.

Conditions for submitting Form 15G

• You must be an individual, HUF, or trust (not a company or firm)
• You must be a resident Indian
• Your estimated total income for the year must be below the basic exemption limit (Rs 3 lakh under new regime, Rs 2.5 lakh under old regime)
• The total interest income on which TDS would otherwise be deducted must not exceed the basic exemption limit

Conditions for Form 15H (senior citizens aged 60 and above)

• Your estimated tax liability for the financial year must be nil
• There is no requirement that total income be below the exemption limit, as long as tax liability after deductions is zero
• This makes Form 15H easier to qualify for than 15G for senior citizens with higher income but significant deductions

How to submit

Both forms must be submitted at the beginning of each financial year (April) to every bank branch where you have FDs or RDs. Most banks now accept online submission through their net banking portal. The forms are valid only for one financial year and must be resubmitted annually. Submitting mid-year is still valid, but TDS already deducted before submission will not be reversed by the bank and must be claimed as refund via ITR. Submit before April each year to prevent any TDS deduction from the start.

11. Form 26AS and AIS: How to Check Your TDS

Two documents on the income tax e-filing portal allow you to verify all TDS deducted against your PAN for any financial year.

Form 26AS

Form 26AS is a consolidated annual tax statement that shows all TDS and TCS (tax collected at source) credited to your PAN, advance tax and self-assessment tax paid, income tax refunds received, and details of high-value financial transactions. It is updated periodically as deductors file their quarterly TDS returns. Form 26AS is available free on the income tax portal (incometax.gov.in) and can also be accessed through net banking of banks registered with the tax department.

AIS (Annual Information Statement)

Introduced in FY 2021-22, the Annual Information Statement is an enhanced version that goes significantly beyond Form 26AS. AIS includes all Form 26AS information plus: interest income reported by all banks (not just where TDS was deducted), dividend income, mutual fund transaction details, share purchase and sale data, foreign travel information, GST turnover, and other high-value transactions. The income tax department uses AIS to cross-check the income declared in your ITR against information received from multiple sources. Discrepancies between your ITR income and AIS figures often trigger notices. Always review AIS before filing ITR to ensure you have declared all income that the department is aware of.

12. How to Claim TDS Refund Step-by-Step

TDS refund is claimed by filing your Income Tax Return. There is no separate refund application. The ITR processing automatically identifies excess TDS and generates a refund to your pre-validated bank account.

13. How to Use the TDS Calculator

The TDS Calculator on HisabhKaro allows you to calculate TDS for any payment type, salary, FD interest, rent, professional fees, contractor payments, dividend, and more. Select the relevant section, enter the payment amount, and the calculator instantly shows the applicable TDS rate, threshold, and exact TDS to be deducted or expected to be deducted.

The most useful application is verifying whether TDS should have been deducted from a payment you received or made. If you received Rs 45,000 in FD interest from a bank and wonder why no TDS was deducted, the calculator confirms that Rs 45,000 is above the Rs 40,000 threshold but the bank may have not deducted if they expected your total interest to remain below the threshold. The calculator also shows the 20 percent rate that applies without PAN, useful for verifying TDS deductions on payments where PAN was not provided.

For tax filing, the Income Tax Calculator will show your total tax liability against which you can compare total TDS deducted from Form 26AS to estimate your refund or additional tax payable before you file your ITR. If you are a salaried individual comparing the new versus old tax regime, the calculator's regime comparison shows which option results in lower net tax, and therefore less TDS deduction through the year.