What TDS is, why it exists, and how it shows up in Form 26AS and AIS

If you have ever received a salary slip, a bank interest credit, or a freelance payment from a company, you have probably seen a line that says 'TDS deducted'. Tax Deducted at Source (TDS) is India's way of collecting tax in advance, at the moment income is paid, rather than waiting for you to file your return months later.

Why TDS exists

The Income Tax Act requires the person paying you — your employer, your client, your bank — to withhold a percentage of your income and deposit it with the government on your behalf. This serves three purposes:

• Cash flow for the government: tax flows in throughout the year, not in one April–July rush.
• Compliance: the payer reports the deduction to the Income Tax Department, so there is a third-party record of your income.
• Convenience for you: when you file your ITR, you get credit for every rupee already deducted; often your refund is the difference between TDS paid and actual liability.

Common scenarios where TDS applies

TDS is deducted under dozens of sections of the Income Tax Act. The most common ones an individual sees are:

Every section has a threshold below which no TDS is deducted. For example, bank interest below ₹40,000 in a year (₹50,000 for senior citizens) is not subject to TDS under 194A.

How TDS shows up: Form 26AS and AIS

Form 26AS is your consolidated tax statement. It lists all TDS deducted by anyone during the financial year, advance tax you paid, self-assessment tax, and tax refunds. Every deductor files a quarterly TDS return with the government, and those credits appear in your 26AS within weeks.

You can download Form 26AS from the Income Tax e-Filing portal (under 'My Account' → 'View Form 26AS') or from TRACES. It is structured by financial year and shows the deductor's name, TAN, the amount paid to you, and the tax deducted.

The Annual Information Statement (AIS) is a newer, broader view. It includes not just TDS but also information from banks (interest, deposits), mutual funds, property transactions, foreign remittances, and more. AIS is your single window into what the department already knows about your finances. You can view and download it from the e-Filing portal under 'Services' → 'Annual Information Statement (AIS)'.

What you must do when you file your ITR

When filling your income tax return, you report every source of income and the tax already deducted on it. The ITR form has a section called 'Taxes Paid' where you enter TDS, advance tax, self-assessment tax and TCS. The figures you enter should match Form 26AS and AIS exactly.

If your total tax liability for the year is less than the TDS already deducted, you get a refund. If your liability is more, you pay the difference as self-assessment tax before filing. Either way, TDS is always a credit — it is your money, paid in advance.

TDS is not an extra tax. It is advance payment of the tax you already owe. Your actual liability is determined by your slab and total income; TDS just moves the payment upstream.

Key takeaways

• TDS is tax collected in advance by the payer, on behalf of the government, at the time of payment.
• It covers salary, interest, professional fees, rent, commission, and many other payment types.
• Every TDS deduction is reported in Form 26AS and the Annual Information Statement (AIS).
• When you file your ITR, you claim credit for all TDS; any excess is refunded, any shortfall you must pay.
• Always reconcile 26AS and AIS with your own records before filing — mismatches cause processing delays.

Official sources

This explainer is based on official and primary sources. Always confirm figures and dates on these before acting:

• Income Tax e-Filing portal
• Income Tax Department — incometax.gov.in
• Central Board of Direct Taxes (CBDT), Department of Revenue
• Income Tax Act & Rules — incometaxindia.gov.in

Reviewed: October 2026. Tax rules change — verify the current financial year and assessment year before you rely on any figure.

This is general educational information for Indian taxpayers, not personalised tax, legal or financial advice. Union of Taxpayers is an independent platform and not a government body. Consider a qualified professional for your specific situation.