Written by : Knowledge Centre Team
2026-02-24
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7 minutes read
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Tax Deduction at Source (TDS) is an important aspect of tax compliance. TDS applies to any payment that is changing hands as income for the receiving party. The payor must deduct TDS from any such payment if it exceeds the threshold limit specified for that kind of transaction.
CBDT and the Ministry of Finance have specified the rates for such TDS deductions. The rates and threshold limits vary based on the purpose of the transaction or type of income.
Also, any TDS deductions must be submitted to the central government account
A taxpayer (deductor) who makes a payment of a specified nature to the deductee, is responsible for deducting tax at source and submitting the same into the account of the Central Government.
Here is the TDS rate chart for a person other than a company AY 2021-22, i.e., FY 2020-21:
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| Section & Transaction | Threshold Limit (₹) | TDS Rates (April 2020 to May 13, 2020) (%) | TDS Rates (May 14, 2020, to March 2021) (%) | ||
|---|---|---|---|---|---|
| Resident | Non-resident | Resident | Non-resident | ||
| (192) Salaries | - | Normal slab rate | Normal slab rate | Normal slab rate | Normal slab rate |
| (192A) Premature withdrawal from EPF | 50,000 | 10 | 10 | 10 | 10 |
| (193) Interest on securities - 8% Savings (Taxable) Bonds, 2003 or 7.75% Savings (Taxable) Bonds, 2018 during the financial year | 10,000 | 10 | - | 7.5 | - |
| (193) Interest on securities - Interest on securities for money issued by or on behalf of any local authority/statutory corporation, listed debentures of a company (other than Demat form), any other interest on securities | 5,000 | 10 | - | 7.5 | - |
| (194) Dividends | 5,000 | 10 | - | 7.5 | - |
| (194A) Interest (Banking co., co-operative society engaged in banking, post office) | 40,000 | 10 | - | 7.5 | - |
| (194A) Interest (Any other person) | 5,000 | 10 | - | 7.5 | - |
| (194B) Winning from lotteries | 10,000 | 30 | 30 | 30 | 30 |
| (194BB) Winning from Horse race | 10,000 | 30 | 30 | 30 | 30 |
| (194C) Contractor-Single transaction | 30,000 | ||||
| Individual/HUF | 1 | - | 0.75 | - | |
| -Others | 2 | - | 1.5 | - | |
| (194C) Contractor – Consolidated Payment During the F.Y. | 1,00,000 | ||||
| - Individual/HUF | 1 | - | 0.75 | - | |
| - Others | 2 | - | 1.5 | - | |
| (194D) Insurance commission | 15,000 | ||||
| - Other than Company | 5 | - | 3.75 | - | |
| - Company | 10 | - | 10 | - | |
| (194DA) Maturity of Life insurance policy | 1,00,000 | 5 | - | 3.75 | - |
| (194E) Non-resident sportsmen or sports association | - | - | 20 | - | 20 |
| (194EE) NSS | 2,500 | 10 | 10 | 7.5 | 10 |
| (194F) Repurchase units by MFs | - | 20 | 20 | 15 | 20 |
| (194G) Commission-Lottery | 15,000 | 5 | 5 | 3.75 | 5 |
| (194H) Commission/Brokerage | 15,000 | 5 | - | 3.75 | - |
| (194I) Rent of - Plant/Machinery /Equipment | 2,40,000 | 2 | - | 1.5 | - |
| - Land and Building/Furniture & Fixture | 10 | - | 7.5 | - | |
| (194IA) Transfer of certain immovable property other than agricultural land | 50 Lakh | 1 | - | 0.75 | - |
| (194IB) Rent by Individual/HUF | 50,000 per month | 5 | - | 3.75 | - |
| (194IC) Payment under Joint Development Agreements to Individual/HUF | - | 10 | - | 7.5 | - |
| (194J) Professional Fees | 30,000 | 10 | - | 7.5 | - |
| (194J) Technical Fees (w.e.f. 01.04.2020) | 30,000 | 2 | - | 1.5 | - |
| (194J) Payment to call center operator (w.e.f. 01.06.2017) | 30,000 | 2 | - | 1.5 | - |
| (194J) Director's fees | - | 10 | - | 7.5 | - |
