Understanding Tax Deducted at Source (TDS) is essential whether you’re a salaried individual, a landlord, a freelancer, or a business owner. TDS is a tax collection mechanism under the Income Tax Act, 1961, where a portion of the payment is deducted at the time of the transaction itself. The applicable rate of TDS varies based on the nature of the payment, the recipient’s residency status, and whether a valid PAN is provided.
At RMCAuditors, we simplify tax compliance for you. Below, we present the complete TDS rate chart for FY 2024-25, along with essential insights into how TDS works.
TDS stands for Tax Deducted at Source. It’s a system implemented by the Indian government to ensure that tax is collected in a phased manner throughout the financial year. This method reduces the burden of lump sum payments at the time of filing income tax returns.
What is TDS and Why Does It Matter?
TDS stands for Tax Deducted at Source. It’s a system implemented by the Indian government to ensure that tax is collected in a phased manner throughout the financial year. This method reduces the burden of lump sum payments at the time of filing income tax returns.
TDS is applicable on a variety of incomes and transactions such as:
- Salaries paid by employers
- Interest from bank fixed deposits
- Commission or brokerage income
- Rent payments for the property
- Income from lotteries, betting, or horse racing
- Dividend payouts
In any transaction where TDS is applicable, the person or entity making the payment is called the Deductor, and the person receiving the income is the Deductee. The deducted tax amount is deposited with the government, and the Deductee receives the balance amount.
Practical Example of How TDS Works
Let’s say you won a cash prize of ₹2,00,000 through a game show. Under current tax rules, such winnings are subject to a flat TDS of 30%. This means ₹60,000 will be withheld, and you’ll receive ₹1,40,000. The deducted ₹60,000 is then deposited to the government against your PAN, which reflects in your Form 26AS. If excess TDS has been deducted in any financial year, you can claim it back when filing your income tax return.
Why Knowing TDS Rates is Crucial
Being informed about applicable TDS rates ensures you’re not caught off guard at year-end. Overlooking TDS rules can result in cash flow issues, non-compliance, or missed refund opportunities. It’s particularly important for freelancers, landlords, and business owners who deal with multiple types of income.
Stay Ahead with RMCAuditors
At RMCAuditors, we offer expert support for TDS compliance, from calculating accurate deductions to timely return filing. Our mission is to help you avoid penalties and streamline your tax responsibilities.
Explore our complete TDS rate chart for FY 2024-25 and reach out to our team for personalized assistance.
TDS Rate Table for Financial Year 2024-25 (Assessment Year 2025-26)
1. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) covering Salary and Retirement-related payments
| Section | Applicable Category | Nature of Payment | Exemption Threshold (Rs.) | Rate of TDS | Remarks |
|---|---|---|---|---|---|
| 192 | Resident and Non-Resident Individuals | Income from Salaries | As per income tax slab | Based on slab rates | TDS should be deducted monthly by the employer according to estimated annual earnings. |
| 192A | Resident and Non-Resident Individuals | Early withdrawal from EPF | 50,000 | 10% | No TDS deduction if the withdrawn amount is less than Rs. 50,000. |
2. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) applicable on Interest earned from Banks, Debentures, and Bonds
| Section | Applicable For | Nature of Payment | Threshold for TDS (Rs.) | Rate of TDS | Remarks |
|---|---|---|---|---|---|
| 193 | Resident | Interest on listed company debentures | 5,000 | 10% | Only applicable to debentures listed on recognized stock exchanges. |
| 193 | Resident | Interest on 8% and 7.75% Savings Bonds | 10,000 | 10% | No tax deduction if interest earned does not exceed Rs. 10,000 yearly. |
| 194 | Resident | Dividends distributed by domestic companies | 5,000 | 10% | TDS not applicable if total dividend payout is under Rs. 5,000. |
| 194A | Resident | Interest from bank or post office deposits | 40,000 (50,000 for senior citizens) | 10% | No deduction if interest earned is within the specified limit. |
