What is the meaning of 5% TDS?

A 5% tax deducted at source (TDS) refers to a tax rate of 5% that is deducted at the source of certain payments. In this case, the recipient of the payment is subject to tax, and the payer is responsible for deducting and remitting 5% of the total amount before the payment is made.

For example, if you receive ₹10,000 and the applicable TDS rate is 5%, the payer will deduct ₹500 (5% of ₹10,000) as TDS and pay the remaining ₹9,500 to you. The ₹500 deducted is submitted to the Income Tax Department. When you file your tax return, this TDS amount will be reflected, and you can claim it as tax already paid. If your total tax liability is lower than the TDS deducted, you may be eligible for a refund. Check the TDS percentage through a TDS calculator to make an informed decision.