Why Is TDS Deducted Even Though My Income Is Below the Taxable Limit?

If you're trying to avoid TDS in the future, the solution depends on the type of income and your status.

For eligible resident taxpayers, Forms 15G and 15H can be used in applicable cases to request non-deduction of TDS on specified income such as interest, provided the statutory conditions are satisfied. The Income Tax Department describes Form 15G for eligible resident individuals below 60 and Form 15H for resident individuals aged 60 or more.

However, don't assume these forms apply to everyone. In particular, NRIs should be careful because Forms 15G/15H have specific eligibility requirements.

There is also a mechanism for obtaining a lower or nil withholding certificate where the estimated total income justifies a lower rate or no deduction. Under the Income Tax Act, 2025, the corresponding provision is Section 395(1).

I had this happen with fixed-deposit interest.

The bank deducted TDS because the interest payment crossed the applicable TDS threshold, but after considering my overall income and eligible deductions, my final tax liability was lower than the TDS already deducted.

I filed my ITR and claimed the TDS credit. The excess amount was then claimed as a refund.

The important thing is that you should include the relevant income in your ITR and claim the TDS credit rather than simply ignoring the deduction.

The Income Tax Department confirms that excess tax paid can be claimed as a refund through the ITR, subject to processing and acceptance of the refund claim.

TDS and your final income-tax liability are not always the same thing.

TDS is generally deducted by the payer when a payment falls under a provision requiring tax to be withheld. The payer may not have the complete picture of your total income, deductions, exemptions, or other sources of income when making that particular payment.

For example, a bank may deduct TDS on interest even though your overall taxable income for the year eventually results in little or no tax payable.

So don't assume that the TDS itself means you necessarily owe that amount as final tax.

First check your Form 26AS and AIS, along with the relevant TDS certificate such as Form 16 or Form 16A. The Income Tax Department recommends using these records while preparing the return and claiming TDS credit.

One thing I'd recommend is checking your Form 26AS and Annual Information Statement (AIS) before filing.

I initially thought my bank had deducted too much TDS, but after downloading Form 26AS, I found that all the deductions had been correctly reported. Once I entered those details in my ITR, the refund calculation happened automatically.

If there's a mismatch between your TDS certificate and Form 26AS, it's worth resolving that first because it can affect the refund amount.

My case involved rental income instead of bank interest.

The tenant deducted TDS before paying my monthly rent because that's what the law required. When I calculated my total income at the end of the financial year, my actual tax liability was much lower than the TDS already deducted.

After filing my Income Tax Return and completing e-verification, I received the balance as a refund. From my experience, TDS is like an advance tax payment—it doesn't always mean you actually owe that much tax.