TDS (Tax Deducted at Source) refers to the tax collected by the payer on specified types of income while making payments to the payee and subsequently depositing it with the government on behalf of the payee. This system was introduced to reduce tax evasion.This is mandatorily deductible and payable from a wide range of incomes and other transactions. Prescribed persons are required to deduct tax (TDS) on specified transactions and pay it to the government within the stipulated time as per TDS Rate Chart as applicable for various categories.
When to Remit TCS (Tax Collected at Source) to the Government?
Taxpayers must remit the taxable sum to the government by the 7th day of the following month. Non-payment or delayed payment attracts a penalty of 1.5% per month on the total payable amount until it is deposited.
Example: If TDS is deducted in January, it must be paid to the government by February 7. However, for TDS deducted in March, the payment deadline is April 30. In the case of TDS deducted on property purchases, the payment is due 30 days from the end of the month in which the TDS is deducted.
New TDS Thresholds Effective April 1, 2025
The 2025 Budget introduced significant changes to TDS compliance thresholds, aiming to reduce the tax burden for taxpayers and streamline compliance for businesses.
Key Threshold Changes:
- Rent Payments: The annual TDS limit on rent has increased to Rs. 6 lakh from the previous Rs. 2.4 lakh.
- Interest Paid on Deposits:
- For senior citizens, the threshold is now Rs. 1,00,000 (up from Rs. 50,000).
- For other individuals, the limit is Rs. 50,000 (up from Rs. 40,000).
- Interest on Securities: The threshold for TDS has been set at Rs. 10,000, whereas previously there was no threshold.
- Dividends: The threshold has been increased to Rs. 10,000 from Rs. 5,000.
- Winnings from Lottery, Puzzle, Horse Race, etc.: TDS will now be deducted only if winnings in a single transaction exceed Rs. 10,000. Previously, tax was deducted if the aggregate amount in a financial year exceeded Rs. 10,000.
- Commission and Brokerage:
- Threshold for insurance commission, lottery commission, and other commissions or brokerage has increased to Rs. 20,000 from Rs. 15,000.
- Fees for Professional and Technical Services:
- Payments for legal advice, drafting agreements, court representation, engineering, architecture, IT services, or other technical services are now exempt from TDS if the total amount paid does not exceed Rs. 50,000 per financial year, up from the previous limit of Rs. 30,000.
- Under Section 194C: For contractors and sub-contractors
- The obligation to deduct TDS arises if the payment exceeds Rs. 30,000 in a single transaction or Rs. 1,00,000 in aggregate in a financial year
- 1% if the payment is made to an individual or HUF.
- 2% if the payment is made to any other person.
- If PAN is not furnished, a 20% TDS rate applies.
- TDS for Transport Contractors: For transport businesses furnishing PAN, TDS will be nil.
- Transport Contractors: For transport businesses furnishing PAN, TDS is nil.
- Property Transactions under section 194 IA
- If the value of the property purchased or payment made is less than Rs. 50 lakh, there is no need to deduct TDS.
- If the value exceeds Rs. 50 lakh, TDS must be deducted at 1% and paid to the government.
These changes aim to provide relief to taxpayers and ensure smoother compliance processes. Staying updated on these regulations will help individuals and businesses efficiently manage their tax obligations.
TDS rate chart, which summarises the TDS provisions of the Income Tax Act, w.e.f.01.04.2025
| Section | TDS Threshold (RS) | TCS rate |
| 192 Salary paid to Residents/Non Residents | Above 12 lakhs | Regular Slab Rate or the Rate of Income Tax applicable to the employee based on the slab he/she falls in. |
| 192A R, NR Premature withdrawal from EPF | 50000 | 10% |
| 193 – Interest on Securities | 10000 | 10% |
| 194A – Interest on deposits paid by Banks, cooperative Societies and Post Office | 100000 (for senior citizens) 50000 (For others) | 10% |
| 194- Dividend for individuals/shareholders | 10000 | 10% |
| 194K units in respect of units of Mutual Funds | 10000 | 10% |
| 194B winning from loterry, crossword Fuzzle 194 BB winning horse race | 10000 in a single transaction | 30% |
| 194BA- R, NR, FC Income from online games | No limit | 30% |
| 194 D Insurance Commission | 20000 | Domestic Companies, 10% other than company 5% |
| 194DA ® Income from the insurance pay-out, while payment of any sum in respect of a life insurance policy | 100000 | 2% from October 2024 |
| 194E (NR, FC) Payment to non-resident sportsmen/sports association | No limit | 20 % |
| 194 G income by way of prize/commission on lottery ticket | 20000 | 2% (from 1st October 2024) |
| 194H Commission/brokerage | 20000 | 2% (from 1st October 2024) |
| 194-I Rent Payable (a) Plant and Machinery (b) Land and building, furniture fixture (c) Rent payable by individuals in case rent payable crosses Rs.50000 per month | 600000 per annum | (a) 2% (b) 10% (c) 5% |
| 194 J Fee for professional /Technical service | 50000 | 10% |
| 194LA income by way of enhanced compensation | 500000 | 10% |
| 206C (1G) Remittance under LRS and overseas tour program Package | 1000000 | Individuals 1% Companies 2% Without PAN 20% |
Note:
Applicable surcharge and health and education cess shall be deducted in addition to the TDS
The Tax Collected at Source (TCS) will be removed on remittances made for educational purposes when these remittances are financed through loans from specified financial institutions (Section 80E).
The Tax Collected at Source (TCS) on the purchase of goods will be removed, effective from April 1, 2025.
The higher TDS rate will only apply in cases where taxpayers do not provide PAN.
*NR=Non Resident Indian, FC=Foreign Citizen
The Tax Collected at Source (TCS) will be removed on remittances made for educational purposes when these remittances are financed through loans from specified financial institutions (Section 80E).
The Tax Collected at Source (TCS) on the purchase of goods will be removed, effective from April 1, 2025.
