TDS
Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act where the payer of certain income (employer, bank, tenant, etc.) deducts a specified percentage of tax at the time of payment and deposits it with the government on the recipient's behalf.
Understanding TDS
TDS shifts the compliance burden from millions of recipients to a smaller set of organised payers (employers, banks, large companies). The deductor uses your PAN to credit the deducted tax to your tax account, viewable on Form 26AS and AIS through the income tax portal.
If too much TDS has been deducted (e.g., your bank deducted on FD interest but you are below the taxable threshold), you can claim a refund when filing your ITR. To prevent unnecessary deduction in the first place, eligible taxpayers can submit Form 15G (under 60) or Form 15H (60+) to their bank.
Why it matters
Always cross-check your Form 26AS and AIS before filing your ITR. If your employer or bank has deducted TDS but not deposited it (or deposited under the wrong PAN), you cannot claim credit and may be wrongly assessed for the full amount. Mismatches are the single biggest cause of refund delays and notice-from-IT-department situations.
Example
You earn ₹12 lakh salary in FY 2026-27. Your employer deducts ₹65,000 as TDS across the year and deposits it. When you file your ITR, your computed tax liability is ₹70,000 — so you pay the additional ₹5,000 as self-assessment tax. If your liability had been ₹55,000, you would receive a ₹10,000 refund.
You earn ₹12 lakh salary in FY 2026-27. Your employer deducts ₹65,000 as TDS across the year and deposits it. When you file your ITR, your computed tax liability is ₹70,000 — so you pay the additional ₹5,000 as self-assessment tax. If your liability had been ₹55,000, you would receive a ₹10,000 refund.