# How TDS Works: Tax Deducted at Source by Section

> TDS rates differ by payment type and section. Here's how Tax Deducted at Source works and how to find the net amount payable.

- URL: https://www.pyalm.com/blog/tds-calculator-guide
- Author: Fadhil Abdulla
- Category: Free Tools
- Published: 2026-06-21
- Updated: 2026-06-21

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## What is TDS?

Tax Deducted at Source (TDS) means the payer withholds a percentage of certain payments and deposits it with the government on the recipient's behalf. The recipient later claims it against their total tax liability.

## Rates depend on the section

Each payment type falls under a different section of the Income Tax Act, each with its own rate and threshold — for example, professional fees, contractor payments, rent, and commission are all treated differently. The [TDS Calculator](https://www.pyalm.com/free-tools/tds-calculator) lets you pick the section so the correct rate applies.

## The calculation

It's straightforward once you have the rate:

- **TDS** = gross amount × section rate
- **Net payment** = gross amount − TDS

For instance, on professional fees of ₹1,00,000 at 10%, you deduct ₹10,000 and pay the vendor ₹90,000.

## Why getting the section right matters

Deduct too little and you risk interest and disallowance; deduct too much and you tie up the vendor's cash until they claim a refund. Selecting the right section avoids both.

## How to use it

1. Choose the relevant TDS section.
2. Enter the gross amount.
3. The tool shows the TDS to deduct and the net payable.

[Open the TDS Calculator](https://www.pyalm.com/free-tools/tds-calculator) | [More free finance tools](https://www.pyalm.com/free-tools)