| 194A | Resident | Interest from non-bank financial sources | 5,000 | 10% | Includes loans from NBFCs, individuals, and other informal lenders. |
3. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) related to Winnings from Lottery, Gambling, and Gaming
| Section | Applicable Entities | Nature of Payment | Threshold for Deduction (Rs.) | Rate of TDS | Remarks |
|---|---|---|---|---|---|
| 194B | Residents, Non-Residents, and Foreign Companies | Winnings from lotteries, game shows, or gambling | ₹10,000 (combined total) | 30% | No deduction relief for lower winnings. |
| 194BA | Residents, Non-Residents, and Foreign Companies | Earnings from online gaming | No minimum limit | 30% | TDS applies at the time of withdrawal or at financial year-end. |
| 194BB | Residents, Non-Residents, and Foreign Companies | Earnings from horse race betting | ₹10,000 (per year) | 30% | Relevant for winnings obtained at racecourses. |
4. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) applicable on payments made to Contractors and Subcontractors
| Section | Applicable To | Nature of Payment | Threshold Limit (₹) | TDS Rate | Remarks |
|---|---|---|---|---|---|
| 194C | R | Contractor or sub-contractor fees | ₹30,000 (per instance) or ₹1,00,000 (per year) | 1% for individuals, 2% for companies | Relevant for payments related to transport, construction, and other contracts. |
| 194D | R | Commission on insurance | ₹15,000 annually | 5% for individual agents, 10% for companies | TDS not applicable if yearly commission is within ₹15,000. |
5. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) for Professional Service fees and Royalties
| Section | Applicable To | Nature of Payment | Exemption Threshold (₹) | TDS Rate | Remarks |
|---|---|---|---|---|---|
| 194J | Resident | Fees for professional services (e.g., legal, medical, consultancy) | ₹30,000 | 10% | Includes services from consultants, legal advisors, and doctors. |
| 194J | Resident | Payments for technical services, BPOs, and film royalties | ₹30,000 | 2% | Applicable to IT services, engineering support, and media royalties. |
6. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) on Rent payments
| Section | Applicable To | Nature of Payment | Threshold Limit (Rs.) | TDS Rate | Remarks |
|---|---|---|---|---|---|
| 194-I | R | Rent for usage of plant or machinery | 2,40,000 | 2% | No deduction if total annual rent is under Rs. 2,40,000 |
| 194-I | R | Rent for land, buildings, furniture, or fittings | 2,40,000 | 10% | Relevant for both commercial and residential rental arrangements |
| 194-IB | R | Rent paid by individual/HUF not liable under 194-I | 50,000 per month | 5% (before Oct 1, 2024), 2% (from Oct 1, 2024) | Applies to individuals/HUFs making rent payments not covered under 194-I |
TDS Rates for FY 2024-25 (Assessment Year 2025-26) Applicable to Non-Residents and Foreign Corporations
1. TDS Rate Chart for Financial Year 2024-25 (Assessment Year 2025-26) on Interest Payments to Non-Resident Indians and Foreign Entities
| Section | Applies To | Payment Type | TDS Rate | Remarks |
|---|---|---|---|---|
| 194LB | Non-Residents, Foreign Companies | Interest earned on foreign currency loans | 5% | Relevant for interest paid on debt fund investments |
| 194LC | Non-Residents, Foreign Companies | Interest on foreign currency loans | 5% | Subject to RBI regulatory conditions |
| 194LD | Non-Residents, Foreign Companies | Interest from bonds denominated in rupees | 5% | Pertains to specific categories of bonds |
2. TDS Rates for Capital Gains for Non-Resident Taxpayers for Financial Year 2024-25 (Assessment Year 2025-26)
| Section | Applicable To | Type of Payment | TDS Rate Chart | Notes |
|---|---|---|---|---|
| 195 | NR | Income earned from investments | 20% | Covers dividends, interest, and capital gains. |
| 195 | NR | Long-term capital gains (LTCG) on shares under Section 112A | 10% | Applicable on sale of listed equity shares. |
| 195 | NR | Short-term capital gains (STCG) as per Section 111A | 15% | Relevant for certain specified bonds. |
3. TDS Rate Schedule for FY 2024-25 (AY 2025-26) on Royalty and Technical Service Fees Paid to Non-Residents
| Section | Applies To | Nature of Payment | TDS Rate Chart | Remarks |
|---|---|---|---|---|
| 195 | NR, FC | Royalty under agreements before 1976 | 50% | Higher rate because of older contracts. |
