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Tax Deducted at Source (TDS) is a key component of the Indian taxation system, designed to collect tax at the very source of income. It applies to various types of earnings such as salaries, interest income, rent, professional fees, commissions, contractual payments, dividends, and lottery winnings. Each category is governed by specific sections of the Income Tax Act. To ensure proper compliance, it is important to understand the applicable TDS rates, threshold limits, and filing obligations—including TDS returns and certificates like Form 16 and Form 16A. This article provides a comprehensive overview of the different types of TDS in India
What is TDS (Tax Deducted at Source)?
Tax Deducted at Source (TDS) is a tax collection mechanism introduced by the Income Tax Department of India, based on the principle of “pay as you earn.” Under this system, tax is deducted at the point of income generation—before the income reaches the recipient. TDS is applicable to various payments such as salaries, interest, rent, professional fees, dividends, and commissions.
The entity making the payment (payer) is responsible for deducting the applicable TDS and depositing it with the government. The amount deducted is reflected in the recipient’s Form 26AS, enabling them to claim credit while filing their income tax return. TDS rates vary based on the nature of payment and the recipient’s category or status
Types of TDS in India
Below is a list of key TDS types under various sections of the Income Tax Act, along with their applicable rates, thresholds, and features:
1. Section 192 – TDS on Salary
TDS is deducted by employers on salary payments based on applicable income tax slabs, after accounting for exemptions and deductions. It is deposited monthly and documented in Form 16 issued to the employee at the end of the financial year.
2. Section 194C – TDS on Contractor Payments
TDS is applicable on payments made to contractors:
1% for individuals/HUFs
2% for others
Applicable if a single payment exceeds ₹30,000 or aggregate annual payments exceed ₹1,00,000.
3. Section 194I – TDS on Rent
Applies to rent payments:
10% for land/buildings
2% for machinery/equipment
Applicable when total rent exceeds ₹2.4 lakh annually.
4. Section 194A – TDS on Interest (Other than Securities)
TDS at 10% on interest income (like bank deposits) exceeding:
₹40,000 (general)
₹50,000 (senior citizens)
Rate increases to 20% if PAN is not provided.
5. Section 194J – TDS on Professional and Technical Services
TDS of 10% on fees paid for professional/technical services, applicable when annual payments exceed ₹30,000.
6. Section 194H – TDS on Commission and Brokerage
TDS at 5% on payments exceeding ₹15,000 annually for commission or brokerage.
7. Section 194 – TDS on Dividends
TDS of 10% on dividend payments exceeding ₹5,000. If PAN is not provided, the rate is 20%.
8. Section 195 – TDS on Payments to Non-Residents
Applicable to interest, royalty, dividends, and other payments to non-residents. The rate depends on the nature of income and relevant DTAA (Double Taxation Avoidance Agreement) provisions.
9. Section 194B – TDS on Lottery and Game Winnings
Flat TDS of 30% on winnings from lotteries, puzzles, and similar contests exceeding ₹10,000.
10. Section 194IA – TDS on Sale of Immovable Property
Buyers must deduct 1% TDS on property transactions exceeding ₹50 lakh (excluding agricultural land).
11. Section 194D – TDS on Insurance Commission
TDS at 5% on insurance commissions exceeding ₹15,000 paid to agents or intermediaries.
12. Section 194O – TDS on E-commerce Transactions
E-commerce operators must deduct 1% TDS on payments to sellers, applicable beyond ₹5 lakh annually.
13. Section 194Q – TDS on Purchase of Goods
Buyers must deduct 0.1% TDS on purchases exceeding ₹50 lakh annually from a single seller.
14. Section 194R – TDS on Benefits or Perquisites
TDS at 10% on business-related benefits/perquisites provided to residents if the total value exceeds ₹20,000 per financial year.
15. Section 192A – TDS on Premature PF Withdrawals
TDS at 10% on EPF withdrawals before five years of service if the amount exceeds ₹30,000. A higher rate (up to 34.608%) applies without
TDS Section List (With Rates & Thresholds)
Below is a comprehensive table outlining the various TDS sections under the Income Tax Act, their applicable rates, and threshold limits:
| Section | Nature of Payment | TDS Rate | Threshold Limit |
|---|---|---|---|
| Section 192 | TDS on Salary | As per applicable income tax slabs | N/A |
| Section 194C | TDS on Contractor Payments | 1% (Individual/HUF), 2% (Others) | ₹30,000 per transaction / ₹1,00,000 annually |
| Section 194I | TDS on Rent | 10% (Land/Building), 2% (Machinery/Equipment) | ₹2.4 lakh per annum |
| Section 194A | TDS on Interest (other than securities) | 10% (with PAN), 20% (without PAN) | ₹40,000 (Individuals) / ₹50,000 (Senior Citizens) |
| Section 194J | TDS on Professional/Technical Fees | 10% | ₹30,000 per annum |
| Section 194H | TDS on Commission and Brokerage | 5% | ₹15,000 per annum |
| Section 194 | TDS on Dividends | 10% (20% if PAN not provided) | ₹5,000 per annum |
| Section 195 | TDS on Payments to Non-Residents | As per applicable DTAA or Income Tax Act | No minimum threshold |
| Section 194B | TDS on Lottery & Prize Winnings | 30% | ₹10,000 |
| Section 194IA | TDS on Sale of Immovable Property | 1% | ₹50 lakh or more |
| Section 194D | TDS on Insurance Commission | 5% | ₹15,000 per annum |
| Section 194O | TDS on E-commerce Transactions | 1% | ₹5 lakh per annum (individual/HUF sellers) |
| Section 194Q | TDS on Purchase of Goods | 0.1% | Exceeds ₹50 lakh per annum |
| Section 194R | TDS on Benefits or Perquisites (Business) | 10% | ₹20,000 per annum |
| Section 192A | TDS on Premature EPF Withdrawals | 10% (Max marginal rate if PAN not provided) | Applies if withdrawal ≤ ₹30,000 before 5 years |
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