Income generation always attracts taxes from the government. It does not matter whether you are an employee or a business, any kind of income which is generated by you will be subject to taxes.
In India, we have different types of taxes such as Income tax, GST, VAT, etc. Some taxes like GST or income tax are paid at the end of the set tenure but there are some taxes which is paid at the income generation point. One such tax which is paid at the income generation point is called Tax deduction at Source.
In this article, we will discuss what Tax deduction at source means, when should TDS be deducted, types of TDS deduction, etc.
But first, let’s find out what is TDS.
Table of Contents
What is TDS?
TDS stands for Tax Deduction at Source which is a deducation of the tax which you are liable to pay. The TDS is deducted from the income-generating source other than salary income and the remaining balance amount is what you receive. It is managed by the Central Board of Direct Taxes CBDT which comes under the Income Tax Department and manages the ITR filed. While filing an ITR, TDS plays a crucial role in calculating the taxes applicable and returns that need to be provided by the bank.
Example of TDS Deduction
Let’s consider a scenario where you’ve deposited Rs.10 Lakhs into an FD account for a year with a 7.5% p.a. interest rate. The earned interest of Rs.75,000 exceeds the tax-free withdrawal cap of Rs.40,000, making it taxable.
The tax is fixed at 10% with a PAN card and 20% without. Consequently, Rs.7,500 (10% of Rs.75,000) will be deducted as TDS, resulting in a final debit of Rs.10,67,500 at maturity.
TDS Rate Chart 2023
TDS is deducted whenever someone engages in income-generating activities other than their salary. The deduction of the TDS will be made as per the tax rate set by the Government. The following is the TDS rate chart-
| Section | Nature of Payment | Threshold (Rs.) | Individual / HUF TDS Rates (%) | Others TDS Rate (%) |
| 192 | Salaries | Rs. 2,50,000 | Slab Rates | Slab Rates |
| 192A | Premature EPF withdrawal* | Rs. 50,000 | 10% | 10% |
| 193 | – TDS on interest on securities*** | Rs. 10,000 | 10% | 10% |
| 194 | Payment of dividend | Rs. 5,000 | 10% | 10% |
| 194A | Interest issued by banks or post offices on deposits | Rs. 40,000 Rs. 50,000 (For senior citizens) | 10% | 10% |
| 194A | Interest by others apart from on securities | Rs. 5,000 | 10% | 10% |
| 194B | Amounts that someone has won through lotteries, puzzles, or games | Aggregate of Rs. 10,000** | 30% | 30% |
| 194BB | Amounts that someone has won from horse races | Rs. 10,000 | 30% | 30% |
| 194C | Payments to contractor or sub-contractor – Single Payments | Rs. 30,000 | 1% | 2% |
| 194C | Payments to contractor/sub-contractor – Aggregate Payments | Rs. 1,00,000 | 1% | 2% |
| 194D | Payment of insurance commission to domestic companies | Rs. 15,000 | NA | 10% |
| 194D | Payment of insurance commission to companies other than domestic ones | Rs. 15,000 | 5% | NA |
| 194DA | Maturity of Life Insurance Policy | Rs. 1,00,000 | 5% | 5% |
| 194EE | Payment of an amount standing to the credit of an individual under NSS (National Savings Scheme) | Rs. 2500 | 10% | 10% |
| 194F | Payment of repurchase of the unit by UTI (Unit Trust of India) or any mutual fund | No Limit | 20% | 20% |
| 194G | Payments or commissions on the sale of lottery tickets | Rs. 15,000 | 5% | 5% |
| 194H | Commission or brokerage | Rs. 15,000 | 5% | 5% |
| 194I | Rent of land, building, or furniture | Rs. 2,40,000 | 10% | 10% |
| 194I | Rent of plant and machinery | Rs. 2,40,000 | 2% | 2% |
| 194IA | Payment for transfer of immovable property other than agricultural land | Rs. 50,00,000 | 1% | 1% |
| 194IB | Rent payment that is made by an individual or HUF not covered under payment 194I | Rs. 50,000 (per month) | 5% | NA |
| 194IC | Payments that are made under the Joint Development Agreement (JDA) to Individual/HUF | No Limit | 10% | 10% |