| 195 | NR, FC | Royalty under agreements after 1976 | 20% | Relevant for more recent royalty contracts. |
| 195 | NR, FC | Fees for technical services | 20% | Covers consulting and IT-related services. |
TDS Rate Schedule for the Financial Year 2024-25 (Assessment Year 2025-26) Applicable to Resident Individuals and Domestic Corporations
| Section | Transaction Type | Applicable TDS Rate |
|---|---|---|
| 192 | Payment of salaries | According to the regular slab rates |
| 192A | Premature withdrawal from EPF | With PAN: 10%Without PAN: 20% |
| 193 | Interest earned on securities | 10% |
| 194 | Dividend distribution | 10% |
| 194A | Interest from banks, post offices, and cooperative societies | 10% |
| 194B | Winnings from lotteries, crossword puzzles, and card games | 30% |
| 194BA | Earnings from online games | 30% |
| 194BB | Winnings from horse racing | 30% |
| 194C | Payments to contractors or subcontractors | Individuals/HUF: 1%Others: 2% |
| 194D | Commission related to insurance | Domestic companies: 10%Others: 5% |
| 194DA | Life insurance claim payouts | Before Oct 1, 2024: 5%After Oct 1, 2024: 2% |
| 194E | Payments to non-resident sports persons or associations | 20% plus surcharge and 4% cess |
| 194EE | Withdrawals from National Savings Scheme (NSS) | 10% |
| 194F | Repurchase of UTI or mutual fund units | 20% |
| 194G | Commission from lottery ticket sales | Before Oct 1, 2024: 5%After Oct 1, 2024: 2% |
| 194H | Brokerage and commission payments | Before Oct 1, 2024: 5%From Oct 1, 2024: 2% |
| 194-I | Rent payments | Plant & machinery: 2%Land/building/furniture: 10% |
| 194-IA | Transactions involving immovable property (excluding agricultural land) | 1% |
| 194-IB | Rent payments by individuals/HUF not covered under section 194-I | Before Oct 1, 2024: 5%After Oct 1, 2024: 2% |
| 194-IC | Payments made under Joint Development Agreements (JDA) | 10% |
| 194J | Fees for professional/technical services, royalties, and director remuneration | Professional services: 10%Technical services: 2%Royalty (cinema distribution): 2% |
| 194K | Dividend income from mutual funds | 10% |
| 194LA | Compensation for acquiring immovable property | 10% |
| 194LB | Interest on infrastructure debt funds for non-residents | 5% plus surcharge and 4% cess |
| 194LC | Interest on foreign currency loans | Standard loans: 5%IFSC bonds: 4% |
| 194LD | Interest on rupee-denominated bonds to FIIs/QFIs | 5% |
| 194LBA(1) | Income from business trusts distributed to unit holders | 10% |
| 194LBA(2) | Interest income of business trusts from Special Purpose Vehicles (SPV) | 5% |
| 194LBA(3) | Rental income from business trust assets | Individuals: 30%Foreign companies: 40% |
| 194LBB | Income from investment funds | Individuals: 10%Foreign companies: 40% |
| 194LBC | Income from securitisation funds | Individuals/HUF: 25%Domestic companies: 10%Foreign companies: 40%NRIs: 10% |
| 194M | Payments by individuals/HUF not under sections 194C, 194H, or 194J | Before Oct 1, 2024: 5%After Oct 1, 2024: 2% |
| 194N | Large cash withdrawals from banks, post offices, or cooperative societies | If ITR filed last 3 years (amount > Rs 3 Cr): 2%If no ITR filed:Rs 20L–Rs 3Cr: 2%Above Rs 3Cr: 5% |
| 194O | Payments by e-commerce platforms for goods/services | Before Oct 1, 2024: 1%After Oct 1, 2024: 0.1% |
| 194P | Pension or interest payments to senior citizens (aged 75+) | According to normal slab rates |
| 194Q | TDS on goods purchase | 0.10% |
| 194R | Business-related perquisites or benefits | 10% |
| 194S | Transfer of virtual digital assets | 1% |
| 195 | Income sources for non-residents (NRIs) | LTCG (Sections 115E, 112, 112A): 10%STCG (Section 111A): 15%Interest on foreign loans: 20%Royalty/technical fees: 10%Other income: 30%-40% |
| 196B | Income from offshore fund units including LTCG | 10% |
| 196C | Income from foreign currency bonds or GDRs of Indian companies | 10% |
| 196D | Income from Foreign Institutional Investors (excluding dividends and capital gains) | 20% |
| 206AB | Enhanced TDS rates for non-filers of income tax returns | Higher of twice the normal rate or 5% applicable |
| 206AA | Higher TDS when PAN is missing | TDS at applicable rate or 20%, whichever is greater |
Key Points to Remember
Section 194T mandates a 10% TDS deduction on payments from firms to partners when the amount surpasses Rs. 20,000.
