Question 1

What is TDS and when is it deducted?

Accepted Answer

TDS (Tax Deducted at Source) is a mechanism where the payer deducts tax at a prescribed rate before making a payment to the payee. It is deducted on salary, interest, rent, professional fees, contractor payments, and other specified incomes. The deducted amount is deposited with the government on behalf of the payee, who can claim credit for it when filing their income tax return.

Question 2

What is the TDS rate on salary?

Accepted Answer

TDS on salary is not at a flat rate — it is deducted at your average/effective income tax rate based on your estimated annual income and the tax regime you have chosen (old or new). Your employer calculates this by estimating your total salary for the year, applying slab rates, deducting any declared investments/deductions, and spreading the tax equally across 12 months.

Question 3

What happens if TDS is deducted but my income is below taxable limit?

Accepted Answer

If your total income is below the taxable limit after all deductions, you can file an income tax return and claim a refund of the excess TDS deducted. The refund is processed by the IT department and credited to your bank account, typically within 20-45 days of e-verification. You can also submit Form 15G/15H to the payer to prevent TDS deduction on interest income if your income is below the taxable threshold.

Question 4

What is the penalty for not providing PAN (Section 206AA)?

Accepted Answer

Under Section 206AA, if the payee does not provide their PAN to the deductor, TDS is deducted at the higher of: the rate specified in the applicable section, twice that rate, or 20%. In practice, this means 20% TDS for most non-salary payments. Always ensure your PAN is linked with the payer to avoid this significantly higher deduction.

Question 5

What is the TDS threshold for interest income?

Accepted Answer

Under Section 194A, TDS on interest from banks is deducted at 10% when the aggregate interest exceeds ₹40,000 in a financial year (₹50,000 for senior citizens). For interest from non-banking sources, the threshold is ₹5,000. If your total income is below the taxable limit, you can submit Form 15G (or 15H for seniors) to avoid TDS deduction.

Question 6

How can I check my TDS credit and filing status?

Accepted Answer

You can view your TDS credits on Form 26AS and the Annual Information Statement (AIS) on the income tax portal at incometax.gov.in. Form 26AS shows all TDS deducted against your PAN, and AIS provides a comprehensive financial summary. Always verify that TDS reflected in 26AS matches your Form 16/16A before filing your return.

Question 7

When is TDS on rent applicable and at what rate?

Accepted Answer

Under Section 194I, TDS on rent is applicable when annual rent exceeds ₹2,40,000. The rate is 10% for land, building, or furniture, and 2% for plant, machinery, or equipment. Additionally, under Section 194IB, individual tenants paying rent above ₹50,000/month must deduct TDS at 5% on the last month's rent (this applies even to non-business tenants).

TDS Calculator India — Calculate Tax Deducted at Source