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TDS Rates
Team AckoAug 23, 2024
TDS (Tax Deducted at Source), an integral component of income tax, involves mandatory deductions by individuals or entities on specified payments. This article delves into the intricacies of TDS provisions within the range of the Income Tax Act, providing a comprehensive understanding of the how’s, why’s, and what’s of Tax Deducted at Source.
Contents
- The Basics of TDS (Tax Deducted at Source)
- Who Does TDS Apply To?
- Understanding TDS Rates
- TDS on Salaries
- TDS on Rent Payments
- TDS on Interest Income
- TDS on Professional Fees
- TDS on Sale of Property
- TDS on Payments to Non-Residents
- TDS on Winnings and Lotteries
- How to Avoid Excess TDS Deduction
- Filing Income Tax Returns
- TDS Exemptions and Deductions
- The Importance of Form 26AS
- TDS for Non-Resident Indians (NRIs)
- TDS and E-commerce Transactions
- The Role of TAN (Tax Deduction and Collection Account Number)
- The TDS Return Filing Process
- The Penalties for Non-Compliance
- TDS and Digitalization
- TDS and GST: A Love Story
- The Future of TDS
- Wrapping up!
- Frequently asked questions
The Basics of TDS (Tax Deducted at Source)
Let's kick things off with the basics:
TDS stands for Tax Deducted at Source. It's a tax collection mechanism introduced by the government to collect taxes at the very source of income.
The responsibility for deducting TDS falls on the person making payments, also known as the "deductor."
The deducted amount is then deposited with the government on behalf of the payee, ensuring that the taxman gets his share before you do.
Who Does TDS Apply To?
TDS isn't just for the bigwigs; it affects many of us:
Individuals and businesses making payments to others may need to deduct TDS.
TDS applies to various types of income, like salaries, rent, interest, professional fees, and more.
Not everyone has to worry about TDS; there are specific exemptions and thresholds that come to the rescue of small transactions.
Understanding TDS Rates
Now, let's jump into the heart of the matter: TDS rates!
TDS rates are like the fine print of your favourite comic book – important but often overlooked.
These rates are percentages at which tax is deducted on different types of income.
They can vary depending on the nature of income, the deductor, and the payee's PAN (Permanent Account Number).
TDS Rate Chart for Financial Year 2023-2024
| Section | Nature of transaction | Threshold Limit (Rs) | TDS Rate |
|---|---|---|---|
| 192 | Salary | Basic exemption limit | As per applicable slab rates |
| 192A | Premature Withdrawal of EPF | 50,000 | 10% rate of TDS if PAN is provided. If EPF withdrawal is made without PAN, the applicable rate is 20%. |
| 193 | Interest on securities | 2500 | 10% |
| 194 | Dividend | 5,000 | 10% |
| 194A | Interest on deposit in a bank or post office | Senior Citizens- 50,000 Others- 40,000 | 10% for both |
| 194A | Interest from other sources except interest on securities and interest on bank deposits. | 5,000 | 10% |
| 194B | Income from lottery winnings, puzzles, crosswords, card games, etc. | 10,000 | 30% |
| 194BA | Earnings from online games | Nil | 30% |
| 194BB | Income from horse race | 10,000 | 30% |
| 194C | Payment done to subcontractor/contractor | Senior Citizens- 50,000 Others- 40,000 | HUF/Individuals: 1% Others: 2% |
| 194D | Insurance commission to: | ||
| a) Individuals | 15,000 | 5% | |
| b) Companies | 15,000 | 10% | |
| 194DA | Payment made towards life insurance policy | 1,00,000 | 5% |
| 194E | Payment to non-resident sports association/ sportsmen | Unspecified limit | 20% |
| 194EE | Payment to National Savings Scheme | 2,500 | 10% |
| 194F | Payment for the repurchase of the unit by Mutual Fund or UTI | Unspecified limit | 20% |
| 194G | Commission on selling lottery tickets | 15,000 | 5% |
| 194H | Commission/brokerage | 15,000 | 5% |
| 194-I | Rent: | ||
| 194-I(a) plant and machinery | 2,40,000 | 2% | |
| 194-I(b) land/building/furniture/fitting | 2,40,000 | 10% | |
| 194-IA | Payment on transfer of immovable property except agricultural land | 50,00,000 | 1% |
| 194-IB | Rent paid by HUF/Individual who is not required to conduct tax audit | 50,000 per month | 5% |
| 194-IC | Payment under JDA, Joint Development Agreements | Unspecified limit | 10 |
| 194J | Fees paid for - Technical services Royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films | 30,000 30,000 | 2% 2% |