Under Section 206AB, non-filers are subject to higher TDS rates to promote tax compliance.
New regulations for the digital economy impact transactions in e-commerce as well as the transfer of virtual assets.
TDS Rate Chart for the Financial Year 2024-25 (Assessment Year 2025-26) Applicable to Non-Resident Individuals (Excluding Companies)
| Section | Transaction Type | Explanation | Applicable TDS Rate |
|---|---|---|---|
| Section 192 | Income from Salary | TDS applicable when an NRI is employed in India | According to normal slab |
| Section 192A | Early withdrawal from Employees’ Provident Fund | Deducted if withdrawal amount exceeds Rs.50,000 and service duration is less than 5 years | 10% |
| Section 194B | Income from lotteries, card games, puzzles, and similar winnings | Covers game shows and online gaming earnings | 30% |
| Section 194BB | Earnings from horse racing | TDS applies if winnings are more than Rs.10,000 | 30% |
| Section 194E | Payments made to non-resident sports persons, entertainers, or sports bodies | Includes fees for matches, sponsorship payments, and prize money | 20% |
| Section 194EE | Withdrawals from National Savings Scheme | TDS deducted when withdrawal exceeds Rs.2,500 | 10% |
| Section 194F | Repurchase payments for UTI or Mutual Fund units by NRIs | Tax deducted on redemption of investments by non-resident Indians | 20% |
| Section 194G | Commission or brokerage from selling lottery tickets | TDS on commission earned by lottery agents | 5% |
| Section 194LB | Compensation received for acquisition of immovable assets | Includes land, buildings, or any portion of immovable property | 5% |
| Section 194LBA(2) | Interest income from Special Purpose Vehicles (SPVs) distributed by business trusts to unit holders | Business trusts include REITs and InvITs | 5% |
| Dividends received from SPVs by business trusts and passed on to unitholders | Business trusts must hold all shares except those legally required by government | 10% | |
| Section 194LBA(3) | Rental income distributed by business trusts to unit holders | Income derived from real estate properties held by the trust | 30% |
| Section 194LBB | Income paid to unitholders by investment funds | Includes gains from Alternative Investment Funds (AIFs) | 30% |
| Section 194LBC | Income generated from securitisation funds | Applies to Category I and II Alternative Investment Funds | 30% |
| Section 194LC | Interest paid on foreign currency loans to Indian firms or business trusts | Tax on loans availed via External Commercial Borrowings (ECBs) | 5% |
| Interest on long-term bonds listed on IFSC stock exchanges | Relevant for bonds issued in International Financial Services Centres | 4% | |
| Section 194LD | Interest on rupee-denominated bonds to Foreign Institutional Investors (FIIs) and Qualified Foreign Investors (QFIs) | Income from bonds issued by Indian companies | 5% |
| Section 195 | Income earned by NRIs from investments | Includes interest, dividends, and capital gains | 20% |
| Long-Term Capital Gains (LTCG) as per Section 115E | LTCG on shares and securities held by NRIs | 10% | |
| LTCG under Section 112(1)(c)(iii) | Pertains to sales of unlisted shares or property | 10% | |
| LTCG under Section 112A | Applies on sale of equity shares or equity-oriented mutual funds exceeding Rs.1 lakh | 10% | |
| Short-Term Capital Gains (STCG) under Section 111A | Gains from stocks or mutual funds sold within one year | 15% | |
| Other types of Long-Term Capital Gains | Covers all other LTCG sources not specified above | 20% | |
| Interest on foreign currency loans to Indian companies | Loans from non-resident investors | 20% | |
| Royalty payments to non-residents for intellectual property | Includes copyrights, patents, trademarks, software, books, and similar works | 10% | |
| Royalties under industrial policy agreements | Payments made under government-approved industrial projects | 10% | |
| Fees for technical services paid to NRIs | Covers consultancy related to engineering, design, and project management | 10% | |
| Section 196B | Income including LTCG from offshore fund units | Offshore funds involve international investment schemes with Indian assets | 10% |
| Section 196C | Income including LTCG from foreign currency bonds or Global Depository Receipts (GDRs) of Indian firms | Applies to investments in GDRs | 10% |
| Section 196D | Income earned by Foreign Institutional Investors (excluding dividends and capital gains) | Includes trading profits, interest, and other incomes | 20% |
Important Points on TDS for NRIs
- TDS is not required to be deducted if the total payment during the year does not cross the exemption threshold mentioned above.
