TDS Rates
TDS is also known as a ‘Spot Tax’ that is deducted from the Gross income earned. It is a part of the indirect tax section of the Income Tax Act 1961. TDS rates applicable are categorized under different subsections and sections between 1- 30%.
It implies on the income received from the financial products like:
- Interest received on incentives from employer
- Commission payments
- Fixed deposits
- Sale or purchase or rent received on any immovable property
- Dividend on bonds
- Money earned as lottery or awards.
There are also other indirect taxes such as service tax, where TDS Collected before the release of payment. The regulation of TDS rates and its collection done by the Central board of Direct Taxes.
| Income Tax Section | Thresold Limit | TDS rates |
Section 192
| As per applicable Income Tax Slab | As per the income tax slab rate
|
Section 193
| Rs 5000 for Debenture payment | 10% of interest earned on security investments.
|
Section 194
| Rs 2500
| 10% of proceeds from any deemed dividends |
Section 194A
| Rs 10,000 | 10% of proceeds from investments earned other than securities.
|
Section 194 B
| Rs 10,000 | 30% prize money earned from lottery or and any winning in gaming.
|
| Section 194BB | Rs 10,000 | 30% of prize money from horse racing.
|
Section 194C
| Rs 30,000 which is for each contract whereas Rs 100,000 for per annum | Proceeds from any contracts or sub contracts
Individual or HUFs @1% Non individual/ corporate @2%
|
| Section 194D | Rs 15000 | 5% of earnings as insurance commissions |
| Section 194EE | Rs 2500 | 20% of expense in NSS Deposits
|
| Section 194F | NIL | 20% of investment on Mutual funds and UTIs
|
Section 194G
| Rs 15000 | 5% of brokerage earnings.
|
| Section194H | Rs 15000 | 2% of rental amount on plant and machinery
|
Section 194I
| Rs 180,000 | 10% of rent on land and building
|
Section 194 J
| Rs 30,000 per annum
| 10% on technical and professional services
|
| Section 194LA | Rs 250,000 Per annum | 10% on transfer money paid to any resident while acquiring immovable property.
|
Rationale behind TDS Deductions
TDS applies to the income or overheads that comes in the form of incentives over and above the salary. It could be interest earned on fixed deposits, rent payment, commission payment or lotteries.
If you are making payment in any of the categories mentioned above, a fixed TDS rate is applied, and tax liability is deducted before making the payment. In case extra deduction done than the required tax amount, in that case, the taxpayer will be eligible for a TDS refund, if you file your TDS return.
The person or a source who is making TDS deduction is referred to as “Deductor/ employer”. The person to who the payment is being given is termed as “Deductee/ employee”.
Employer after TDS deduction is accountable to give Form 16/ 16 A i.e. TDS certificate to the employee. TDS certificate gives the computation of the tax deducted amount. No TDS certificate in case of nil tax holding such as those payments which are exempted.
TDS deduction exemptions
Cases in which there is TDS exemptions are as follows:
- TDS is not levied on payments in favor of RBI or any other recompense made to the Central Government.
- Banking companies
- Refund given by the Income Tax
- Direct taxes levied on Interest Payments
- LIC, UTI, and investments in co-operative societies
- Interest earned on Indira Vikas Patra (IVP), NSC or KVP
- Institutions notified as NIL TDS organizations
- Financial corporations formed under the finance bill of union government or any state
- Interest earned on NRE account
- Interests earned on recurring deposit or any savings account held with any commercial banks or cooperative societies.
- Apart from the above, TDS might not be pertinent to various other avenues as well. For instance, an interest that is earned on the compensation granted from Motor Vehicles Claims Tribunal.
TDS Deductions on Fixed Deposit Earnings
For Fixed deposits, TDS applies to the payee when he/she earns Rs. 10,000 as an interest in a financial year. If the payee is furnishing PAN details then are liable to pay 10% on the interest earned through fixed deposits, else they need to pay 20% for not providing PAN Details.
Senior Citizens (60 years or older) are exempted from a limit of Rs. 50,000, earlier it was Rs. 10,000.
| - Interest calculated and applied beyond a threshold limit.
- The Current applicable limit is Rs 10,000 in a financial year.
