TDS on Salary, Rent and FD: What's Cut and How to Get It Back

Most salaried Indians never "pay" income tax in a single lump sum. It leaks out of their pay slip, their bank interest and sometimes their rent cheque, month after month, under three letters: TDS. Tax Deducted at Source is simply the government collecting tax in advance, through whoever is paying you. The catch is that the cut is often more than you actually owe, and the only way that money comes back is if you ask for it. Here is how TDS on salary, rent and FD interest works in FY 2025-26, and the exact steps to reclaim what's yours.

TDS is an advance, not a final tax

Think of TDS as a deposit against your eventual tax bill. The payer (your employer, your bank, your tenant) withholds a slice, deposits it with the Income Tax Department against your PAN, and reports it. At the end of the year you add up all your income, work out your real tax, and settle the difference. If too much was withheld, you get a refund. If too little, you pay the balance.

The single most important habit is checking that every rupee deducted actually reached your account with the department. That record lives in two places: Form 26AS and the Annual Information Statement (AIS), both on the income tax e-filing portal. If a deduction is missing there, no refund can include it, however many certificates you hold.

How TDS on salary actually works

Salary TDS under Section 192 is the gentlest of the three, because it is calculated on your own slab rate rather than a flat percentage. Your employer estimates your full-year salary, subtracts the deductions you've declared, computes the tax at the applicable slabs plus 4% health and education cess, and spreads that tax evenly across twelve months.

That design means it largely self-corrects. Declare your rent receipts, 80C investments or home-loan interest (under the old regime) and the monthly cut drops. Forget to declare them and more gets withheld, which you then reclaim later.

A few things worth knowing for this year:

• The new tax regime is now the default. Under it, salaried income up to about ₹12.75 lakh is effectively tax-free for FY 2025-26, thanks to the rebate plus the ₹75,000 standard deduction. Many employees will see zero salary TDS as a result.
• If you want the old regime, with HRA, 80C and the rest, you must tell your employer early in the year.
• Your employer must hand you Form 16 by 15 June after the financial year ends. It is the master summary of your salary and the tax cut on it.

If you switched jobs, give the new employer details of your earlier salary. Otherwise both employers give you the basic exemption separately, too little TDS is cut, and you face a tax demand at filing time.

TDS on fixed deposit interest

This is where people get caught out, because the deduction feels invisible until they see it in the statement. Under Section 194A, a bank deducts TDS once the interest it pays you crosses a yearly threshold.

The Budget 2025 changes, effective from 1 April 2025, raised those thresholds:

• ₹50,000 a year for ordinary depositors (up from ₹40,000).
• ₹1,00,000 a year for senior citizens (up from ₹50,000), on bank, co-operative bank and post office deposits.

The rate is 10% if your PAN is on record, and a punishing 20% if it isn't, so make sure your bank has your correct PAN. One common myth: crossing the threshold doesn't mean your interest is suddenly taxable. Interest on fixed deposits is taxable from the first rupee at your slab rate. The threshold only decides when the bank starts withholding.

If your total income for the year is below the taxable limit, you can stop the deduction before it happens:

• Form 15G for residents under 60 with no tax liability.
• Form 15H for those 60 and above with no tax liability.

Submit these to each bank, ideally in April, and to every branch where you hold deposits. A word of caution that banks rarely spell out: if you do have taxable income, filing 15G or 15H is a false declaration. In that case, let the TDS happen and claim it back through your return instead.

When you, the tenant, must cut TDS on rent

Rent TDS surprises ordinary individuals more than any other. If you are a salaried tenant paying a high rent, the law may make you the tax collector.

Under Section 194-IB, any individual or HUF paying rent of more than ₹50,000 a month must deduct TDS on it. You don't need a TAN; your PAN is enough. The rate was halved to 2% with effect from 1 October 2024 (it was 5% before). You deduct it just once a year, on the last month's rent of the financial year or when you vacate, whichever comes first, applied to the whole year's rent.

The compliance steps are specific:

1. Deduct 2% on the annual rent in the final month.
2. Deposit it using Form 26QC, a challan-cum-statement, within 30 days from the end of the month in which you deducted.
3. Download and give your landlord Form 16C within 15 days of filing Form 26QC.

If your landlord hasn't given you their PAN, the rate jumps to 20% (capped at the last month's rent), so insist on it. Businesses and others fall under a separate provision, Section 194-I, where the annual threshold was raised to ₹6 lakh from FY 2025-26, with TDS at 10% on land and buildings.

The step-by-step way to claim your refund

A refund arises whenever the total TDS against your PAN exceeds your actual tax for the year. There is no separate "refund form". You claim it by filing your income tax return. Here is the clean sequence:

1. Wait for your records to update. TDS shows up in Form 26AS and the AIS only after the deductor files their quarterly return. Don't rush to file before your numbers settle, usually a few weeks into the new financial year.
2. Reconcile everything. Open Form 26AS and the AIS on the e-filing portal and tick off each deduction against your Form 16, Form 16C, FD interest certificates and bank statements. Flag anything missing and chase the deductor to correct it.
3. Pick the right ITR form for your income, and enter your income and all TDS. The portal pre-fills much of it; verify, don't blindly accept.
4. Enter a pre-validated bank account for the refund, and make sure your PAN is linked to it.
5. File and then e-verify within 30 days. An unverified return is treated as never filed, so no refund moves until you complete this, easiest via Aadhaar OTP.

For income earned in FY 2025-26 (assessment year 2026-27), the usual filing deadline for individuals is 31 July 2026. Note that last year the government extended the date to mid-September, so watch for any official extension rather than assuming one.

Once processed, refunds typically land within a few weeks to about 45 days. If the department holds your money beyond a point, it owes you interest under Section 244A, calculated at 0.5% a month. You can track progress under "Refund Status" on the portal or on the NSDL refund page using your PAN.

A simple routine that keeps TDS from biting

Treat TDS as a yearly cycle, not a once-at-filing scramble. Declare your investment proofs to your employer in April so salary TDS stays accurate. Hand your PAN to every bank and submit 15G or 15H only if you genuinely qualify. If you pay rent above ₹50,000, diarise the Form 26QC deadline so a 2% routine doesn't snowball into penalties.

Most importantly, reconcile Form 26AS and the AIS before you file. Because the tax rules around thresholds and dates change almost every Budget, confirm the current year's figures on the official portal before you act on a large deposit, a new tenancy or your return. Done right, TDS is just your tax paid in instalments, and the refund is money the system already owes you.