- PAN must be furnished by the recipient to avoid higher TDS deduction under Section 206AA (20%).
- In case of cumulative payments exceeding the threshold during the financial year, TDS is to be deducted from the entire amount.
- Invoices inclusive of GST (if mentioned separately) are not liable for TDS on the GST portion.
Surcharge and Cess:
If an NRI’s total income surpasses Rs. 50 lakh, applicable surcharge rates will be levied. Additionally, a Health and Education Cess of 4% is charged on the overall tax amount.
Request for Reduced or No TDS:
NRIs have the option to submit Form 13 under Section 197 to seek permission for a lower or zero TDS deduction.
Double Taxation Avoidance Agreement (DTAA):
When an NRI is a resident of a country that has a DTAA with India, the TDS rate mentioned in the agreement, if lower, will be applied.
Refund of Excess TDS:
In case an NRI pays more TDS than required, they can claim a refund by filing their Income Tax Return (ITR).
TDS Deduction Rates for Domestic Companies for the Financial Year 2024-25
| Section | Type of Transaction | Applicable TDS Rate | Remarks |
|---|---|---|---|
| Section 192 | Salary payments | As per income tax slab rates | TDS is determined based on individual tax slabs, factoring in eligible exemptions and deductions. |
| Section 192A | Early EPF withdrawal | 10% | Applicable if withdrawal exceeds ₹50,000. If PAN is not furnished, TDS is charged at 30%. |
| Section 193 | Interest on securities | 10% | Covers interest from bonds, government securities, etc. TDS not applicable if yearly interest ≤ ₹10,000. |
| Section 194 | Dividend payments | 10% | Deducted if the dividend paid exceeds ₹5,000 in a year. |
| Section 194A | Interest (excluding securities) | 10% | Banks don’t deduct TDS if total interest ≤ ₹40,000 (₹50,000 for senior citizens). |
| Section 194B | Winnings from lottery, game shows, puzzles, etc. | 30% | Full winnings are taxed; no threshold exemption. |
| Section 194BB | Earnings from horse races | 30% | Entire winning amount is subject to TDS. |
| Section 194C | Contractor and sub-contractor payments | Individual/HUF – 1%, Others – 2% | – |
| Section 194D | Commission for insurance agents | 10% | Applicable to commissions disbursed by insurance companies. |
| Section 194DA | Payouts from life insurance policies | 5% | TDS is levied on the income part only, not the full amount received. |
| Section 194EE | Withdrawal under National Savings Scheme (NSS) | 10% | No deduction if the withdrawn amount is ≤ ₹2,500. |
| Section 194F | Repurchase of mutual fund/UTI units | 20% | No threshold exemption applies. |
| Section 194G | Commission from lottery ticket sales | 5% | Deducted if total annual commission exceeds ₹15,000. |
| Section 194H | Brokerage or commission | 5% | No TDS if annual payment ≤ ₹15,000. |
| Section 194-I | Rent payments | Plant & Equipment – 2%, Land/Building, etc. – 10% | Deduction required if rent exceeds ₹2.4 lakh annually. |
| Section 194-IA | Property transfers (excluding agricultural land) | 1% | Deducted if the transaction value exceeds ₹50 lakh. |
| Section 194-IC | Payments under Joint Development Agreements | 10% | TDS applies to individuals or HUFs receiving consideration under a JDA. |
| Section 194J | Fees for professional/technical services, royalty, etc. | General – 10%, Technical services/call centers – 2% | No deduction if total payment to a professional is ≤ ₹30,000. |
| Section 194K | Income from mutual fund units | 10% | Applies to dividends paid to resident investors. |
| Section 194LA | Compensation for compulsory property acquisition | 10% | TDS not applicable if compensation ≤ ₹2.5 lakh. |
