TDS (Tax Deducted at Source)
Legally reviewed by Advocate Naresh Kalra -- see full credentials -- reviewer credit only, no consultation link, per platform editorial policy (see /editorial-guidelines/).
TDS (Tax Deducted at Source) is a mechanism under Indian tax law where the payer deducts tax at the prescribed rate before making certain payments -- rent, interest, or sale proceeds from property, among others -- and deposits it with the government on the payee's behalf, with the deducted amount later credited against the payee's final tax liability when they file their return.
For NRIs, TDS matters most in two contexts: a buyer purchasing property from an NRI seller must deduct
TDS under Section 195 at a materially higher rate than the roughly 1% that applies to resident-seller
transactions, calculated on the full sale value unless the seller has obtained a lower or nil-TDS
certificate under Section 197; and any payer remitting rent, interest, or other income to an NRI similarly
deducts TDS before payment. The amount deducted appears in the NRI's Form 26AS and Annual Information
Statement (AIS), and can be claimed as credit against final tax liability when filing an Indian income tax
return -- filing a return is often the only way to recover TDS that was deducted on a gross amount rather
than the smaller actual taxable gain.
