TDS Meaning: What is Tax Deducted at Source, Rates & How to Claim Refund FY 2026-27

TDS (Tax Deducted at Source) is a mechanism where the payer deducts tax at the time of making payment and deposits it with the government on behalf of the recipient. It applies to salary, interest, rent, commission, professional fees, and many other payments. Understanding TDS helps you reconcile your tax credits and avoid surprises at the time of filing ITR.

What is TDS? Full Form and Meaning

TDS stands for Tax Deducted at Source. Under Sections 192 to 196D of the Income Tax Act, specified payments must have tax deducted before the money reaches the recipient. The deductor (employer/bank/company) deposits this tax to the government using Challan 281 and files a TDS return (Form 24Q/26Q/27Q).

The recipient receives the net amount after TDS and can claim the deducted tax as a credit against their total income tax liability when filing their ITR.

Common TDS Sections and Rates FY 2026-27

TDS on Salary – How It Works

Your employer deducts TDS on salary under Section 192 based on your estimated annual income and applicable tax slab. The employer calculates projected total income at the start of the year and distributes the TDS deduction across 12 months.

• You must declare investments and deductions to your employer (via Form 12BB) to reduce TDS
• Submit HRA proof, home loan certificate, LIC receipts, PPF passbook etc.
• The employer issues Form 16 by 15 June – your certificate of TDS on salary
• Form 16 has two parts: Part A (TDS summary) and Part B (income and deduction details)

How to Check Your TDS: Form 26AS and AIS

Form 26AS is your consolidated tax credit statement showing all TDS deducted and deposited by various deductors. The Annual Information Statement (AIS) is a more comprehensive statement showing all financial transactions including TDS, SFT, and other information.

To access Form 26AS / AIS:

1. Login to incometax.gov.in
2. Go to: e-File → Income Tax Returns → View AIS → download PDF or JSON
3. Also accessible via TRACES portal (tdscpc.gov.in)

TDS Mismatch – What to Do

If TDS in Form 26AS doesn’t match what your employer or bank deducted:

• Contact your employer/deductor to file a TDS correction return (Form 26QB rectification)
• The deductor must update their TDS return to reflect the correct amount
• After correction, Form 26AS will be updated within 7-10 working days
• Never claim TDS in ITR that is NOT reflecting in Form 26AS – it will lead to demand notice

How to Avoid TDS – Form 15G / 15H

If your total income is below the taxable limit, you can submit a self-declaration to prevent deductors from deducting TDS:

• Form 15G: For individuals below 60 years with income below the basic exemption limit
• Form 15H: For senior citizens (60+) with total income below taxable limit
• Submit to your bank at the start of each financial year
• Valid for one financial year only – must be renewed annually

How to Claim TDS Refund

If excess TDS has been deducted (more than your actual tax liability), you can claim it as a refund by:

1. Filing your ITR before the due date (31 July 2026 for AY 2026-27)
2. Entering all TDS details as per Form 26AS / AIS
3. The excess TDS will show as a refund due – link your bank account (pre-validated) for direct credit
4. Refunds are typically credited within 20-45 days of ITR processing