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As the deadline for Income Tax Return (ITR) filing in 2025 approaches, understanding Tax Deducted at Source (TDS) becomes essential for every taxpayer. Whether you're a salaried employee, a freelancer, or a business owner, TDS impacts your earnings — and knowing how it works can save you from legal trouble and ensure you're not overpaying taxes.

In this article, we break down what TDS is, when it applies, and what rules you need to follow to stay compliant with the Indian tax system.

What Is TDS?

Tax Deducted at Source (TDS) is a mechanism by which the government collects tax at the point where income is generated, rather than at a later stage. It applies to a wide range of financial transactions such as salary, rent, interest, commission, professional fees, and property purchases.

Here’s how it works: when a person or organization makes a payment above a certain threshold, they are legally required to deduct a portion of the amount as tax and deposit it directly with the Income Tax Department. This deducted amount is then reflected in the payee’s tax account and can be adjusted while filing ITR.

When Is TDS Applicable?

TDS isn't limited to salaries — it’s relevant in several scenarios:

• Salary Payments – Section 192

• Interest Earned on Deposits – Section 194A

• Rent Payments – Section 194I

• Professional Fees – Section 194J

• Commission or Brokerage – Section 194H

• Sale or Purchase of Property – Section 194IA

• Dividend Income – Section 194

For salary payments, the employer issues Form 16, which details the amount of tax deducted. For non-salary payments, such as professional fees or rent, Form 16A is provided.

Where to Check TDS Details?

Taxpayers can easily view their TDS deductions by logging into the Income Tax portal and checking either:

• Form 26AS – A consolidated annual tax statement

• Annual Information Statement (AIS) – A detailed record of all financial transactions

When filing your ITR, you can adjust your total tax liability against the TDS already deducted during the year.

TDS Filing: What the Deductor Must Know

It is mandatory for the person or entity deducting TDS to file TDS returns every quarter. The forms used for this include:

• Form 24Q – For salary payments

• Form 26Q – For non-salary transactions

Failure to file these returns on time, or failure to deposit the deducted amount with the government, can result in penalties under Section 234E of the Income Tax Act. The fine can be ₹200 per day of delay, adding up quickly if ignored.

TDS Rates: What Percentage Is Deducted?

The TDS rate varies depending on the type of payment and the recipient's classification (individual, firm, etc.). For instance:

• Salaries are taxed based on your income tax slab.

• Rent payments to individuals may attract 10% TDS, while professional fees can be taxed at 10% or more.

• If the payee does not provide their PAN, TDS is deducted at a much higher rate — often 20% or more, to ensure compliance.

Understanding how TDS works is not just a technical necessity — it’s a financial safeguard. Knowing when TDS applies, how to track it, and how to claim it during ITR filing ensures you don’t overpay taxes and helps you avoid costly penalties.

Whether you're an individual taxpayer or a business making payments, staying updated on TDS rules is crucial in today’s financial landscape. With the government tightening compliance measures, ignorance of TDS norms can lead to heavy fines and legal hassles.

So, before you hit "submit" on your ITR this year, double-check your TDS details — it could save you both money and stress.

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