| Section 194LBA(1) | Distribution from business trust | 10% | Relevant to REITs and InvITs distributing income to unit holders. |
| Section 194LBB | Income from investment funds | 10% | Applies to earnings distributed to unit holders. |
| Section 194LBC | Securitisation trust income | 10% | Deduction applies to interest distributed by |
TDS Rates Applicable for Non-Resident Companies for the Financial Year 2024–25 (Assessment Year 2025–26)
| Particulars | TDS Rate | Remarks |
|---|---|---|
| Section 194B – Winnings from lotteries, card games, crossword puzzles, etc. | 30% | Applicable if the winnings exceed ₹10,000. |
| Section 194BB – Winnings from horse races | 30% | Deducted when payment is made, provided the amount is above ₹10,000. |
| Section 194E – Payments to foreign sports personalities, entertainers, or sports associations | 20% | Pertains to all such payments made to non-residents. |
| Section 194G – Commission or brokerage on lottery ticket sales | 5% | Deducted from agents earning commission from selling lottery tickets. |
| Section 194LB – Interest payable by infrastructure debt funds to non-residents | 5% | Applies to interest payments made to non-residents from specified debt funds. |
| Section 194LBA(2) – Distribution by business trust to unitholders: 1. Interest from SPV 2. Dividend from SPV | 5% 10% | Applicable when the business trust owns 100% of SPV (except govt. held shares). |
| Section 194LBA(3) – Rental income from real estate distributed by business trust to unitholders | 40% | For foreign companies receiving rental income through REITs. |
| Section 194LBB – Income distributed by investment fund to unitholders | 40% | Applicable when income is paid to non-resident unitholders. |
| Section 194LBC – Income from securitisation fund investments | 40% | Applies to income paid to non-residents by securitisation trusts. |
| Section 194LC – Interest on foreign currency loans or long-term bonds | 5% | Applicable only on government-approved foreign currency loans or bonds. |
| Section 194LC – Interest on long-term bonds listed on an IFSC exchange | 4% | Lower rate applicable for bonds listed in IFSC exchanges. |
| Section 194LD – Interest on rupee-denominated bonds or govt. securities paid to FIIs/QFIs | 5% | Applicable only to interest paid up to 30th June 2023. |
| Section 195 – Payments to non-residents, including: 1. LTCG under Sec 112(1)(c)(iii) 2. LTCG under Sec 112A 3. STCG under Sec 111A 4. Other LTCG 5. Interest on foreign borrowings 6. Royalty for copyright/software (Sec 115A) 7. Royalty under pre-1976 agreements 8. Technical services under pre-1976 agreements 9. Other income | 10% 10% 15% 20% 20% 10% 50% 10% 40% | Rates vary based on income type and applicable provisions. Agreements’ dates impact royalty and technical fee rates. |
| Section 196B – Income (including LTCG) from offshore funds | 10% | Applicable to earnings from offshore mutual fund units received by non-residents. |
| Section 196C – Earnings (including LTCG) from foreign currency bonds or GDRs | 10% | Applies to non-residents earning from these financial instruments. |
| Section 196D – Income (excluding dividends and capital gains) earned by FIIs | 20% | Applicable on non-dividend and non-capital gains income of FIIs. |
Key Points Regarding TDS for Foreign Companies
Surcharge and Cess:
Foreign companies with total income exceeding ₹1 crore are subject to surcharge as follows:
2% on income between ₹1 crore and ₹10 crore
5% on income above ₹10 crore
Additionally, a Health and Education Cess at 4% is levied on the total tax liability.
