Understanding TDS: Tax Deducted at Source
TDS, or Tax Deducted at Source, is a mechanism used by tax authorities to ensure the collection of income tax at the source of income itself. This system requires payers to withhold a portion of certain payments, such as salaries, rent, interest, commission, or contractor fees, and remit it directly to the government.
For instance, as a small business owner, when you pay salaries to your employees, you deduct a specific percentage of tax from their salaries before disbursing the payment. This deducted amount is then paid to the government on behalf of your employees. Similarly, if you rent out property, you deduct TDS from the rent amount before paying it to the landlord.
The main goal of TDS is to ensure timely tax collection as income is earned, rather than waiting until the end of the financial year for individuals to file their tax returns. This helps in efficient tax collection and reduces the chances of tax evasion.
TDS Rate Chart for FY 2024-25 (AY 2025-26)
| Section | Nature of Payment | Threshold | TDS Rate (with PAN) | TDS Rate (without PAN) |
| 194C | Payments to Contractors and Subcontractors, Advertising | Single payment > Rs. 30,000 or Aggregate > Rs. 1,00,000 | 1% (Individual/HUF) 2% (Others) | 5% (Individual/HUF) 20% (Others) |
| 194-I (a) | Rent on Land, Building, Furniture & Fittings | Rs. 2,40,000 per annum | 10% | 20% |
| 194-I (b) | Rent on Plant & Machinery | Rs. 2,40,000 per annum | 2% | 20% |
| 194J | Professional/Technical Fees | Rs. 30,000 | 10% | 20% |
| 194H | Commission/Brokerage (other than lottery) | Rs. 15,000 | 5% | 20% |
| 194Q | Payments for the purchase of goods | Rs. 50,00,000 | 0.1% | 5% |
| 192 | Salary | As per income tax slabs | Slab Rates | Slab Rates |
| 192A | Premature withdrawal of PF | Rs. 50,000 | 10% | 20% (Usually higher) |
| 193 | Interest on Securities | Bonds – 10,000 Other Securities – No Limit | 10% | 20% |
| 194 | Dividends | Rs. 5000 | 10% | 20% |
| 194A | Interest (other than on securities) | Rs. 40,000 Rs. 50,000 for senior citizens Rs. 5,000 from friends/relatives | 10% | 20% |
| 194B | Winnings from lottery, games, etc. | Rs. 10,000 | 30% | 30% |
| 194BA | Income from online games | Nil | 30% | 30% |
| 194BB | Winnings from horse races | Rs. 10,000 | 30% | 30% |
| 194D | Insurance Commission | Rs. 20,000 | Individuals – 5% Companies – 10% | 20% |
| 194E | Payment to non-resident sportsmen/sports association | No threshold | 20% | 20% |
| 194EE | Payments in respect of deposits under NSS | Rs. 2500 | 10% | 20% |
| 194F | Payment for the repurchase of the unit by Unit Trust of India (UTI) or a Mutual Fund | No threshold | 20% | 20% |
| 194G | Commission/brokerage on lotteries | Rs. 15,000 | 5% | 20% |
| 194IA | Sale of Immovable Property | Rs. 50,00,000 | 1% | 20% |
| 194IB | Rent payment that is made by an individual or HUF not covered under payment 194I (No Business/No Audit Cases) | 50,000 per month | 5% | 20% |
| 194IC | Payment under Joint Development Agreements (JDA) to Individual/HUF | No threshold | 10% | 20% |
| 194K | Payment of dividends by mutual Funds | Rs. 5000 | 10% | 20% |
| 194LA | Compensation on acquisition of certain immovable property | Rs. 2,50,000 | 10% | 20% |
| 194M | Certain payments by Individuals/HUF where they are not liable to deduct TDS under Sections 194C, 194H, and 194J | Rs. 50,00,000 | 5% | 20% |
| 194N | In case cash withdrawal over a certain amount takes place from the bank | ITR Filers – Rs. 1 Crore ITR Non-Filers – Rs. 20,00,000 | 2% | 20% |
| 194-O | Amount paid for the sale of products/services by e-commerce service providers via their digital platform | Rs. 5,00,000 | 1% | 5% |
| 194R | Benefits/perquisites from business or profession | Rs. 20,000 | 10% | 20% |
| 194S | Payment for transfer of Virtual Digital Assets | Rs. 10,000 (specified person) Rs. 50,000 (others) | 1% | 1% |
Note – Above chart covers most popular TDS rates for domestic transactions. For detailed list, kindly download TDS rate PDF attached below
Attached – TDS & TCS rate chart AY 24-25