- Increased almost Rs 40,000 on an annual basis from the Financial year 2019-20.
- In case individual is getting interest more than the threshold limit on fixed deposits, in that case, either consolidated or single interest for all fixed deposits held with the same PAN Number, TDS applies at the rate of 10% from interest payout and maturity proceeds whichever happens earlier.
Let’s understand with an example Sunil is holding a Fixed Deposit of Rs. 15 Lakh booked for 1-year term & rate of interest is 10% p.a. He would earn ₹ 150,000 as interest on maturity after 1 year. The bank in such a case will deduct TDS @ 10% of ₹ 150,000 i.e. ₹ 15,000 and deposits the TDS amount with Income Tax Department on the behalf of customer Mr. Sunil. In return, Sunil would receive a TDS certificate, which is generally referred to as Form 16A in taxation terms.
|
| TDS Rate on sale of immovable property | - As per Section 194-IA in the Income Tax Provisions, the TDS rate 1% applies to the sale of any immovable property.
- In case, if the buyer fails in furnishing PAN card, the TDS rate might be levied at a higher rate which is up to 20% (maximum limit).
- The transferee (buyer) of the property has a right to make a TDS deduction before paying the amount to the transferor (seller) who is making the sale of the property.
- Immovable property includes commercial or residential buildings, plots excluding the notified agricultural land or any other portion of the building.
- The transaction can be made via cheque cash or draft by the transferee.
|
TDS Rate on rent of immovable property | - Resident individual or HUF member, paying rent on any immovable property to the resident landlord is accountable for withholding TDS.
- TDS would be applicable at the 10% TDS rate only in cases where the annual rent amount is more than Rs 180,000 in a single financial year.
- Rent can be in any form of the sublease, lease rental or other valid agreement by making use of fittings, furniture, land or building.
- The owner of the property is also eligible to give a valid rent receipt on every payment, which mentions about TDS deduction.
- In the financial year-end, renter(lessee) should also provide Form 16(TDS certificate) to the lesser(landlord) for all the TDS amount deducted and paid to the tax authorities for that same financial year.
- The transaction can be done using any mode that cheque, cash or draft by the transferee.
|
| TDS rate on purchase of immovable property | - The purchase of immovable property means the exchange of money takes place between the buyer and the owner. TDS rate 1% applicable for the same.
- In the case of agricultural land, it does not fall under the provision of TDS.
- The transferee makes the transaction via cheque or cash or draft or other agreed payment modes.
|
TDS Rate on transfer of immovable property in case of NRI | According to Section 195 of the Income Tax Act, provision for TDS for NRI on immovable property is explained . Under this, buyer who is paying to Non- Resident individual is liable for making TDS deduction as per the applicable rates. Capital gains received after making the sale of immovable property by an NRI is subjected to Income Tax. The transaction can be made via cheque cash or
draft by the transferee.
|
| TDS rate on under-construction immovable property | For all the under-construction properties whose net worth estimated is more than Rs 50 Lakhs, TDS applicable on the installments paid. The transaction can be made via cheque cash or draft by the transferee.
|
| TDS when makes an EPF Withdrawal | TDS applies to withdrawal of EPF in case an employee withdraws his or her PF amount Rs 50,000 or above before completing its continuous 5 years services. - 10% is applicable in case Form-15G/15H is not submitted. However, PAN details are being given.
- 34.608% or maximum marginal rate if the employee is unable to provide PAN number.
|
TDS Rates on insurance commission Since June 2016, exemption limit for TDS on insurance commission set as Rs 15000. Section 194D deals with the provisions and responsibilities of any person who is authorized to make payment in the form of rewards or remuneration to the resident.
| Other Forms of commissions charged at different rates mentioned below:
Section 194 G– Commission, etc., on sale of lottery tickets. Charged at the rate of 5%. Section 194 H- Commission or brokerage. Charged @ of 5%. Section194J- Remuneration/fee/commission to a director. Charged at the rate of 10%
|
TDS Rates on Income from services As per Section 194J, any person is liable for deducting TDS mentioned below except individual or HUF: - Fee or professional services
- Fee for technical services
- Royalty
- Renumeration or fee paid to director
| Rates applicable if payee furnishes PAN Card TDS rate charged will be 10%
Case of not having a PAN Card - Rates in force, i.e., the rate prescribed in the Finance Act
- At the rate of 20%
- At the rate specified in the relevant provision of the Income-tax Act
|
TDS Rates on interest income Section 194 A deals with the provision related to TDS on interest income earned on recurring or fixed deposits. Each payer who is paying interest is liable to make a TDS deduction when the interest income exceeds more than Rs 10,000 in the case of bank and Rs 5000 in other cases.
