Lesson 1 of 3 · 6 min
Tax you never saw leave
TDS is tax withheld by whoever pays you and deposited against your PAN. It is an advance on your bill, never the bill itself — filing is where the two meet.
TDS — tax deducted at source — means the person paying you holds back a slice and deposits it with the government against your PAN. Your employer does it on salary, your bank does it on deposit interest, clients do it on freelance fees.
The money is not gone. It sits as a credit in your name, waiting to be counted when you file.
TDS you are likely to meet first, tax year 2026-27
- Bank deposit interest — rate
- 10%
- Bank deposit interest — deducted only above
- ₹50,000 a year
- Selling a Virtual Digital Asset (crypto, NFTs)
- 1%
Under section 194A (now section 393), where your PAN is on file. Without a PAN it doubles.
₹1,00,000 for senior citizens.
Deducted on the sale value under section 194S (now section 393).
Myth
“TDS was deducted, so my tax for the year is settled.”
False
TDS is a prepayment at a flat rate the deductor applies, not your final bill. The real bill is computed when you file, at your slab. If your slab rate is higher than the TDS rate you owe the difference; if it is lower — or the rebate makes your tax nil — the excess comes back as a refund. Either way, the return is where it gets squared up.
The bank already took the tax. Why am I doing this again?
KabirTara
Kabirasking
My bank cut tax on my interest before the money reached me. Why does the department want me to work the same thing out a second time?
Taraexplaining
Because the bank does not know you. It applies one flat rate to every customer. Your actual rate depends on your whole year's income, and only your return can see that.
Kabirasking
So the bank's cut is a guess.
Taraexplaining
A deposit, not a guess. It sits under your PAN as a credit with your name on it. Filing is the moment that credit meets the real bill.
Kabirasking
And if the credit is bigger than the bill?
Taraexplaining
The difference comes back as a refund. That is why people who earn too little to owe anything still file — otherwise their own money stays parked with the government, unclaimed.
Quick check
Your bank deducted 10% TDS on ₹60,000 of deposit interest, but your income puts you in the 20% slab. What happens at filing?
Check yourself
1 / 3
Kabir asks
What is TDS, in one line?
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