| (194K) Payment of any income in respect of (a) units of a mutual fund as per section 10(23D); or (b) the units from the administrator; or (c) units from a specified company (w.e.f. 01.04.2020) | 5,000 | 10 | - | 7.5 | - |
| (194LA) Compensation on the transfer of certain immovable property other than agricultural land (TDS exempted if covered under RFCTLARR Act w.e.f. 01.04.2017) | 2,50,000 | 10 | - | 7.5 | - |
| (194LB) Income by way of interest from infrastructure debt fund | - | - | 5 | - | 5 |
| (194LBA) Income from units of business trust | - | ||||
| - interest received or receivable from a special purpose vehicle; or | 10 | 5 | 7.5 | 5 | |
| - dividend referred to in sub-section (7) of section 115-O | 10 | 10 | 7.5 | 10 | |
| (194LBA) Distribution of rental income to unitholders | - | ||||
| - Other than Company | 10 | 30 | 7.5 | 30 | |
| - Company | 10 | 40 | 7.5 | 40 | |
| (194LBB) Income in respect of units of investment fund | |||||
| - Other than Company | 10 | 30 | 7.5 | 30 | |
| - Company | 10 | 40 | 7.5 | 40 | |
| (194LBC) Income in respect of investment in securitization fund | - | ||||
| - Individual/HUF | 25 | 30 | 18.75 | 30 | |
| - Company | 30 | 40 | 22.5 | 40 | |
| - Other Person | 30 | 30 | 22.5 | 30 | |
| (194LC) Income by way of interest by an Indian specified company to a non-resident/foreign company on foreign currency approved loan / long-term infrastructure bonds from outside India | - | - | 5 | - | 5 |
| (194LC) Income by way of interest by an Indian specified company on a rupee-denominated bond / any long-term bonds from outside India, which is listed only on a recognized stock exchange located in any International Financial Services Centre | - | - | 4 | - | 4 |
| (194LD) Interest on certain bonds from Govt. securities | - | - | 5 | - | 5 |
| (194M) Certain payments by Individual/HUF | 50 lakh | 5 | - | 3.75 | - |
| (194N) Payment of a certain amount in cash | 1 Crore | 2 | 2 | 2 | 2 |
| (194N) Payment of certain amount in cash (first proviso of section 194N) if: | |||||
| - Amount is more than Rs.20 lakh but up to Rs. 1 crore | N.A | N.A | 2 | 2 | |
| - Amount exceeds Rs. 1 crore (Applicable from 01.07.2020) | N.A. | N.A. | 5 | 5 | |
| (194-O) Applicable for e-commerce operator for the sale of goods or provision of services facilitated by it through its digital or electronic facility or platform (Applicable from 01.10.2020) | - | N.A | - | 0.75 | - |
| (195) Income of Investment made by an NRI | - | - | 20 | - | 20 |
| (195) Long-term capital gain | - | ||||
| - Under Section - 115E/112(1)(c)(iii)/112A | - | 10 | - | 10 | |
| - Any Other Gains | - | 20 | - | 20 | |
| (195) Short-term capital gain - 111A | - | - | 15 | - | 15 |
| (195) Royalty | - | - | 10 | - | 10 |
| (195) Fees for technical services | - | - | 10 | - | 10 |
| (195) Interest income payable by Govt./Indian concern (other than section 194LB or 194LC) | - | - | 20 | - | 20 |
| (195) Any Other Income - Other than Company | - | - | 30 | - | 30 |
| - Company | - | 40 | - | 40 | |
| (196A) Income in respect of: - Units of a Mutual Fund specified under clause (23D) of section 10; or - From the specified company referred to in the Explanation to clause (35) of section 10 | - | - | 20 | - | 20 |
| (196B) Income from units to an offshore fund | - | - | 10 | - | 10 |
| (196C) Income from foreign currency bonds or GDR of an Indian company | - | - | 10 | - | 10 |
| (196D) Income of foreign Institutional Investors from securities (not being dividend or capital gain) | - | 20 | - | 20 | |
TDS Slab Rates for Salaried Professionals
TDS deduction for you will happen at the slab rates if you are salaried. Starting FY 2020-21, you have the option of sticking with the old income tax slabs or go for the New Tax Regime.
