If you’ve ever looked at your payslip and wondered why the number in your bank account is smaller than your gross salary, TDS is a big part of the answer. Here’s exactly how it works, how much gets deducted, and what applies beyond just your salary.
[Use the TDS Calculator above ↑] — enter your annual salary to see your estimated monthly deduction.
TDS (Tax Deducted at Source) is exactly what it sounds like — instead of paying your entire year’s income tax in one lump sum, tax is deducted incrementally at the point income is paid to you, and deposited directly with the government by whoever’s paying you (your employer, your bank, your tenant, and so on). You then claim credit for whatever’s already been deducted when you file your return.
Your employer estimates your total annual tax liability based on your salary structure, declared investments, and chosen tax regime, then divides that estimate across your remaining pay periods for the year. This is why your TDS can shift mid-year — submitting new investment proofs, a salary revision, or switching tax regimes all change the estimate your employer is working from.
Unlike most other TDS categories, salary TDS has no minimum threshold — it applies to anyone whose estimated annual income exceeds the basic exemption limit for their chosen regime.
TDS isn’t just a salary thing — it applies across several everyday income types, each with its own threshold and rate. Current figures for tax year 2026-27, under section 393 of the Income-tax Act, 2025 (the old section numbers are in brackets):
| Income Type | Section | Threshold | Rate |
|---|---|---|---|
| FD/RD interest | 393(1), Sl. No. 5(ii) (old 194A) | ₹50,000/year (₹1,00,000 for senior citizens) | 10% |
| Rent (individuals/HUF) | 393(1), Sl. No. 2(i) (old 194-IB) | ₹50,000/month | 2% |
| Rent (businesses) | 393(1), Sl. No. 2(ii) (old 194-I) | ₹50,000/month | 2% (machinery), 10% (land/building) |
| Professional/technical fees | 393(1), Sl. No. 6(iii) (old 194J) | ₹50,000/year | 10% (2% for technical services) |
| Property purchase | 393(1), Sl. No. 3(i) (old 194-IA) | ₹50,00,000 | 1% |
A recent change worth knowing: the thresholds in the table are higher than the ones older references still show (₹40,000 a year for FD interest, ₹2,40,000 a year for business rent and ₹30,000 for professional fees), so smaller, routine payments that used to trigger TDS may no longer do. If you’re using an older TDS reference or calculator, it may still show those outdated figures.
Professional fees paid by individuals and HUFs: an individual or HUF who pays professional fees exclusively for personal purposes does not deduct TDS at all (section 393(4), Sl. No. 9). An individual or HUF who pays for business or professional purposes deducts at the ₹50,000 threshold shown in the table only if they are a “specified person”, meaning their business turnover in the previous tax year exceeded ₹1 crore or their professional receipts exceeded ₹50 lakh. Any other individual or HUF deducts 2% only once such payments in a year exceed ₹50 lakh (Sl. No. 6(ii)).
Paperwork for individuals and HUFs: an individual or HUF who deducts TDS on rent (Sl. No. 2(i)), on buying property (Sl. No. 3(i)) or on professional fees (Sl. No. 6(ii)) pays the tax within 30 days from the end of the month of deduction, along with a challan-cum-statement in Form 141, and gives the payee a TDS certificate in Form 132 (rules 218 and 215). Other deductors file a quarterly statement and issue Form 131.
If the person being paid doesn’t provide a valid PAN, TDS is deducted at the higher of the normal rate, the rate in force, or 20% (5% in a few cases) under section 397(2) of the Income-tax Act, 2025 (earlier Section 206AA). This applies across virtually every TDS category, not just salary.
Is TDS the same as income tax?
Not exactly — TDS is a mechanism for collecting income tax incrementally throughout the year rather than in one lump sum. The TDS deducted is credited against your final tax liability when you file your return; if too much was deducted, you get a refund.
What is the TDS threshold for FD interest?
₹50,000 per year for regular depositors, ₹1,00,000 per year for senior citizens, under section 393 of the Income-tax Act, 2025 (earlier Section 194A).
Has the TDS threshold for rent changed recently?
Yes. For business tenants it is now ₹50,000 a month, against ₹2,40,000 a year earlier, and individual tenants deduct TDS at 2% once rent reaches ₹50,000 a month. Both are under section 393 of the Income-tax Act, 2025 (earlier Sections 194-I and 194-IB).
What happens if TDS deducted is more than my actual tax liability?
You claim the excess as a refund when filing your income tax return — TDS is a credit against your final liability, not an additional tax.
See also our in-hand salary calculator and CIBIL score guide for more on managing your take-home pay. Won a prize or game show money? TDS applies there too, at a flat rate: see tax on lottery and game show winnings. For the FD interest row above, see current FD interest rates.
Sources: Income-tax Act, 2025, sections 392, 393 and 397; Income-tax Rules, 2026, rules 204, 205, 215 and 218. Verified November 2026.
