TDS (tax deducted at source): meaning, sections and filing
TDS is income tax deducted by the payer at the time of payment. Under the Income-tax Act 2025, section 393 sets most rules; returns use Forms 138-144.
Short answer
TDS (tax deducted at source) is income tax that the payer deducts from certain payments, such as salary, fees, rent and contract payments, and deposits with the government on the payee's behalf. Under the Income-tax Act, 2025, section 392 covers salary and section 393 consolidates most other TDS provisions in a table setting the payment type, payer and threshold.
- Main provisions
- Sections 392 (salary) and 393 (others), Income-tax Act 2025
- Deposit
- Generally by the 7th of the next month; March by 30 April
- Quarterly statements
- Forms 138 (salary), 140 (residents), 144 (non-residents)
- Certificates
- Form 130 (salary), Form 131 (others)
How TDS works under the new Act
Section 393 is organised by payee type: residents, non-residents and any person, with each table entry listing the nature of payment, who must deduct and the threshold. Rates are generally the rates in force set by the Finance Act, so classification of a payment, for example as a contract versus professional services, decides the rate. Former 1961 Act sections such as 194C and 194J now map into this table. Lower or nil deduction certificates are covered by section 395, and TAN, higher deduction for non-PAN cases and filing of statements by section 397.
Compliance cycle
A deductor deducts tax at the time of payment or credit, whichever is earlier, deposits it through a challan, files quarterly statements and issues certificates. Under the Income-tax Rules, 2026, the quarterly statements are Form 138 for salary, Form 140 for other payments to residents and Form 144 for payments to non-residents, replacing Forms 24Q, 26Q and 27Q. Certificates are Form 130 for salary and Form 131 for other payments, replacing Forms 16 and 16A. Late deduction or deposit attracts interest, and late statements attract a fee and possible penalty.
Why it matters for startups
Missed TDS is one of the most common findings in startup due diligence, especially on rent, professional fees, foreign payments and contractor invoices. Expenses on which TDS was not deducted can also be disallowed. Map every vendor to the correct section 393 entry, deposit on time and reconcile with Form 168 every quarter.
Related services
Sources
- Taxmann: TDS and TCS under the Income-tax Act 2025
- Business Today: income-tax forms changing from 1 April 2026
- EZTax: Income-tax Act 1961 vs 2025 section mapping
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
What happened to sections 194C and 194J?
From 1 April 2026, these and most other TDS sections were consolidated into the table in section 393 of the Income-tax Act, 2025.
When is TDS for March deposited?
TDS deducted in March is generally due by 30 April; for other months, by the 7th of the following month.
What is the new form for Form 16?
Under the Income-tax Rules, 2026, the salary TDS certificate is Form 130, and the non-salary certificate is Form 131.