Application for Lower or Nil TDS:
Foreign entities can submit Form 13 under Section 197 to apply for a certificate permitting deduction of tax at a lower or nil rate.
Applicability of DTAA:
When a foreign company is based in a country that has a Double Taxation Avoidance Agreement (DTAA) with India, the TDS will be applied at the reduced rate specified in the agreement.
Preferential TDS Rates on Certain Interest Incomes:
Interest earned on long-term bonds listed on stock exchanges in IFSCs is subject to a concessional TDS rate of 4%.
Interest from external commercial borrowings (ECBs) and rupee-denominated bonds is taxed at 5%.
Claiming TDS Refund:
If a foreign company has paid more TDS than required, it can recover the excess by filing an income tax return (ITR) in India.
TDS Exemptions and Special Cases
The following payments are not subject to Tax Deducted at Source (TDS):
Transfers made to the Reserve Bank of India, as well as to the central or state governments.
Interest income from savings bank accounts, National Savings Certificates (NSC), and Kisan Vikas Patra (KVP).
Interest received on income tax refunds.
Transactions involving cooperative banks and certain financial institutions.
TDS on Fixed Deposit Interest
Interest earned on fixed deposits up to ₹40,000 per financial year (₹50,000 for senior citizens) is not liable for TDS.
When the interest amount crosses the specified limit, TDS is deducted at 10%.
If the depositor fails to provide their PAN, the TDS rate increases to 20%.
TDS on Sale and Rental of Property
For property purchases exceeding ₹50 lakh, the buyer must deduct 1% TDS before making the payment to the seller.
If the seller is a non-resident (NRI), TDS will be applied at applicable capital gains tax rates, which may go up to 30% for short-term gains.
Rental income exceeding ₹2.4 lakh annually is subject to TDS at 10%.
TDS on Salary and How to Track It
TDS on salaries is computed based on applicable income tax slabs, under either the old or new tax regime.
Employers are responsible for deducting TDS from monthly salaries and depositing it with the government.
Employees can track TDS deductions through their payslips or by checking Form 26AS via the income tax portal.
How Is Salary TDS Determined?
To estimate an employee's taxable income for the financial year, the employer makes a reasonable projection by considering several components, such as:
Basic pay
Dearness allowance
Other types of allowances
Bonuses
Incentives
Perquisites
Deductions under Section 80C
Applicable HRA exemptions
A standard deduction of ₹50,000
Based on these elements, the employer calculates the applicable income tax using the current slab rates and deducts TDS on a monthly basis. You can also use an online tax calculator to get an estimate yourself.
Understanding Form 16 and Salary TDS Details
Form 16 is a certificate issued by the employer, typically around May or June each year. It contains two parts:
Part A: Provides information on the TDS deducted and submitted to the Income Tax Department
Part B: Shows the breakdown of salary components, deductions claimed, exemptions, and the net taxable income
This form is a helpful document when filing your income tax return and can be used to verify the accuracy of the TDS deducted.
How to Verify TDS Deducted Online
You can check the details of TDS deductions made against your PAN through the official Income Tax portal. Follow these steps:
Visit the Income Tax e-Filing website.
Log in using your PAN credentials and password. If you’re a new user, register first.
Navigate to ‘My Account’ and select ‘View Form 26AS’.
Download Form 26AS to view the TDS details.
Match the figures shown in Form 26AS with your salary slip and Form 16 to ensure accuracy.
In case of any errors, such as incorrect amounts or missing entries, notify your employer immediately.
What to Do If TDS Is Deducted But Not Paid to the Government
If your employer has deducted TDS from your salary but has not deposited it, you may face issues while filing your Income Tax Return (ITR). In such a case:
Contact your employer and ask them to deposit the pending TDS.
If the issue is not resolved, you can raise a complaint with the Income Tax Department.
Use your downloaded Form 26AS as supporting evidence when pursuing a resolution.
Smart Ways to Reduce TDS Deduction
Looking to increase your net salary and minimize TDS deductions? Here are some practical methods to help you achieve that:
1. Use Form 15G or 15H (For Fixed Deposit Investors)
If your total income for the year is below the taxable limit, you can prevent TDS on interest from fixed deposits, recurring deposits, and similar savings instruments by submitting:
Form 15G (for individuals below 60 years)
Form 15H (for senior citizens)
Submit these forms to your bank or financial institution.