| Under section 194A rate of TDS is - 10%, if the payee possesses PAN
- If the payee does not have PAN, he/she is liable to pay 20%
|
TDS Rates on Contracts Section 194 C is applicable when any payment is made to contractor/sub-contractor for any work which includes- - Advertising contract
- Telecasting and broadcasting including the production of such programs
- Carriage of passengers and goods by any mode of transport (exception: Railways)
- Catering services
- Supplying or manufacturing a product as per the requirement or the specification of a customer by using the materials that are supplied by such customer.
- Supply of labor for works contract
| The Rate of TDS applicable to contracts under section 194 C is 1% for Residential Individuals and HUF. However, residents other than individual or HUF are liable to pay 2%. Payee not possessing PAN card will be liable to pay at the rate of 20%.
|
TDS on Salary
As per Section 192, the employer is eligible to make a TDS deduction from the estimated income of an employee. There is no TDS deduction in case the salary of an employee is under the threshold limit that is less than Rs 250,000 in the given financial year. TDS on salary is deducted based on the average rate of Income Tax of the taxpayer in the financial year.
However, exceeding above the minimum limit, TDS will be charged at the rate of 20%, if PAN is not possessed by the employee.
TDS rate on Salaried individuals
| Serial No. | Taxable Income | TDS rates | Applicable Section |
| 1 | Up to Rs 2.5 Lakhs | NIL | Section 192 |
| 2 | 2.5 Lakhs to 5 Lakhs | 5% | Section 192
|
| 3 | 5 Lakhs to 10 Lakhs | 10% | Section 192
|
| 4 | Above 10 Lakhs | 20% | Section 192
|
TDS Rates for Senior citizen
| Serial No. | Taxable income | TDS Rates |
| 1 | Up to 3 Lakhs | NIL |
| 2 | 3 Lakhs to 5 Lakhs | 5% |
| 3 | 5 Lakhs to 10 Lakhs | 20% |
| 4 | Above 10 Lakhs | 30% |
TDS rates for Super Senior Citizens
| Serial No. | Taxable income | TDS Rates |
| 1 | Up to 5 Lakhs | NIL |
| 2. | 5 Lakhs to 10 Lakhs |
20%
|
| 3 | Above 10 Lakhs
| 30% |
Understand the process of TDS Calculations
| Nature of Payment | TDS Rates | Applicable Section |
Salary Payment
| Regular Slab rate
| Section 192 |
Interest earned on securities
| @10%
| Section 193
|
Dividend accrued (apart from the dividend as mentioned in the Section 115-O
| @10% (20%, in case of invalid PAN No.
| Section 194 |
Income earned other than securities.
| @10%
| Section 194A |
| Income earned on the prize of money, lotteries, games or crosswords | @30%
| Section 194B |
Commission payment for insurance agents.
| @ 5% (20%, in case of invalid /no PAN)
| Section 194D |
Premium paid for any Life Insurance policy
| @1%
| Section 194DA |
Rental Income
| For plant and machinery @2% Land, furniture, fitting and furniture @10% | Section 194I |
Payment is done after transfer of any immovable property exclusive of agricultural land.
| @1% | Section 194IA |
TDS rates for Non- Resident Indians
| Nature of Payment | TDS Rates | Applicable Section |
Salary Payment
| Normal slab rate | Section 192
|
Payment of accrued fund balance
| @10% | Section 192A
|
Income from Prize money on lotteries, card games, crossword Puzzles or games within the ambit of Indian Law
| @30% | Section 194B
|
Income due to prize money in horse racing
| @30% | Section 194BB
|
Deposit made under the National Saving Scheme
| @10% | Section 194EE
|
Investment in any Mutual Funds or UTI Bonds
| @20% | Section 194F
|
Commission money earned for selling lottery tickets
| @5% | Section 194G |
