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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:
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.
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:
| Relevant Section | Nature of Payment | TDS rate (valid till 13th May 2020) |
|---|---|---|
Salary | Applicable tax slab | |
Section 192A | 10% | |
Section 193 | Interest received on securities | 10% |
Section 194 and 194K | Dividend received from Mutual funds and shares | 10% |
Section 194A | Interest received (other than Interest on Securities such as Fixed deposit interest) | 10% |
Section 194B | Winnings from the lottery, crosswords, or any such game | 30% |
Section 194BB | Winnings from horse races | 30% |
Section 194D | Insurance Commission received | 5% for Non corporates |
Section 194DA | Life Insurance Plans not tax-exempt under Section 10(10D) | 5% |
Section 194H | Commission or brokerage received (not including Insurance Commission) | 5% |
Section 194IA | Purchase of land or property | 1% |
Section 194IB | Payment of monthly rent by an individual or HUF more than Rs.50,000 | 5% |
Section 194M | Payment / Commission / Brokerage made to professional of Rs.50 lakh and abov | 5% |
Section 194N | Cash withdrawal | 2% (exceeding Rs.20 lakh) |
Section 194J | Payment of Professional Fees | 2% (FTS*, call centre) |
Section 194EE | Payment of deposits under National Savings Scheme | 10% |
Section 194 – I(a) | Rent for plant and machinery | 2% |
Section 194 – I(b) | Rent for immovable property | 10% |
Few cases are there, wherein the TDS exemption is offered. TDS deduction is not levied on payments made in favour of RBI (Reserve bank of India), or any recompense made towards the central government.
Moreover, TDS exemptions are provided against the payment of interest from:
Read more: TDS on Fixed Deposit
In case, you (employee) make withdrawals worth Rs. 50,000 and above from your EPF account, within five years of continuous service, you are liable to following TDS Rates:
a) 10% - After submitting PAN details but not Form-15G/15H
a) Under Section 192, employers are eligible to deduct TDS from the estimated income of each employee as per applicable Rate of TDS on salary for AY 2020-21
b) No income tax will be deducted if an employee’s estimated income is below the minimum tax slab threshold for a given the financial year
c) No TDS deduction rate is applicable for employees whose total annual income is less than Rs.2,50,000
Different TDS slab rates for salaried individuals are provided below:
| Taxable Income | TDS Rate |
|---|---|
Up to Rs.2.5 lakh | Nil |
Between Rs.2.5 lakh and Rs.5 lakh | 5% |
Between Rs.5 lakh and Rs.10 lakh | 20% |
Above Rs.10 lakh | 30% |
| Taxable Income | TDS Rate |
|---|---|
Up to Rs.3 Lakh | Nil |
Between Rs.3 Lakh and Rs.5 Lakh | 5% |
Between Rs.5 Lakh and Rs.10 Lakh | 20% |
Above Rs.10 Lakh | 30% |
| Income Slabs | TDS Rate |
|---|---|
Up to Rs.5 lakh | Nil |
Between Rs.5 lakh and Rs.10 lakh | 20% |
Above Rs.10 Lakh | 30% |
Read more: Income Tax Slab for FY 2020-21 & AY 2021-22
| Section | Nature of Commission | TDS Rate |
|---|---|---|
Section 194G | Commission received on the sale of lottery tickets | 5% |
Section 194H | Commission or brokerage | 5% |
Section 194J | Fee / Remuneration/ Commission to a Director | 10% |
According to Section 194J of the Income Tax Act, an individual is liable to deduct on the following payments made to a resident person (except HUF or individual):
If a payee provides PAN details, he or she will be liable to a TDS deduction rate of 10% (excluding any cess and surcharges)
In cases where the PAN details are unavailable, the payee is responsible for paying higher of the following TDS Rates:
1. Under Section 194C, any payment made to a contractor or subcontractor for any work including:
2. For Residential Individuals and HUF, the TDS deduction rate of 1% is applicable on contracts under section 194C
3. For others, the TDS deduction rate of 2% is applicable
4. Any Payee who is unable to provide PAN details will be liable to pay a TDS deduction rate of 20%.
1. Due to the COVID-19 situation, the TDS Rates on non-salaried payments made to Indian residents have been reduced by 25% under the Atma Nirbhar Bharat Abhiyaan
2. The lower TDS Rates will be in effect for the period from 14th May 2020 to 31st March 2021
3. There will be no reduction in TDS Rates, in cases where the tax deduction or collection is made at a higher rate because of the non-availability of the PAN or Aadhaar details
4. The changes aim to increase liquidity for individuals so that they can tackle the COVID-19 induced financial distress
5. These reduced TDS Rates will culminate into a higher self-assessment tax later
| Relevant Section | Nature of Payment | Existing TDS Rates | New TDS Rates (14th May 2020 onwards) |
|---|---|---|---|
Section 192A | Premature withdrawal from EPF | 10% | 10% |
Section 193 | Premature withdrawal from EPF | 10% | 7.50% |
Section 194 and 194K | Interest received on securities | 10% | 7.50% |
Section 194A | Dividend received from Mutual funds and shares | 10% | 7.50% |
Section 194B | Interest received (other than Interest on Securities such as Fixed deposit interest) | 30% | 30% |
Section 194BB | Winnings from the lottery, crosswords, or any such game | 30% | 30% |
Section 194D | Winnings from horse races | 5% | 3.75% |
Section 194DA | Insurance Commission received | 5% | 3.75% |
Section 194H | Life Insurance Plans | 5% | 3.75% |
Section 194IA | Commission or brokerage received (not including Insurance Commission) | 1% | 0.75% |
Section 194IB | Purchase of land or property | 5% | 3.75% |
Section 194M | Payment of monthly rent by an individual or HUF more than Rs. 50,000 | 5% | 3.75% |
Section 194N | Payment / Commission / Brokerage made to professional of Rs 50 lakh and above | 2% (exceeding Rs 20 lakhs) | 2% |
Section 194J | Cash withdrawal | 2% (FTS*, call centre) | 1.5%(FTS*, call centre) |
Section 194EE | Payment of Professional Fees | 10% | 7.50% |
Section 194 – I(a) | Payment of deposits under National Savings Scheme | 2% | 1.50% |
Section 194 – I(b) | Rent for plant and machinery | 10% | 7.5% |
* Fund Transfer Services
ARN:- Aug21/Bg/18CC
Disclaimer:
Save 46800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are:
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TDS is the abbreviation for Tax Deducted at Source, managed by the Central Board of Indirect Taxes.
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TDS return is essentially a summary of all the transactions pertaining to TDS completed during a quarter
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Tax Deducted at Source, abbreviated as TDS is the amount that is deducted at source, i.e. from the income of an Indian taxpayer, be it salary, income from savings accounts, or rent
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