| 194J | Fees paid for any other professional services or technical service | 30,000 | 10% |
| 194K | Earnings from units payable to a resident | Unspecified limit | 10% |
| 194LA | Compensation for acquiring an immovable property | 2,50,000 | 10% |
| 194LB | Interest paid to Non-resident on Infrastructure Debt Fund | Unspecified limit | 5% |
| 194LBA(1) | Earnings received by a business trust from an SPV | Unspecified limit | 10% |
| 194LBB | Income of a unit holder from an investment fund. | Unspecified limit | 10% |
| 194LBC | Income from investment in securitization trust Individuals/HUF Others | Unspecified limit | 25% 30% |
| 194M | Payment of commission except income tax commission under Section 194C, 194H, and 194J | 50,00,000 | 5% |
| 194N | Cash withdrawal exceeding a specific amount 1 crore | 1 crore | 2% |
| 194N | Cash withdrawal from multiple bank accounts during the previous year | ||
| Amount exceeding 1 crore (exceeding 20 lakhs for people not filing ITR for previous 3 years) | 1 crore | 2% | |
| Aggregate cash withdrawal exceeding 20 lakhs | 20 lakhs | 2% | |
| Aggregate cash withdrawal exceeding 1 crore | 1 crore | 5% | |
| 194O | Payment to e-commerce participant by e-commerce operator | 5,00,000 | 1% 5% in case PAN is not provided |
| 194P | TDS for senior citizens aged over 75 years | Basic exemption limit | Normal tax slab rates |
| 194Q | Purchase of goods after 1.07.2021 | 50,00,000 | 0.10% |
| 194R (Introduced in budget 2022) | TDS deducted on benefit or Perquisite to a business or profession | 20,000 | 10% |
| 194S | Payment of virtual digital assets | Specified Persons- 50,000 Others- 10,000 | 1% |
| 195 | Income on investments of NRI citizens | Unspecified limit | 20% |
| 195 | LTCG under section 115E in the case of NRI citizen | Unspecified limit | 10% |
| 195 | LTCG under section 112(1)(c)(iii) | Unspecified limit | 10% |
| 195 | LTCG under section 112A | Unspecified limit | 10% |
| 195 | STCG under section 111A | Unspecified limit | 15% |
| 195 | Other LTCG other then LTCG mentioned u/s 112A, 10(33), 10(36) | Unspecified limit | 20% |
| 195 | Interest paid on borrowings from Indian companies or the government in INR. | Unspecified limit | 20% |
| 195 | Income from royalty, paid by Indian company/government under section 115A | Unspecified limit | 10% |
| 195 | Earnings from royalty by government or Indian company as per an agreement according to the industrial policy. | Unspecified limit | 10% |
| 195 | Income from royalties payable from Indian companies or the government. Agreement should be made between 31st Mar 1961 to 1st Apr 1976 | Unspecified limit | 50% |
| 195 | Earnings from royalty to be paid by government or Indian company in pursuance of an agreement on matters included in the industrial policy Agreement should be between 31st March 1976 | Unspecified limit | 10% |
| 195 | Earnings from technical fees to be paid by Indian government or company in pursuance of an agreement for industrial policy | Unspecified limit | 10% |
| 195 | Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy If the agreement for such payment is entered in between 29th February 1964 and 1st April 1976 | Unspecified limit | 50% |
| 195 | Earnings from technical fees to be paid by the government or Indian company in accordance with an agreement on industrial policy matters. If the agreement for the payment is entered between 29th Feb 1964 and 1st Apr 1976 | No Specified limit | 10% |
| 195 | Any other income | Unspecified limit | 30% |
| 195 | Any other income | Unspecified limit | 40% |
| 196B | LTCG and other income from units of an offshore fund | Unspecified limit | 10% |
| 196C | LTCG and other income from foreign currency bonds or Indian GDRs | Unspecified limit | 10% |
| 196D | Income (except dividend and capital gain) from FIIs | Unspecified limit | 20% |
| 206AB | Payment made to people not filing their ITR Latest Update: People not required to file ITR and NRs not having Permanent establishment in India are not considered as non-filers | Unspecified limit | - 2 times the rate mentioned in the Income Tax Act - 5%, whichever is highe |
| 206AA | TDS rate if PAN not available | Unspecified limit | Rates specified or 20%, whichever is higher |
TDS on Salaries
We all love payday, but TDS has a role to play here too:
Employers deduct TDS from your salary based on your income tax slab, which means the more you earn, the more TDS you pay.
