TDS Guide — Tax Deduction at Source
Updated June 2026 · VerifiedExplore Our TDS Resources
Detailed guides on every aspect of TDS compliance, rates, and refunds:
How Does TDS Work?
TDS works in three simple steps:
- Deduction: The payer (deductor) deducts tax at the applicable rate from the payment amount at the time of credit or payment, whichever is earlier.
- Deposit: The deducted tax must be deposited with the government by the 7th of the following month (30 April for March deductions).
- Return & Certificate: The deductor files quarterly TDS returns (Form 138 for salary, Form 140 for non-salary) and issues a TDS certificate (Form 16/16A) to the deductee.
What Are the Key TDS Rates for Tax Year 2026-27?
| Nature of Payment | Section (New Act) | TDS Rate | Threshold |
|---|---|---|---|
| Salary | 392 | Slab rates | Basic exemption limit |
| Interest (Banks) | 393 | 10% | ₹40,000 (₹50,000 for seniors) |
| Interest (Others) | 393 | 10% | ₹5,000 |
| Professional / Technical Fees | 393 | 10% | ₹30,000 |
| Contractor Payments | 393 | 1% (Individual/HUF) / 2% (Others) | ₹30,000 (single) / ₹1,00,000 (aggregate) |
| Rent — Land & Building | 393 | 10% | ₹2,40,000 p.a. |
| Rent — Plant & Machinery | 393 | 2% | ₹2,40,000 p.a. |
| Commission / Brokerage | 393 | 5% | ₹15,000 |
| Dividend | 393 | 10% | ₹5,000 |
| Transfer of Immovable Property | 393 | 1% | ₹50,00,000 |
| E-commerce Operator | 393 | 1% | ₹5,00,000 |
What Are the TDS Return Filing Due Dates?
| Quarter | Period | TDS Deposit Due Date | Return Filing Due Date |
|---|---|---|---|
| Q1 | Apr – Jun | 7th of next month | 31 July |
| Q2 | Jul – Sep | 7th of next month | 31 October |
| Q3 | Oct – Dec | 7th of next month | 31 January |
| Q4 | Jan – Mar | 30 April (for March) | 31 May |
What Is TCS (Tax Collected at Source)?
TCS is tax collected by the seller from the buyer at the time of sale of specified goods. Under the Income-tax Act, 2025, TCS provisions are governed by Section 394 (earlier Section 206C). Common TCS items include:
- Foreign remittance under LRS: 5% above ₹7 lakh (20% for non-education/medical purposes above threshold).
- Sale of motor vehicle: 1% if value exceeds ₹10 lakh.
- Overseas tour packages: 5% (20% above ₹7 lakh for non-specified purposes).
- Scrap, minerals, timber: 1-5% depending on the item.
Frequently Asked Questions
What is TDS and who deducts it?
TDS (Tax Deduction at Source) is a system where the person making a specified payment (salary, rent, interest, professional fees, etc.) deducts tax at the applicable rate before paying the recipient. The deducted tax is deposited with the government and credited to the recipient’s tax account.
What happens if TDS is not deducted?
If the deductor fails to deduct TDS, they face disallowance of the expense (30% of the payment), interest at 1% per month for non-deduction and 1.5% per month for non-deposit, along with penalties under the Income-tax Act, 2025.
How do I check my TDS credits?
You can check TDS credits in your Form 26AS and Annual Information Statement (AIS) on the income tax e-filing portal (incometax.gov.in). These statements show all TDS deducted against your PAN by various deductors.
Can I get a TDS refund if excess tax was deducted?
Yes. If TDS deducted exceeds your actual tax liability, you can claim a refund by filing your Income Tax Return. The excess amount is refunded to your bank account, usually within 4-6 weeks of ITR processing.
What is the difference between Form 138 and Form 140?
Form 138 (earlier Form 24Q) is the quarterly TDS return for salary payments under Section 392. Form 140 (earlier Form 26Q) is the quarterly TDS return for all non-salary payments like interest, rent, professional fees, and contractor payments.
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