Here are the TDS slab rates for salaried under the new regime:
| Income Tax Slab | TDS Slab Rates FY 2020-21 | Max. Tax in Rs. |
|---|---|---|
| Rs 0.0 – 2.5 Lakhs | NIL | 0 |
| Rs 2.5 Lakhs - 3 Lakhs* | 5% | 2500 |
| Rs. 3 Lakhs – 5 Lakhs* | 5% | 12,500 |
| Rs. 5 Lakhs - 7.5 Lakhs | 10% | 37,500 |
| Rs 7.5 Lakhs – 10 Lakhs | 15% | 75,000 |
| Rs 10 Lakhs - 12.50 Lakhs | 20% | 1,25,000 |
| Rs. 12.5 Lakhs - 15 Lakhs | 25% | 1,87,500 |
| > Rs. 15 Lakhs | 30% | 1,87,500 + 30% of income over Rs 15 lakhs |
* Tax rebate u/s 87a is available
However, under the new tax regime section 87A is the only tax rebate available. All other modes of tax saving and set-off and carry forward of losses will not apply from the old regime.
Thus, if you have been following the tax saving investments to reduce your tax liability, you should continue with the old regime of TDS slab rates.
Sunset Period for Lower TDS Rates due to COVID-19
Due to the COVID-19 pandemic, the Government has specified Lower TDS rates.
The TDS rates for the specified non-salaried payments made to the residents have been reduced by 25% of the applicable rates. This is for the period from 14th May 2020 to 31st March 2021.
These shall be the concessional rates of TDS that will be applicable only till 31st March 2021. Hence, old TDS rates shall apply with effect from 1st April 2021.
Detailed Explanations of Changes to TDS in Budget 2021
The changes in the TDS rules in the Union Budget 2021 are explained below:
- TDS Rate Change: The new section 194Q has been introduced to provide for TDS deduction @ 0.1% by a buyer for paying any sum to a resident for the purchase of goods.
- Tax Deductor: TDS u/s 194Q is to be deducted only by the buyer whose total sales or gross receipts / turnover from the business carried on by him is above Rs 10 Crores during the previous financial year.
- Threshold: The TDS deduction by the buyer, if the purchase of goods by him from the seller is of the value or aggregate of such value exceeding Rs. 50 Lakhs in the previous year.
- Where is TDS Not Applicable: The provisions for TDS Deduction under this section shall not apply to:
- Transaction on which TDS is deductible under any provision of the Act; and
- Transaction, on which TDS is collectible u/s 206C
- TDS Exemption: Central Government may exempt a person from obligation of TDS under this section on fulfillment of conditions as may be specified in that notification. The Board with the approval of the Central Government has been empowered to issue guidelines for removing difficulty in giving effect to the provisions of this section.
- TCS Exemption: In case of a transaction where TDS or TCS is to be deducted under any other provision, TDS u/s 194Q shall not apply.
- Higher TDS rate due to PAN not available: If PAN is not provided, TDS is required to be deducted at the rate of 5%.
- TDS/ TCS on non-filers of ITR at higher rate: If income-tax return is not filed, TDS deduction shall be at higher rate of the following:
- At twice the rate specified in the relevant provision of the Act; or
- At twice the rate or rates in force; or
- At the rate of 5%
The only way to save tax is to increase your tax-free income. You can do so by investing your savings into life insurance plans, which give you both investment growth and tax saving.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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