TDS Types and Relevant Sections
Tax Deducted at Source (TDS) is a system introduced by the Indian government,
wherein tax is collected at the origin of income. It ensures that tax is deducted
from payments such as salary, rent, interest, and professional fees at specified rates.
The person (payer) deducting the tax is required to deposit it with the government,
reducing tax evasion.
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Types of TDS and Relevant Sections
1. Salary Income
- Section: 192
- Applicable On: Salary payments
- Rate: As per income tax slab rates of the employee
2. Interest Income
- Section: 194A
- Applicable On: Interest other than interest on securities (e.g., bank interest)
- Rate: 10% (if PAN is provided); 20% otherwise
- Threshold: INR40,000 (INR50,000 for senior citizens)
3. Dividends
- Section: 194
- Applicable On: Dividend income paid by domestic companies
- Rate: 10%
- Threshold: INR5,000
4. Rent Payments
- Section: 194I
- Applicable On: Rent on land, building, machinery, equipment
- Rate: 10% for land/building, 2% for machinery/equipment
- Threshold: INR2,40,000 per annum
5. Payments to Contractors or Sub-contractors
- Section: 194C
- Applicable On: Payments for work contracts, supply contracts, transportation, etc.
- Rate: 1% for individuals/HUF, 2% for others
- Threshold: INR30,000 per payment or INR1,00,000 in a financial year
6. Professional or Technical Services
- Section: 194J
- Applicable On: Fees for professional/technical services, royalty, etc.
- Rate: 10%
- Threshold: INR30,000 per financial year
7. Commission or Brokerage
- Section: 194H
- Applicable On: Commission or brokerage payments
- Rate: 5%
- Threshold: INR15,000 per financial year
8. Purchase of Immovable Property
- Section: 194IA
- Applicable On: Property purchases (excluding agricultural land)
- Rate: 1%
- Threshold: INR50,00,000 or more
9. Rent Paid by Individuals/HUF not liable for Tax Audit
- Section: 194IB
- Applicable On: Rent paid by individuals/HUF not subject to tax audit
- Rate: 5%
- Threshold: INR50,000 per month
10. E-commerce Transactions
- Section: 194O
- Applicable On: Payments by e-commerce operators to sellers on their platform
- Rate: 1%
- Threshold: INR5,00,000 for individuals/HUFs
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Special Sections for TDS on Foreign Payments or Other Cases
1. Interest on Securities (NRO Accounts/Foreign Payments)
- Section: 195
- Applicable On: Payments to non-residents
- Rate: As per DTAA or Income Tax Act, whichever is lower
2. Cash Withdrawals
- Section: 194N
- Applicable On: Cash withdrawals exceeding INR1 crore (INR20 lakh for some cases)
- Rate: 2%
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Filing and Compliance
- TDS Returns:
- Form 24Q: Salary payments
- Form 26Q: Non-salary payments
- Form 27Q: Payments to non-residents
- Form 26QB: Property transactions
- Due Dates:
- Monthly deposit of TDS: 7th of the following month
- Quarterly TDS return: 31st July, 31st October, 31st January, and 31st May
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TDS Certificate
- Form 16: Issued for salary income
- Form 16A: Issued for non-salary income
- Form 16B: Issued for property transactions
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This framework ensures that taxes are collected efficiently and transparently,
minimizing the risk of tax evasion.
