What is TDS?
- TDS, or Tax Deducted at Source, is a means of collecting income tax in India.
- It is prescribed under the Income Tax Act of 1961, where tax is deducted from the income of the taxpayer at the time of payment.
- This initiative helps in reducing tax evasion and ensures timely revenue for the government.
Sections of TDS & TDS Rates
- The TDS provisions are outlined in various sections of the Income Tax Act.
- Each section specifies the type of income that is subject to TDS and the rate at which it should be deducted.
- For example, Section 192 deals with salary payments, while Section 194A covers interest payments to residents.
- Understanding these sections is crucial for both deductors and deductees to comply with the tax regulations.
| Section | Nature of Payment | Threshold Limit | TDS Rate |
|---|---|---|---|
| 192 | Salary | Basic exemption limit | As per slab |
| 192A | EPF withdrawal (before 5 yrs) | ₹50,000 | 10% |
| 194A | Interest (Bank/FD) | ₹5,000 (₹40,000 for banks) | 10% |
| 194C | Contractor/Sub-contractor | ₹30,000 (single) or ₹1,00,000 (year) | 1% (Ind/HUF), 2% (others) |
| 194H | Commission/Brokerage | ₹15,000 | 5% |
| 194I | Rent (Land/Building) | ₹2,40,000 | 10% |
| 194IA | Sale of Immovable Property | ₹50 lakh | 1% |
| 194J | Professional/Technical Fees | ₹50,000 Applicable from 01-04-2025 | 10% for Professional & 2% for Technical |
| 194N | Cash Withdrawal | ₹20 lakh/₹1 crore | 2% or 5% |
| 194Q | Purchase of Goods | ₹50 lakh | 0.1% |
- The rates of TDS vary depending on the nature of the income and the provisions of the Income Tax Act.
- For instance, the TDS rate for salaries under Section 192 is based on the individual’s income tax slab.
- Similarly, TDS on interest payments under Section 194A is generally at a rate of 10%.
- It is essential for businesses and individuals to keep abreast of these rates to ensure correct tax deductions.