What is TDS?
Tax Deducted at Source (TDS) is a mechanism that has been introduced by the Income Tax Department. Under this, the responsible person is supposed to deduct a certain percentage of income as tax before making the payment to the receiver. The payment includes salary, commission, professional fees, interest, rent, etc.
Why Is TDS Deducted?
You may be
aware of TDS or Tax Deducted at Source, which is essentially a spot tax
deducted from your actual source of income. Overall, TDS is levied on any
income or overheads including:
- Salary
- Incentives (over and above your salary)
- Interests on bank FDs (fixed deposits)
- Lotteries
- Dividends and Bonds
- Commission Payments
- Rent
payment of any immovable property
While
deducting TDS under any of these heads, a fixed TDS deduction rate
is applied, and the tax liability is deducted before making the
payment. Here, the source or individual who deducts TDS is called a ‘Deductor’,
while the individual to whom the payment is being made is known as ‘Deductee’.
Thus, a
‘Deductor’ is your employer/organisation that pays a salary or incentive to
you, while you would be a ‘Deductee.’ Moreover, if the Deductor takes more than
the required amount as tax, you will be eligible to claim a TDS Refund if you
file your TDS Return.
What are the TDS rates?
The Indian
Tax System has around 20 to 25 sections [1] that govern different types of
payments on which TDS is applicable. Here are a few common types of payments on
which tax is to be deducted at source along with the relevant section and TDS
rates applicable.
What are the Different TDS Rates?
The employer
or Deductor is responsible for providing TDS certificate (Form 16 /16A) to
their employee that depicts the computation of the TDS amount deducted. The TDS
deducted tax amount is calculated as per applicable TDS Rates. Various TDS
Rates And TDS sections relevant to the common types of income/payments are
illustrated in the following TDS rate chart:
TDS Rate Chart For The FY 2019-2020 (AY:
2020-2021)
|
Nature of Payment |
Section |
Basic Cut-off (Rs.) p.a. |
TDS rate for |
|||
|
Individual
and HUF |
Other than
Individual/ HUF |
If PAN is
not submitted/ Invalid PAN |
||||
|
Payment of
Salaries by Employers |
192 |
Slab rate |
Slab rate |
Not
applicable |
30% |
|
|
Premature
payment by PF Organization from EPF A/c (i.e.
before 5 Years). |
192A |
50,000.00 |
10% |
Not
applicable |
20% |
|
|
Payment of
Interest on Securities by company. |
193 |
10,000.00 |
10% |
10% |
20% |
|
|
Payment of
Dividend other than dividend as referred to Section 115O by company (i.e.
Dividend on which Dividend Distribution Tax is not paid) |
194 |
2,500.00 |
10% |
10% |
20% |
|
|
Payment of
Interest by bank |
194A |
40,000.00 (Non
Sr.Citizen) 50,000.00 (Sr.
Citizen) |
10% |
10% |
20% |
|
|
Payment of
Interest by others |
194A |
5,000.00 |
10% |
10% |
20% |
|
|
Payment of
prize from Wining from Lotteries by any person. |
194B |
10,000.00 |
30% |
30% |
30% |
|
|
Payment of
prize from Wining from Horse Race by any person. |
194B |
10,000.00 |
30% |
30% |
30% |
|
|
Payment to
Contractors by any person. |
194C |
30,000.00 (Single
bill) or 1 Lakh aggregate bills during the year. |
1% |
2% |
20% |
|
|
Payment to
Transporter Covered u/s. 44E and submit declaration in prescribed format.
(i.e. owning less than 10 goods carriages) |
194C |
• |
0 |
0 |
20% |
|
|
Payment to
Transporter not covered u/s. 44E (i.e.
owning more than 10 goods carriages) |
194C |
30,000.00 (Single
bill ) or 75,000.00 aggregate bills during the year. |
1% |
2% |
20% |
|
|
Payment of
Insurance Commission to agents by Insurance Company. |
194D |
15,000.00 |
5% |
10% |
20% |
|
|
Payment in
respect of maturity of Life Insurance Policy by Life Insurance Company. |
194DA |
1 Lakh |
1% |
1% |
20% |
|
|
Payment to
NRI sportsman or association by any person or organization |
194E |
• |
20% |
20% |
20% |
|
|
Payment
out of deposit under National Saving Scheme (NSS) |
194EE |
2,500.00 |
10% |
10% |
20% |
|
|
Payment
with respect to repurchase of units by Mutual Fund Companies. |
194F |
• |
20% |
20% |
20% |
|
|
Payment of
Lottery Commission |
194G |
15,000.00 |
5% |
5% |
20% |
|
|
Payment of
commission or Brokerage |
194H |
15,000.00 |
5% |
5% |
20% |
|
|
Payment of
rent on land, building, furniture and fittings. |
194I |
240,000.00 |
10% |
10% |
20% |
|
|
Payment of
rent on plant, machinery or equipments. |
194I |
240,000.00 |
2% |
2% |
20% |
|
|
Payment
made on account of transfer of immovable property other than agriculture
land. |
194IA |
50 Lakh |
1% |
1% |
20% |
|
|
Rent
payable by individual not covered u/s. 194I for land, building, furniture and
fittings |
194IB |
50,000.00
PM |
5% |
5% |
20% |
|
|
Payment of
Professional Fees other than call centers |
194J |
30,000.00 |
10% |
10% |
20% |
|
|
Payment of
Professional Fees to call centers. |
194J |
30,000.00 |
2% |
2% |
20% |
|
|
Compensation
on transfer of certain immoveable property than Agriculture Land |
194LA |
250,000.00 |
10% |
10% |
20% |
|
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