Explainer
TDS explained: why it isn’t your final tax
Tax deducted at source is an advance payment, not a final bill. How TDS works on deposits and dividends, and what to do about it when you file.
2 min read
Topic2 pieces · 6 terms
How investments are taxed
Tax is one input into an investment decision, not the reason for it. Knowing how gains, interest and dividends are taxed — and when tax is deducted at source — helps you compare options on what you actually keep.
Tax rules change, and the Income-tax Act, 2025 took effect on 1 April 2026. These pages are general education, dated when reviewed, and not tax advice — please speak with a qualified tax professional about your situation.
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Glossary
Key terms
The words you’ll meet most often in this topic, defined in a sentence. Each links to the full definition.
Capital gains
The profit made when you sell or redeem an investment for more than it cost; taxed as short- or long-term depending on how long you held it.
LTCG
Long-Term Capital Gains
Gains on assets held longer than a set period; for listed shares and equity-oriented funds, that currently means more than 12 months.
STCG
Short-Term Capital Gains
Gains on assets sold within a set holding period; for listed shares and equity-oriented funds, gains on holdings of 12 months or less.
TDS
Tax Deducted at Source
Tax withheld by the payer — an employer, bank or fund house — before paying you, and credited against your final tax for the year.
ELSS
Equity Linked Savings Scheme
An equity mutual fund with a three-year lock-in whose investments can qualify for a tax deduction under the old tax regime, within limits.
IDCW
Income Distribution cum Capital Withdrawal
A mutual fund option that pays out distributions from time to time; payouts can include part of your own capital, not just income.
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