| 194J | Fees paid for professional services | Rs. 30,000 | 10% | 10% |
| 194J | Amount paid for technical services | Rs. 30,000 | 2% | 2% |
| 194J | Amounts paid as royalty for sale/distribution/exhibition of cinematographic films | Rs. 30,000 | 2% | 2% |
| 194K | Payment of income for units of a mutual fund, for example- dividends | Rs. 5,000 | 10% | 10% |
| 194LA | Payment made for compensation for acquiring certain immovable property | Rs. 2,50,000 | 10% | 10% |
| 194LB | Payment of interest on infrastructure bonds to Non-Resident Indians | NA | 5% | 5% |
| 194LBA(1) | Certain income distributed by a business trust among its unit holder | NA | 10% | 10% |
| 194LD | Payment of interest on rupee-denominated bonds, municipal debt security, and government securities | NA | 5% | 5% |
| 194M | Amounts paid for contract, brokerage, commission, or professional fee (other than 194C, 194H, 194J) | Rs. 50,00,000 | 5% | 5% |
| 194N | In case cash withdrawal over a certain amount takes place from the bank, and ITR is filed | Rs. 1,00,00,000 | 2% | 2% |
| 194N | In case cash withdrawal takes place from a bank and one does not file ITR | Rs. 20,00,000 | 2% | 2% |
| 194O | Amount paid for the sale of products/services by e-commerce service providers via their digital platform | Rs. 5,00,000 | 1% | 1% |
| 194Q | Payments made for the purchase of goods | Rs. 50,00,000 | 0.10% | 0.10% |
| 194S | TDS on the payment of any crypto or other virtual asset | NA | 1% | 1% |
| 206AA | TDS for non-availability of PAN | NA | At a rate higher of Specified rate as per the act 20% Rate in force | 20% |
| 206AB | TDS on non-filers of Income tax return | NA | Rate higher of: 5% Twice the mentioned rate in the provision Rate in force |
Types of TDS Deduction
The following are some of the income sources that are eligible for TDS deduction-
- Salary
- Payments to Contractor
- Commission payments
- Sale of House
- Insurance Commission
- Interest on securities
- Interest other than interest on securities
- Rent Payment
- Professional fees
- Online Gaming
- Winning from games like a lottery, crossword puzzle, card, etc.
What is a TDS Certificate?
A TDS Certificate is issued by the deductor, such as an account or entity, serving as proof of TDS deduction. There are two types of TDS certificates: Form 16 (issued by employers for salary deductions) and Form 16A (for deductions other than salary). FAQ
TDS is deducted on various transactions, including salary, FD maturity, commission payments, insurance disbursements, and other types of income. Additionally, there are various other forms of TDS applicable in different scenarios.
TDS is required to be deducted at source meaning, any entity or person will deduct the TDS once at the time of payment as per the TDS Slab.
To calculate TDS on the invoice, the pre-GST value, i.e., the value before the inclusion of GST, will be considered for the deduction.
TDS deduction is computed at a rate of 10% for individuals with a PAN Card and 20% for those without a PAN Card. This deduction is applicable only when TDS surpasses the Rs.40,000/- threshold.
Interest earned on FD deposits is subject to TDS taxation. However, if the interest earned is below Rs.40,000/-, the FD account remains tax-free.
I’m Shiv Kumar, a graduate with a passion for finance, marketing, and technology. My journey into finance started with a desire to understand money management and investing.
Our main goal is to empower individuals through financial education. We believe that everyone should have the opportunity to build a strong financial foundation. Whether you’re a seasoned investor or just getting started, we provide articles, guides, and resources to help you navigate the financial landscape.
I invite you to join our community of financially savvy individuals. Feel free to ask questions, engage with our content, and explore the topics that matter to you. Together, let’s take control of our financial futures.
