Types and Rates of TDS

Types and Rates of TDS

TDS is calculated on the basis of a threshold limit, which is the maximum level of income after which TDS will be deducted from future income/payments. TDS is deducted as a percentage of overall payment, and may range from 1% to 30% of actual payable amount.

Major sections of the Income Tax Act that outline TDS deductions are:

IT Section	TDS Rate	Threshold limit*
Section 192	According to income slab	According to income slab
Section 193	10% of income from interests on securities.	NIL
Section 194	10% of income from deemed dividends	NIL
Section 194A	10% of income from interests other than those on securities	Rs.5,000
Section 194B	30% of lottery or game-related winnings	Rs.10,000
Section 194BB	30% of income from horse racing	Rs.5,000
Section 194C	1% of earning from contracts or sub contracts for individuals and HUF (Hindu Unified Families) 2% for corporates	Rs.30,000
Section 194D	10% of income from insurance commissions	Rs.20,000
Section 194EE	20% of payment in NSS deposits	Rs.2,500
Section 194F	20% of payment made for repurchase of UTI or MF units	NIL
Section 194G	10% of commission earned from selling lottery tickets	Rs.1,000
Section 194H	10% of commission or brokerage earnings	Rs.5,000
Section 194I	2% of rent of plant and machinery 10% of rent of land, building, fitting, or furniture	Rs.1.8 lakhs
Section 194J	10% of fees for technical or professional services	NIL
Section 194L	10% of compensation payment made to a resident when acquisitioning some immovable property	Rs.1 lakh

*Threshold limit denotes the amount of income/profit up to which TDS will not be deducted. TDS will be calculated on value of income up and over threshold limit only.

TDS on income from salaries . are deducted on an estimation made at the start of the financial year. The employer is responsible for deducting taxes every month in equal instalments. In case the deductee has switched jobs during the fiscal year, the employer will deduct taxes on the basis of all accrued income in the fiscal year. Deductees should be very careful when mentioning their overall income as tax avoidance will be penalised by relevant authorities.

When is TDS not Deducted?

TDs is not collected on payments made to the Reserve Bank of India, the Government of India etc. TDS will not be collected when interest is credited or paid to:

• Central or State Financial Corporations.
• Banking companies.
• Interest paid under Direct Taxes or refund from the IT department.
• UTI, LIC and other insurance or co-operative societies.
• Interests earned from recurring deposit or savings account in cooperative societies or banks.
• Interest in Indira Vikas Party, KVP, or NSC.
• Interest earned in NRE account.
• All institutions notified under no-TDS.

Apart from these, there are other avenues also where TDS may not be applicable, such as interest on compensation from MVCT (Motor Vehicles Claims Tribunal). Therefore, taxpayers are advised to check if their interest income is liable for TDS with a particular institution or not.