Find out about the different sources of income that invite TDS and how you can reduce your tax outgo

The tax deducted at source, or TDS, is applicable on earnings from various financial instruments. Here's a guide to help you know when TDS is applicable.

When is tax deducted at source?

There is no uniform rate for TDS. It can range from 1% for sale proceeds from selling a house, to 30% for winnings from a horse race. Here's a look at how much TDS is cut from your earnings.

Salary

At the beginning of the financial year, or when you join a new organisation, your employer will ask you to fill an investment declaration form. This will include the maximum tax deductions allowed under Sections 80C, 80D and other tax-saving instruments. If, despite all these deductions, your salary is above the exemption limit, TDS will be cut from it every month.

Lottery winnings

Money won in a lottery, puzzle competition or a horse race is subject to the high est TDS rate of 30%. The TDS is applicable even on non-cash winnings.

Bank accounts

If the interest you have earned from your bank FD is above 10,000, you will receive it after the bank deducts tax. This ex emption limit also applies to interest earned from a bank savings account.

Property

Whether it is rental income or the money that you get after selling a house, you will receive the final amount only after tax is deducted. However, you can avail of exemptions in both cases.

Superannuation fund and debentures

If you withdraw money from a superannuation fund, it is added to the income and if your income is above the taxable limit, TDS will be applicable. In the case of debentures, interest income up to 2,500 is exempt from tax deduction.

Gold and silver

The finance minister recently announced that from July onwards, cash used to buy gold and silver jewellery worth more than 5 lakh will have to pay taxes upfront.

How to save on TDS

No TDS is applicable on the interest earned from a recurring deposit. However, once you receive the maturity amount, it will be added to your income and you will have to pay tax on it. If your income is below the taxable limit, but the interest earned from your deposits is above 10,000, you can submit form 15 G/H to the bank at the beginning of the financial year to not cut TDS.

What to watch out for

When you file your return, calculate the total income and the tax bracket you fall under, to determine the balance tax to be paid. If your income is taxable, you will have to pay the differential tax. Don't think you can avoid paying taxes by not declaring your permanent account number. All the taxes that are cut on your behalf by a bank, an individual or an organisation are listed in Form 26 AS, which is also called the annual tax statement.