TDS
Also called: tax deducted at source
What is TDS?
TDS, or tax deducted at source, is income tax withheld by the person making a payment — on rent, contractor bills, professional fees, salary and other specified payments — and deposited with the government on the recipient's behalf.
Why TDS matters
If you are the payer, failing to deduct or deposit TDS brings interest, penalties and disallowance of the expense. If you are the recipient, the deducted amount is money you have already paid, claimable against your final tax.
TDS formula
TDS = Payment amount × applicable TDS rate ÷ 100
Deduct on the amount before GST for most payment types.
How TDS works in practice
Deduct at the prescribed rate when crediting or paying, deposit by the due date, and file the quarterly statement so the credit reflects in the recipient's tax account. Rates and thresholds differ by payment type.
Frequently asked questions
No. Income tax TDS is withheld on payments generally; GST TDS applies to specified deductors on certain supplies under GST law.