Understanding TDS: A Complete Guide to Tax Deducted at Source
Tax Deducted at Source (TDS) is a mechanism where the payer deducts tax before making payment to the payee. Introduced to collect tax at the source of income, TDS ensures regular tax collection and reduces tax evasion. The deducted amount is deposited with the government and reflected in Form 26AS of the payee.
How TDS Works
1
Payer deducts TDS at prescribed rate before making payment
2
Payer deposits TDS with government (Challan 281)
3
Payer files quarterly TDS return (Form 24Q/26Q)
4
TDS credit appears in payee's Form 26AS
TDS on Salary (Section 192) — New vs Old Regime
Employers calculate TDS on salary based on the employee's chosen tax regime and estimated annual income. The tax is deducted equally each month. Employees can switch regimes each year.
| Income Slab | Old Regime Rate | New Regime Rate (FY 2025-26) |
|---|---|---|
| Up to ₹2,50,000 | Nil | Nil |
| ₹2,50,001 - ₹4,00,000 | 5% | Nil |
| ₹4,00,001 - ₹5,00,000 | 5% | 5% |
| ₹5,00,001 - ₹7,50,000 | 20% | 10% |
| ₹7,50,001 - ₹10,00,000 | 20% | 15% |
| ₹10,00,001 - ₹12,00,000 | 30% | 15% |
| ₹12,00,001 - ₹12,75,000 | 30% | 20% |
| ₹12,75,001 - ₹15,00,000 | 30% | 20% |
| Above ₹15,00,000 | 30% | 30% |
Important TDS Deadlines
- TDS Deposit: 7th of the following month (30th April for March)
- TDS Return Filing (Q1): 31st July | Q2: 31st October | Q3: 31st January | Q4: 31st May
- Form 16 Issuance: 15th June (by employer to employee)
- Form 16A Issuance: 15 days after TDS return due date