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Tax term

TDS

A plain-English definition of TDS— what it means, how it works, and a simple example.

Quick answer

TDS (Tax Deducted at Source) is income tax a payer deducts before paying you — on salary, interest or rent — and deposits with the government.

Rather than collecting all tax at year-end, the government requires certain payers to withhold a slice upfront. Your employer deducts TDS from salary; a bank deducts it on fixed deposit interest above ₹40,000 a year (₹50,000 for seniors).

The deducted amount is credited against your total tax liability. You see it in your Form 26AS and Annual Information Statement, and you claim it when filing your return.

For example, if a bank deducts ₹5,000 TDS on your FD interest but your actual tax on it is only ₹2,000, you claim a ₹3,000 refund when you file. If no tax is due, you can submit Form 15G or 15H to avoid TDS altogether.

Related terms

Fixed Deposit (FD)Capital GainsGSTSection 80C

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A note on accuracy:this definition is for general education, not personalised financial or tax advice. Figures are illustrative and rules can change — confirm anything that affects a real decision.