Employers are required to calculate TDS based on the estimated annual income, divide it by the number of months, and deduct accordingly.
If you're looking to reduce the TDS bite, remember to submit your investment declarations and proofs on time.
TDS on Rent Payments
Renting a place? TDS is there too:
If you pay rent above a specified threshold, TDS applies.
The rate is usually 10% of the rent amount, but if the rent exceeds a certain limit, it goes up to 30%.
If your landlord doesn't have a PAN, get ready to shell out a higher TDS amount.
TDS on Interest Income
Got some extra cash sitting in the bank? Interest income is not TDS-free:
TDS on interest income is usually deducted at 10%.
Banks deduct TDS when the interest income exceeds a certain limit, which can vary depending on the type of account.
If your total income is below the taxable limit, you can submit Form 15G or 15H to avoid TDS.
TDS on Professional Fees
Freelancers and consultants, listen up:
If you're making professional payments above a certain limit, TDS is here to say hello.
The rate typically ranges from 2% to 10%, depending on various factors.
Filing Form 15G or 15H can also help you avoid TDS if your income is below the taxable limit.
TDS on Sale of Property
Thinking of buying or selling a property? TDS has a role here too:
TDS is applicable when you buy property, and the rate is generally 1% of the property's sale value.
If you're the seller, you need to pay TDS if the property's sale value is above a certain threshold.
TDS on Payments to Non-Residents
Crossing international borders? TDS is like your travel companion:
Payments to non-residents attract TDS, and the rates can vary based on the nature of payment, country of residence, and tax treaties.
Make sure to obtain a Tax Residency Certificate (TRC) to avail of lower TDS rates as per tax treaties.
TDS on Winnings and Lotteries
Feeling lucky? TDS might take a slice of your fortune:
If you strike it rich with lottery winnings or gambling, TDS can be as high as 30%.
But don't worry, you can claim a refund by filing your income tax return.
How to Avoid Excess TDS Deduction
Nobody wants to pay more taxes than necessary, right? Here are some handy tips:
Ensure your deductor has your correct PAN to avoid higher TDS rates.
Invest wisely in tax-saving instruments to reduce your overall taxable income.
Submit Form 15G or 15H when your income is below the taxable limit.
Filing Income Tax Returns
Now that you know about TDS, you might be wondering about the next step:
You can claim a refund if your TDS deductions exceed your actual tax liability by filing your income tax return.
Filing your returns is essential, even if TDS fully covers your tax liability, as it helps maintain a clean tax record.
TDS Exemptions and Deductions
Let's not forget the silver lining in the TDS cloud – exemptions and deductions:
Section 10 of the Income Tax Act provides a list of incomes that are exempt from TDS. For example, interest on specified government bonds.
Various deductions, under sections like 80C, 80D, and 80G, can reduce your taxable income, indirectly lowering the TDS liability.
Understanding these exemptions and deductions can help you optimise your tax planning and reduce the impact of TDS on your finances.
The Importance of Form 26AS
You might be wondering how to keep tabs on all your TDS deductions. Enter Form 26AS:
Form 26AS is your TDS statement. It's like a ledger of all TDS deductions made against your PAN.
You can access it online through the Income Tax Department's website, making it easy to keep an eye on your TDS credits.
Verify that the TDS deductions mentioned in Form 26AS match with what your deductors have deducted. Any discrepancies should be addressed promptly.
Form 26AS is a crucial tool to ensure you receive credit for all TDS deductions while filing your income tax return.
TDS for Non-Resident Indians (NRIs)
If you're an NRI, TDS adds a unique twist to your tax story:
NRIs are subject to TDS on various incomes, including interest, rent, capital gains, and more.
TDS rates for NRIs can differ from those for residents, often being higher.
However, tax treaties between India and the NRI's country of residence can provide relief and reduce TDS rates.
Navigating TDS as an NRI requires careful planning, knowledge of tax treaties, and compliance with Indian tax laws.
TDS and E-commerce Transactions
In the era of digital transactions and e-commerce, TDS has extended its reach:
E-commerce operators, like Amazon or Flipkart, are now required to deduct TDS at the rate of 1% on payments made to sellers on their platforms.
This provision aims to ensure tax compliance among e-commerce sellers and prevent tax evasion.
If you're an e-commerce seller, be prepared for TDS deductions on your earnings from these platforms.
