Introduction
Tax Deducted at Source (TDS) is a mechanism introduced by the Indian government to collect tax at the point of income generation. Whether you are a salaried employee, freelancer, or business owner, understanding TDS is essential to ensure compliance and avoid excess tax payments.
But what if too much TDS is deducted? Can you claim a refund? In this guide, we’ll explain how TDS works, key deduction rates, and how to claim a TDS refund in India for FY 2024-25.
What is TDS (Tax Deducted at Source)?
TDS is a tax collection method where the payer deducts tax before making a payment to the recipient.
Who Deducts TDS? Employers, banks, tenants, companies, and others making specified payments.
Who Pays TDS? Salaried individuals, freelancers, business owners, landlords, and investors.
Where is TDS Applied? On salary, interest income, rent, professional fees, dividends, etc.
Example: If your annual salary is ₹10,00,000 and TDS is 10%, your employer deducts ₹1,00,000 as tax and deposits it with the government.
TDS Deduction Rates for FY 2024-25
| Income Type | TDS Rate | Applicable Section |
|---|---|---|
| Salary | As per income tax slab | Section 192 |
| Interest on Fixed Deposits (FDs) | 10% | Section 194A |
| Rent (Above ₹50,000 per month) | 5% | Section 194IB |
| Professional Fees (Above ₹30,000) | 10% | Section 194J |
| Contract Payments | 1% (Individuals), 2% (Companies) | Section 194C |
| Property Sale (Above ₹50 lakh) | 1% | Section 194IA |
| Dividend Income | 10% | Section 194 |
Note: If you don’t provide PAN, TDS may be deducted at 20% instead of the standard rate.
How to Check TDS Deducted on Your Income
Step 1: Check Your Form 26AS
- Form 26AS is a statement that shows all TDS deductions against your PAN.
- How to Download Form 26AS?
Log in to the Income Tax e-Filing Portal (incometax.gov.in).
Click on “View Form 26AS” under “e-File”.
Download your TDS statement.
Step 2: Check AIS (Annual Information Statement)
- AIS gives a detailed view of your income, TDS, and investments.
- Access it from the Income Tax Portal under “AIS/TIS” section.
How to Claim TDS Refund in India?
If excess TDS is deducted, you can claim a refund while filing your Income Tax Return (ITR).
Steps to Claim TDS Refund
Step 1: Calculate Total Taxable Income
- Add all income sources (salary, interest, freelance, rent, etc.).
- Check total tax payable as per the latest tax slabs.
Step 2: Compare with TDS Deducted
- If TDS deducted > Total Tax Payable, you are eligible for a refund.
Step 3: File Your Income Tax Return (ITR)
- File ITR before July 31, 2025 using the Income Tax Portal or ClearTax, TaxBuddy, or Quicko.
- Choose the correct ITR form (ITR-1 for salaried, ITR-4 for freelancers).
Step 4: Verify Your ITR
- E-verify using Aadhaar OTP, Net Banking, or DSC to process your refund faster.
Step 5: Wait for Refund Processing
- The IT department processes refunds within 30-90 days.
- Track your refund status on the Income Tax Portal under “Refund Status”.
Pro Tip: Link your bank account with PAN and validate it to receive refunds smoothly.
Common TDS Issues & How to Resolve Them
TDS Deducted But Not Reflected in Form 26AS?
Ask the deductor (employer/bank) to file a TDS correction.
Ensure correct PAN is provided to avoid mismatches.
Bank Deducted TDS on FD Even Though My Income is Below ₹2.5 Lakh?
Submit Form 15G (Below 60 years) or Form 15H (Senior Citizens) to avoid TDS deduction.
Employer Deducted More TDS Than Needed?
Check Form 16 and adjust tax calculations while filing ITR.
How to Avoid Excess TDS Deduction?
Declare Your Investments to Employer
- Submit HRA, 80C, and 80D details at the start of the financial year.
Submit Form 15G/15H for Fixed Deposits
- Avoid TDS deduction if total income is below the basic exemption limit.
Ensure PAN is Linked with Income Sources
- Without PAN, TDS is deducted at 20% instead of the standard rate.
Opt for Lower TDS Deduction (Section 197)
- Apply for a lower TDS certificate if your tax liability is lower than the standard TDS rate.
When is TDS Not Required?
- For salaried individuals with an annual income below ₹2.5 lakh (₹3 lakh for seniors, ₹5 lakh for super seniors).
- For FDs if Form 15G/15H is submitted.
- On rent payments below ₹50,000/month.
- On dividends below ₹5,000 per year.
Old vs. New Tax Regime: Impact on TDS
| Aspect | Old Tax Regime | New Tax Regime |
|---|---|---|
| TDS on Salary | Higher due to exemptions | Lower tax but no deductions |
| TDS on Interest Income | Same in both regimes | Same in both regimes |
| Who Benefits? | High deduction claimers | Higher salary earners |
If you claim high tax deductions (80C, 80D, HRA), the Old Regime is better!
Conclusion
TDS plays a crucial role in ensuring tax compliance, but many individuals end up paying extra due to lack of awareness. By understanding how TDS works, how to check Form 26AS, and how to claim refunds, you can maximize tax savings and avoid unnecessary deductions.
Need expert tax advice? Consult us at taxnoteblog@gmail.com for personalized assistance on TDS refunds and tax planning.
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