🔹 What is TDS?
TDS (Tax Deducted at Source) is a method where tax is deducted by the payer (deductor) at the time of making specified payments like salary, interest, rent, etc., and is deposited with the government.
🔍 Major TDS Sections with Limits, Rates & Examples
1. Section 192 – TDS on Salary
- Rate: Based on income tax slab
- Threshold: ₹2.5 lakh (General), ₹3 lakh (Senior), ₹5 lakh (Super Senior)
- Deductor: Employer
- Deductee : Employee
Example:
An employee earning ₹8 lakh annually will have TDS deducted based on applicable slab after adjusting exemptions (HRA, standard deduction, etc.).
2. Section 194A – TDS on Interest (Other than securities)
- Rate: 10%
-
Threshold:
- ₹50,000 (General)
- ₹1,00,000 (Senior citizens – for interest on bank/post office)
- Exception No TDS on Interest on Saving Bank Account, Interest by Firm to Partners, Interest on Income Tax Refund, Interest on Zero Coupon Bond etc.
Example:
Bank pays ₹1,20,000 as FD interest to a senior citizen → TDS of ₹12,000 will apply unless Form 15H is submitted.
3. Section 194C: Contractor Payment
- Threshold: ₹30,000 (single), ₹1,00,000 (aggregate)
- Rate: 1% (Individual/HUF), 2% (others)
-
Example:
Mr. X pays ₹50,000 to a contractor Mr. Y. TDS of ₹500 (1%) if PAN is present.
Mr. X pays ₹50,000 to a contractor XYZ Pvt Ltd TDS of ₹1000 (2%) if PAN is present.
4. Section 194H: Commission/Brokerage
- Threshold: ₹20,000
- Rate: 5%
-
Example:
You pay ₹25,000 brokerage — TDS = ₹1,250
5. Section 194I: Rent
- Threshold: ₹50000 Per month
- Rate: 10% (land/building/Furniture), 2% (equipment/machinery)
-
Example:
Rent of ₹55,000/month for Building = ₹6.6L/year → TDS = ₹66,000 (10%)
6. Section 194J: Professional Services
- Threshold: ₹50,000/year, Limit is applicable for each nature of payment i.e. 50000/year for each Fee for Professional Services, Fees for technical Services, Royalty, Non-Compete Fee. There is no limit for directors fees.
- Rate: 10%, 2% for Payment to any Call Centre, Fees for Technical Service & Royalty paid for sale, distribution or exhibition of cinematographic film.
-
Example:
Consultancy fees of ₹60,000 → TDS = ₹6,000
7. Section 194Q: Purchase of Goods
- Applies if Buyer Turnover > ₹10 Cr in Last year
- Threshold: ₹50,00,000
- Rate: 0.1% in excess of ₹50 Lakh
-
Example:
Purchase of ₹70L → TDS on ₹20L = ₹2,000
8. Section 194R: Perquisites/Benefits
- Threshold: ₹20,000/year
- Rate: 10% (no need to check if recipient is taxable or not)
-
Example:
A business gifts an iPhone worth ₹80K to a dealer → Deduct ₹8,000 TDS
✅ Pro Tips for Taxpayers
- Always collect TDS Certificate (Form 16/16A)
- Track deductions via AIS/26AS
- File ITR even if no tax due — to claim TDS refund
- Use PAN & TAN correctly to avoid notices
📊 TDS Summary Chart (FY 2025–26)
| Section | Nature of Payment | Rate | Threshold |
|---|---|---|---|
| 192 | Salary | Slab rate | Slab-based |
| 194A | Interest (Bank/FDR) | 10% | ₹50K/₹1L |
| 194C | Contractor | 1%/2% | ₹30K/₹1L |
| 194H | Commission | 5% | ₹20K |
| 194I | Rent | 2%/10% | ₹50K/month |
| 194J | Professional Fees or Technical Fee, Royalty, Non-Compete Fee, Director Fee | 10%/2% | ₹50K |
| 194Q | Purchase of Goods | 0.10% in excess of ₹50L | ₹50L |
| 194R | Perquisite/Gift | 10% | ₹20K |
📌 Section 206AA – When PAN is Not Available
Section 206AA of the Income Tax Act, 1961 is a penal provision. It applies when the deductee fails to furnish PAN to the deductor. In such a case, TDS must be deducted at a higher rate, overriding the usual TDS rates under other sections.
🔍 Key Provisions of Section 206AA
| Particulars | Details |
|---|---|
| Applicability | All payments where TDS is deductible (e.g. salary, contractor, interest, rent, professional fee) |
| When It Applies | If the recipient of income fails to furnish PAN to the deductor |
| TDS Rate | Higher of the following: a) Rate specified under the relevant TDS section b) 20% For section 194-O & 194-Q rate is 5% instead of 20%. |
📌 Examples of Section 206AA in Action
✅ Example 1 – Rent Payment under Section 194I
- Normal TDS on rent: 10%
- If PAN is not provided: TDS = 20% under Section 206AA
✅ Example 2 – Professional Fees under Section 194J
- Normal TDS: 10%
- If PAN not given: TDS = 20%
❗ Even if the applicable section prescribes a lower rate (say 5% under 194IB), Section 206AA still enforces 20% if PAN is missing.
🧠 Final Thoughts
Understanding TDS provisions helps avoid penalties and ensures proper tax planning. Whether you're a salaried employee, professional, business owner, or investor — knowing applicable TDS sections for FY 2025–26 is essential for smooth compliance.
🎯 Want to check how much TDS applies to your payment?
👉 Use My TDS Calculator Tool to calculate your TDS liability instantly and accurately for any section — salary, rent, contractor, commission.