What is TDS and how does it work?

Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act where tax is collected at the time a payment is made rather than at the end of the year. The payer (deductor) withholds tax at a prescribed rate and deposits it with the government, while the payee (deductee) receives the net amount and claims credit for the TDS in their return.

Each type of payment is governed by its own section with a specific rate and a threshold limit below which no deduction is required. This calculator lets you pick the section, enter the gross payment and instantly see the TDS rate, TDS amount and net payment.

How to use this TDS calculator

Select the TDS section that matches the nature of payment (for example 194J for professional fees or 194I for rent). Enter the gross payment amount, then keep "PAN available" checked if the payee has furnished a valid PAN. The calculator shows the applicable rate, the TDS to deduct, the net payment and whether the amount crosses the section threshold. If the payment is below the threshold, it tells you that no TDS is required.

Common TDS sections explained

• Section 194C — payments to contractors and sub-contractors. 1% for individuals/HUF and 2% for others.
• Section 194J — professional fees at 10% and technical services at 2%.
• Section 194I — rent: 10% on land and building, 2% on plant and machinery.
• Section 194H — commission and brokerage at 2%.
• Section 194A — interest other than on securities (such as fixed deposit interest) at 10%.

The no-PAN 20% rule and thresholds

Under Section 206AA, if the payee does not provide a valid PAN, TDS must be deducted at the higher of the section rate or 20%. In practice this means a flat 20% on most payments where the PAN is missing. Always collect the PAN before making payment to avoid over-deduction and reconciliation issues.

TDS is only deducted once the payment crosses the section threshold. Below the threshold, no TDS is required. Note that for contractor payments under 194C there is both a per-payment threshold and a higher annual aggregate threshold.

TDS due dates and CA firm use

TDS deducted in a month must generally be deposited by the 7th of the following month (with the March deduction deposited by 30 April). Quarterly TDS returns such as Form 26Q are then filed, after which TDS certificates (Form 16A) are issued to deductees. Missing these dates attracts interest and late fees.

For CA firms and chartered accountants, getting the rate, threshold and PAN status right is essential when advising clients, processing vendor payments and preparing TDS returns. Use this free tool to verify deductions for your clients before payments go out and to cross-check entries while filing.

TDS rate chart (FY 2025-26)