TDS
IT Act Sections
TDS
is basically a spot tax, deducted from the actual source of income. The same is
described in the indirect tax section of Income tax Act 1961. It is implied on
the income received from financial products like interest received on fixed
deposits, incentives from the employer, commission’s payments, dividends on
bonds, sale/purchase or rent of any immovable property and money earned as
lottery or awards. The TDS rate applicable under different sections &
subsection of is between 1%- 30%.
|
IT Section
|
Threshold Limit*
|
TDS Rate
|
|
Section 192
|
As per applicable
income slab
|
As per income tax slab rate
|
|
Section 193
|
₹ 5000 for
debenture payment
|
10% of the interests
earned on security investments.
|
|
Section 194
|
₹ 2500
|
10% of proceeds from
any deemed dividends
|
|
Section 194A
|
₹ 10,000
|
10% of proceeds from
interests earned on investments other than securities
|
|
Section 194B
|
₹ 10,000
|
30% of prize money
on lottery or gaming related winnings
|
|
Section 194BB
|
₹ 10,000
|
30% of prize money
from horse racing
|
|
Section 194C
|
₹ 30,000
which is for each contract, whereas ₹ 100,000 is for p.a.
|
Proceeds from any
contracts / sub contracts
•
Individuals or HUF @ 1%
•
Non Individual/corporate @ 2%
|
|
Section 194D
|
₹ 15,000
|
5% of earning
as insurance commissions
|
|
Section 194EE
|
₹ 2,500
|
20% of expense in
NSS deposits
|
|
Section 194F
|
NIL
|
20% of investment in
MF or UTI units
|
|
Section 194G
|
₹ 15,000
|
5% of the
commission money from lottery ticket selling.
|
|
Section 194H
|
₹ 15,000
|
5% of the
brokerage earnings
|
|
Section 194I
|
₹ 1,80,000
|
2% on rental
amount of plant & machinery/
10% on the rent of land & building
|
|
Section 194J
|
₹ 30,000 p.a
|
10% on the technical/professional
services
|
|
Section 194LA
|
₹ 2,50,000
|
10% on the
transfer money paid to any resident while acquiring an immovable
property
|
*Threshold
amount is the max. amount exempt from TDS. The above rates are indicative and
may change based on government notification.
Other
indirect taxes such as service tax, TDS are also collected prior release of a
payment. The TDS rates and collection is regulated by CBTD (Central Board for
Direct Taxes).
TDS
is a spot tax, deducted from the actual source of income. The same is described
in the indirect tax section of Income tax Act 1961. It is implied on receiving
income from various financial products. TDS is charged on various incomes generated
in the form of incentives, commissions, payment & dividends earned for a
variety of sale, services, rent or purchase of a property, interest earned on
term deposits, etc.
The rates at which TDS is applied may vary as per the nature of income which
could be between 1% – 30%. The onus to collect TDS and deposit the same lies on
the service provider or the seller.
Rationale for TDS Deduction
- TDS is applied on any income or
overheads such as incentive (over & above salary), interests on fixed
deposit from banks, lotteries, commission payment and rent payment. While
making payments in any of these heads, a fixed rate is applied and the tax
liability is deducted prior making the payment. If one has deducted more
than the required tax amount, you will be eligible for a TDS Refund
if you file your TDS Return
- The source or person who
deducts TDS is referred as “Deductor”. The person to whom the payment is
being done is termed as “Deductee.”. For example, a deductor is an
employer/ organization paying salary or incentive to their employee who
would be a deductee.
- The employer or Deductor is
accountable to provide Form 16 /16A (TDS certificate) to the employee with
the computation of the tax deducted amount. No TDS certificate can be
issued for nil tax holding such as those payments which are exempted.
TDS Deduction Exemptions
There
are few cases when the TDS is exempted. TDS is not levied on payments in favor
of RBI, or towards any other recompense to the central government. Apart from
this, TDS is exempted from the payment of interest from the following:
·
·
- Banking companies
- Financial corporations formed
under the finance bill of union government or any state
- Income Tax
refund
- Direct taxes interest payment
- LIC, UTI and investments in
co-operative societies
- Interests earned in recurring
deposit or any savings account held with any commercial banks or
cooperative societies
- Interest earned on Indira
Vikas Patra (IVP), NSC or KVP
- Interest earned on NRE
account
- Any institutions notified as
Nil TDS organization
Apart
from the above, TDS might not be pertinent on various other avenues as well.
For example interest earned on the compensation granted from Motor Vehicles
Claims Tribunal.
TDS Deduction on Fixed Deposit Interest Earnings
a)
The tax deduction at source in cases of interest earned on fixed deposit
is calculated and applied beyond a threshold limit.
b) The current applicable limit is Rs. 10,000 in a financial
year. This has been increased to Rs. 40,000 annually from FY 2019-20 onwards.
c) In case, an individual earns interest more than the
threshold limit on fixed deposit on either single or consolidated interest for
all fixed deposits held with the same PAN number, then TDS will be applicable
at a rate of 10% from the interest payout or maturity proceeds whichever
happens earlier Let’s understand with an example. Mr. X is holding a Fixed
Deposit of Rs. 15 Lakh booked for 1 year term & rate of interest is 10%
p.a. He would earn ₹ 150,000 as interest on maturity after 1 year. The bank in
such as case will deduct TDS @ 10% of ₹ 150,000 i.e. ₹ 15,000 and deposits the
TDS amount with Income Tax Department on the behalf of customer Mr. X. In
return, