Key Takeaways
- TDS is tax paid in advance on your behalf by whoever pays you.
- It is credited against your final liability when you file your return — you may owe more or get a refund.
- Banks deduct TDS on deposit interest above thresholds; forms exist to declare that your income is below the taxable limit.
- Check Form 26AS / the Annual Information Statement to reconcile every deduction.
On this page
The idea in one sentence
Instead of waiting for you to pay tax at year-end, the law asks the payer to deduct a slice of certain payments and remit it to the government immediately. That slice is TDS.
Where you will meet it
- Salary — your employer estimates your annual tax and deducts it monthly.
- Bank and post-office interest — deducted when interest credited in a year crosses a threshold.
- Rent, professional fees, commission, contract payments — deducted by the payer above specified limits.
- Sale of property, some investments — specific provisions apply.
Rates and thresholds differ by payment type and are revised periodically; look them up on the Income Tax Department portal rather than relying on a remembered figure.
It is a prepayment, not the final bill
TDS is credited against the tax you actually owe once your full income is computed (see how income tax calculation works). Three outcomes are possible:
- TDS equals your liability — nothing more to do.
- TDS exceeds your liability — you claim a refund in your return.
- TDS falls short — you pay the balance (possibly as advance tax during the year).
TDS on deposit interest
Banks deduct TDS on FD and RD interest once the interest in a financial year crosses the applicable threshold. If your total income is below the taxable limit, you can submit the relevant self-declaration form so the bank does not deduct. Note that no TDS does not mean no tax — interest is still taxable if your total income requires it. Our guide on how FD and RD interest is taxed goes deeper, and the FD calculator shows pre-tax maturity so you can see what the interest figure is.
How to check what was deducted
Every deduction is reported against your PAN and appears in Form 26AS and the Annual Information Statement on the income-tax portal. Reconcile these against your own records before filing; mismatches are a common cause of notices and delayed refunds.
Sources
We reference primary and official sources. Rate- and rule-dependent details must be verified against the latest official information.
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Related Guides
How Is Interest on FDs and RDs Taxed?
Interest earned on fixed deposits and recurring deposits is fully taxable as 'income from other sources' at your slab rate. Banks may deduct TDS above thresholds, but you owe tax on the interest either way. The post-tax return is what to compare against alternatives.
taxHow Income Tax Calculation Works in India
Income tax in India is computed in stages: total your income under different heads, subtract eligible deductions and exemptions, apply the slab structure of your chosen regime, then add cess and adjust for tax already paid. Knowing the structure matters more than memorising the numbers, which change with each Budget.
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