2. Invest in Tax-Exempt Schemes
Tax-saving investments help reduce your taxable income, which in turn lowers your TDS. Common tax-saving options include:
Public Provident Fund (PPF): Offers tax-free returns and a deduction of up to ₹1.5 lakh under Section 80C.
Employee Provident Fund (EPF): Mandatory for salaried employees, with deductions eligible under Section 80C.
Equity Linked Savings Scheme (ELSS): Mutual fund option with high returns and tax benefits.
National Pension System (NPS): Get an extra deduction of ₹50,000 under Section 80CCD(1B).
Health Insurance Premiums: Deduction under Section 80D—₹25,000 for individuals and ₹50,000 for senior citizens.
Interest on Education Loans: Section 80E allows full deduction of interest paid, with no upper cap.
3. Take Advantage of HRA Exemption
If you’re staying in a rented home, you can reduce taxable income by claiming House Rent Allowance (HRA). Here’s what you need:
Submit rent receipts and the landlord’s PAN if annual rent exceeds ₹1 lakh.
HRA exemption is calculated as the least of the following:
Actual HRA received
50% of salary for metro cities / 40% for non-metro cities
Rent paid minus 10% of basic salary
4. Plan Salary-Linked Tax Deductions Effectively
Employees can reduce TDS from salary by:
Declaring planned investments and deductions early in the financial year
Submitting proof of investments promptly
Choosing between the old and new tax regimes based on your total liability
5. Request a Lower or Nil TDS Certificate (Section 197)
If your actual tax outgo for the year is expected to be lower than the TDS deducted, apply for a certificate under Section 197 to reduce or eliminate TDS. Ideal for:
Freelancers or consultants with low annual tax obligations
Individuals receiving large one-time incomes (e.g., property sales, commission)
How to apply:
Log in to the Income Tax portal and file Form 13
Mention estimated income, deductions, and expected tax
Once approved, share the certificate with the deductor to ensure lower TDS
6. Claim a Refund When Filing Income Tax Return
If TDS deducted exceeds your tax liability, you can claim a refund during ITR filing. Refunds are directly credited to your bank account once processed.
To track your TDS refund status:
Sign in to the Income Tax e-filing portal
Navigate to ‘My Account’ → ‘Refund/Demand Status’
Select the assessment year to check the status and refund details
7. Smart Income Distribution (For Business Owners and Professionals)
If you’re self-employed or run a business, consider these strategies to lower TDS:
Allocate income among family members, such as spouse or parents
Deduct legitimate business expenses like office rent, internet, travel, etc.
Consider forming an LLP or Private Limited Company to access additional tax benefits
Conclusion
Understanding TDS rates and procedures is key to effective tax planning, whether you’re a salaried individual, freelancer, NRI, or business owner. By actively monitoring deductions, utilizing exemptions, and filing timely returns, you can minimize tax burdens and ensure compliance.
FAQ's
A Chartered Accountant Certificate is an official document issued by a licensed Chartered Accountant. It is used to verify financial stability, business ownership, or regulatory compliance. Many visa categories, such as investor or entrepreneur visas, require this certificate to confirm that applicants meet financial and legal requirements.
Typically, you will need:
- Recent financial statements (balance sheets, profit and loss statements).
- Copies of your latest tax returns.
- Business registration and licensing documents (if applicable). Your Chartered Accountant may request additional documents depending on your visa requirements.
Only a licensed Chartered Accountant registered with a recognized professional body can issue this certificate. Examples include:
- Institute of Chartered Accountants of India (ICAI)
- American Institute of CPAs (AICPA)
- Other equivalent organizations in your country.
The time frame depends on the complexity of your financial documentation and your Chartered Accountant\u2019s review process. It typically takes 3-7 business days if all necessary documents are in order.
Yes, as long as the certificate 2019s information is accurate and valid at the time of each application. However, it\u2019s recommended to have a recent certificate to avoid issues with outdated information.
Feel free to ask if you have further questions or need clarification on the process!
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