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 FY 2026-27:
| Income Type | Section | Threshold | Rate |
|---|---|---|---|
| FD/RD interest | 194A | ₹40,000/year (₹1,00,000 for senior citizens) | 10% |
| Rent (individuals/HUF) | 194-IB | ₹50,000/month | 2% |
| Rent (businesses) | 194-I | ₹6,00,000/year | 2% (machinery), 10% (land/building) |
| Professional/technical fees | 194J | ₹50,000/year | 10% (2% for technical services) |
| Property purchase | 194-IA | ₹50,00,000 | 1% |
A recent change worth knowing: Budget 2025 raised both the rent threshold (from ₹2,40,000/year to ₹6,00,000/year for businesses, and to ₹50,000/month for individuals) and the professional fees threshold (from ₹30,000 to ₹50,000) — meaning smaller, routine payments that used to trigger TDS no longer do. If you’re using an older TDS reference or calculator, it may still show the outdated ₹30,000 or ₹2,40,000 figures.
If the person being paid doesn’t provide a valid PAN, TDS jumps to a flat 20% under Section 206AA — regardless of what the normal rate would otherwise be. 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?
₹40,000 per year for regular depositors, ₹1,00,000 per year for senior citizens, under Section 194A.
Has the TDS threshold for rent changed recently?
Yes — Budget 2025 raised it significantly: to ₹6,00,000/year for businesses (from ₹2,40,000) and to ₹50,000/month for individual tenants under Section 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.
