TDS Calculator
Comprehensive Guide to Tax Deducted at Source (TDS) in India
Tax Deducted at Source (TDS) is a fundamental direct tax collection mechanism governed by the Central Board of Direct Taxes (CBDT) under the Income Tax Act, 1961. Under the TDS framework, any entity or person (known as the Deductor) making specified payments—such as salary, professional fees, contractor payments, rent, interest, or commission—is legally obligated to deduct a prescribed percentage of tax before remitting the net amount to the payee (Deductee).
How the TDS Formula Works
Calculating TDS requires applying the specific section's tax rate to the gross invoice or payment amount:
TDS Tax Component = (Gross Invoice Amount × TDS Rate %) / 100Net Payable Amount = Gross Invoice Amount - TDS Tax Component
Major TDS Sections, Thresholds & Applicable Tax Rates
- Section 194C (Contractor Payments): 1% for Individuals/HUF payees; 2% for Companies/Firms. Threshold: Single payment > ₹30,000 or aggregate annual payment > ₹100,000.
- Section 194J (Professional & Technical Services): 10% for professional fees, legal advice, or royalty; 2% for technical services, call center operations, or equipment hire. Threshold: > ₹30,000 per financial year.
- Section 194I (Rent Payments): 2% for plant, machinery, or equipment rental; 10% for land, building, or furniture rental. Threshold: > ₹240,000 per financial year.
- Section 194A (Interest other than Securities): 10% on bank FD/RD interest exceeding ₹40,000 (₹50,000 for Senior Citizens).
- Section 206AA (Higher Tax for Missing PAN): If the payee fails to furnish a valid PAN card, TDS is mandatorily deducted at 20% (or the higher specified rate).
Step-by-Step Practical Calculation Example
Scenario: A private firm receives a professional service invoice of ₹150,000 under Section 194J (10% TDS rate).
- Gross Invoice Value: ₹150,000
- Applicable TDS Rate: 10%
- TDS Deducted Amount: (150,000 × 10) / 100 = ₹15,000
- Net Payment Deposited to Contractor: ₹135,000
- Compliance Step: The firm deposits ₹15,000 to the Central Government via Challan 281 and issues Form 16A.
How to Verify TDS Credits via Form 26AS & AIS
Deductors deposit collected TDS into government accounts on a quarterly basis. Payees can verify that TDS has been credited to their PAN card by logging into the Income Tax e-Filing portal and downloading their Form 26AS and Annual Information Statement (AIS).
Frequently Asked Questions (FAQs)
Can I claim a refund if excess TDS was deducted?
Yes. If your total annual tax liability calculated during Income Tax Return (ITR) filing is less than the total TDS deducted across your payments, the Income Tax Department will refund the excess amount directly to your validated bank account with interest.
What is Form 15G and Form 15H?
Form 15G (for individuals below 60) and Form 15H (for senior citizens) are self-declaration forms submitted to banks to prevent TDS deduction on fixed deposit interest if your total estimated annual income is below the basic tax exemption limit.
What is the difference between Form 16 and Form 16A?
Form 16 is an annual TDS certificate issued by employers for salary income. Form 16A is a quarterly TDS certificate issued for non-salary payments (professional fees, interest, rent, contractor fees).