The Role of TAN (Tax Deduction and Collection Account Number)
Behind the scenes of TDS, there's another player – TAN:
TAN is a unique 10-digit alphanumeric code obtained by deductors.
It is used to identify and report TDS payments to the government.
Deductors must quote TAN on all TDS-related documents, including TDS returns.
Understanding TAN is essential for businesses and individuals responsible for deducting TDS, ensuring they comply with tax regulations.
The TDS Return Filing Process
Deductors have responsibilities too. Filing TDS returns is one of them:
Deductors must file TDS returns periodically, providing details of TDS deductions made and deposited.
These returns can be filed online through the TRACES portal.
Timely and accurate TDS return filing is crucial to avoid penalties and legal complications.
Deductors, make sure you're up to date with the TDS return filing process to fulfil your obligations correctly.
The Penalties for Non-Compliance
Nobody wants to get on the wrong side of the taxman. Here's why compliance is crucial:
Failure to deduct TDS or deposit it with the government can lead to penalties.
Late filing of TDS returns also incurs penalties.
Non-compliance can attract interest on the unpaid TDS amount and even legal action.
Understanding the penalties for non-compliance is a sobering reminder of the importance of adhering to TDS regulations.
TDS and Digitalization
The digital age has ushered in changes in the TDS landscape:
The government has introduced online systems for TDS compliance, making it easier to deduct and deposit TDS.
Digitalization has also led to quicker processing of TDS returns and refunds.
Automation tools and software have simplified TDS calculations for both deductors and taxpayers.
Embracing digitalization can streamline the TDS process, reducing errors and making compliance more efficient.
TDS and GST: A Love Story
TDS and the Goods and Services Tax (GST) go hand in hand:
Businesses registered under GST need to deduct TDS at specified rates when making payments to suppliers.
This provision helps the government ensure that suppliers report their transactions accurately and pay GST on time.
Non-compliance with GST TDS provisions can result in fines and penalties.
Understanding the intersection of TDS and GST is essential for businesses operating in the GST regime.
The Future of TDS
TDS is a dynamic field that continues to evolve:
The government periodically revises TDS rates and rules to align with changing economic conditions.
Efforts are underway to simplify TDS procedures and reduce compliance burdens for taxpayers.
As technology advances, TDS processes are likely to become even more efficient and transparent.
Keeping an eye on the future of TDS can help taxpayers and deductors adapt to upcoming changes and stay compliant.
Wrapping up!
Well, we've taken quite the TDS journey together, haven't we? From understanding the basics to exploring the nuances, you're now equipped to handle TDS like a pro!
TDS may seem complex, but with knowledge and careful planning, you can minimise its impact on your finances. Stay updated with the latest TDS rates, exemptions, and deductions to optimise your tax planning. Remember that timely and accurate compliance with TDS regulations is the key to avoiding penalties and legal hassles.
So, whether you're an employee, a freelancer, a business owner, or an NRI, TDS is a part of your financial story. By navigating its intricacies, you're well on your way to a brighter financial future.
The world of TDS may not be the most thrilling, but with the right knowledge, it can be a manageable and even rewarding aspect of your financial journey. Remember, it's all about keeping your financial house in order, one tax deduction at a time.
Frequently asked questions
Below are some of the frequently asked questions on TDS Rates
What is TDS, and who does it affect?
TDS, or Tax Deducted at Source, is a tax collection method that impacts individuals and businesses making various payments, including salaries, rent, and interest.
How are TDS rates determined?
TDS rates depend on the type of income, the person making the payment, and the payee's PAN card status.
Can you explain TDS on salaries?
TDS on salaries is based on income tax slabs, with higher earners paying more TDS.
How does TDS on rent work?
TDS applies to rent payments above a certain threshold, typically at a 10% rate.
What are the TDS rates for interest income?
Interest income is subject to TDS at a standard rate of 10%, but it may vary based on account type.
How is TDS applied to professional fees?
TDS on professional fees ranges from 2% to 10%, depending on the situation.
When does TDS come into play in property transactions?
TDS is applicable when buying or selling property, with a rate of 1% on the sale value.
How can one avoid excessive TDS deductions?
To reduce TDS, ensure accurate PAN details, invest wisely for tax benefits, and submit Form 15G/15H if income is below taxable limits.
How does Form 26AS help with TDS?
Form 26AS is a TDS statement that tracks all deductions against your PAN, aiding in tax filing and verification.
What's the future of TDS in India?
TDS is evolving with changing economic conditions and digitalization, aiming for simpler procedures and enhanced compliance.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet, and is subject to changes.
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