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.

Budget 2026 brought further refinements effective April 1, 2026 that affect a much wider set of taxpayers. The most impactful for individual investors: Section 194H commission TDS was cut from 5 percent to 2 percent, directly benefiting insurance agents, mutual fund distributors, and anyone receiving brokerage income. More practically, Form 15G and 15H can now be submitted once to your depository (NSDL or CDSL) and it automatically applies to all companies where you hold shares, eliminating the need to submit a separate declaration to each company before the dividend record date. Previously, missing even one submission meant a 10 percent TDS on that company's dividend even if your total income was below the taxable limit. Section 194C's definition of "work" was also clarified to explicitly include manpower supply, ending years of litigation on whether security guard and contract labour payments attract 1 percent (contractor rate) or 10 percent (professional services rate); the answer is now definitively 1 percent. The Income Tax Act 2025 guide covers how the new Tax Year terminology (replacing the old Assessment Year system) affects TDS compliance references and filing deadlines.

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.

Two rules from this table deserve special attention because they affect almost every salaried and investment-income earner. First, the "Without PAN" column is not theoretical; it applies automatically the moment a deductor cannot verify your PAN. Banks do this instantly via system checks; if your PAN is not seeded into your bank account, your FD interest TDS doubles to 20 percent from the next quarter. Use the FD calculator to model your net interest after TDS and decide whether to spread FDs across accounts or submit Form 15G to avoid deduction entirely. Second, if you legitimately expect your actual tax liability to be lower than the TDS rate in this chart, which is common for consultants or contractors with high business expenses, and you can apply to your Assessing Officer for a Lower Deduction Certificate under Section 197 (Form 13). This certificate instructs your client or employer to deduct TDS at a lower rate validated by the tax department, avoiding a cash flow deficit that you'd otherwise have to recover through an ITR refund that takes months. For salaried employees, the salary breakup calculator shows exactly which components are fully taxable, partially exempt (HRA, LTA), or TDS-free (gratuity within limits), helping you optimise your CTC structure before your employer finalises TDS for the year.

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 shown on your payslip - from April 2026, this is deducted under Section 392 of the Income Tax Act 2025, not the old Section 192. When evaluating two job offers, this means the TDS burden differs for each offer based on its CTC, basic salary percentage, city, and HRA structure - making the monthly in-hand comparison more complex than a simple CTC division.

One category of salary TDS that surprises employees every year: the perquisite from ESOP exercise or RSU vesting. When you exercise stock options or receive vested RSUs, the gain (FMV minus exercise price for ESOP, full FMV for RSU) is treated as perquisite income under Section 17(1)(d) of the Income Tax Act 2025 and added to your salary income for that year. Your employer deducts TDS under Section 392(1) on the combined total in that payroll cycle, which can mean several lakhs of additional TDS in a single month for large grants. Unlike regular salary TDS which is spread evenly across months, ESOP-linked TDS spikes in the exercise month because the employer recomputes the full-year liability and deducts the shortfall in one go.

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.

The compliance burden of Section 194T falls entirely on the firm, not the partners, and the practical steps are more involved than they appear. The firm must first obtain a Tax Deduction and Collection Account Number (TAN) if it does not already have one, since TDS cannot be deposited without a TAN. TDS must be deposited to the government by the 7th of the month following the month of deduction (except March, which has until April 30). The firm must then file quarterly TDS returns (Form 26Q) covering partner payments, and issue Form 16A to each partner within 15 days of the due date for the quarterly return. Consider a practical example: a partnership firm pays its two working partners Rs 3 lakh per month each (Rs 36 lakh annually per partner, well above the Rs 20,000 threshold). The firm must deduct Rs 30,000 per month per partner (10 percent of Rs 3 lakh), deposit Rs 60,000 monthly to the government, and issue Form 16A quarterly. Partners then use their Form 16A and Form 26AS credit to adjust TDS against their personal income tax liability. Late deposit of TDS attracts interest at 1.5 percent per month from the date of deduction to the date of actual deposit, and failure to deduct at all means the payment may be disallowed as a business expense under Section 40(a)(ia), increasing the firm's own taxable income.

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.

The PAN-TDS link is now so deeply embedded in tax infrastructure that a mismatch creates downstream problems beyond just the 20 percent deduction rate. When a deductor files their quarterly TDS return with your incorrect PAN (or no PAN), the credit does not appear in your Form 26AS or Annual Information Statement (AIS) on the TRACES portal. This means when you file your ITR and claim a TDS credit that the system cannot trace to your PAN, the claim is rejected and you may receive a demand notice even though the tax was physically deducted. To fix this, you must contact the deductor and ask them to file a correction TDS return linking the deduction to your correct PAN. This can take weeks and is entirely preventable. The most common scenario is freelancers and consultants working with multiple clients who do not proactively share their PAN before the first payment. The AIS on the income tax portal now shows all TDS credits, interest income, dividend income, and securities transactions credited to your PAN. Cross-checking this against your own records before filing your ITR is the most effective way to ensure no deduction is lost or disputed.

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.

TDS on Key Investments: EPF, FD, PPF and Mutual Funds

TDS rules for investments catch most people off-guard because the rate and applicability vary sharply by instrument, and the most common investment choices sit at opposite ends of the TDS spectrum. Fixed Deposits are the most TDS-prone investment for retail investors: 10 percent TDS applies once annual interest from a single bank crosses Rs 40,000 (Rs 1,00,000 for senior citizens). Since FD interest is also taxed at your full slab rate, an investor in the 30 percent bracket on a Rs 10 lakh FD at 7 percent earns Rs 70,000 gross, has Rs 7,000 deducted as TDS, and ultimately pays Rs 21,000 in tax (30 percent of Rs 70,000), recovering the Rs 7,000 TDS credit in their ITR but losing the use of that cash for the year. The FD calculator shows your exact post-TDS return across different tenures and slab rates, including why FDs above the threshold benefit from spreading across family members or submitting Form 15G. PPF is at the opposite extreme: zero TDS at any stage, and interest and maturity are fully exempt, which is why the PPF calculator consistently produces better post-tax outcomes than FD despite the lower headline rate for investors above the 20 percent slab.

EPF withdrawal TDS is the most expensive surprise for early withdrawers. Under Section 192A, TDS of 10 percent applies if you withdraw from EPF before completing 5 continuous years of service and the withdrawal amount exceeds Rs 50,000. Without PAN, this jumps to 20 percent. On a Rs 3 lakh EPF withdrawal by someone who changed jobs after 3 years, the TDS is Rs 30,000 (10 percent), on top of the income tax that applies at slab rate since the withdrawal is also fully taxable. Use the EPF calculator to track your accumulation and understand the tax cost of early withdrawal before making the decision. Equity mutual funds have the most investor-friendly TDS treatment: zero TDS is deducted at redemption for resident investors, regardless of the LTCG or STCG amount. You self-declare and pay the tax through advance tax or ITR, which means you retain the full redemption amount and manage the tax timing yourself. This is a structural advantage over FDs where TDS is deducted before you receive the money. The full tax comparison across instruments including post-tax real returns is covered in the post-tax retirement income guide, and the capital gains tax guide for India covers LTCG and STCG rates on equity, debt, and property in detail. For employees with stock options, the perquisite stage at exercise and capital gains stage at sale are governed by separate rules -- a two-stage tax that most employees only discover when their salary credit drops unexpectedly in the exercise month.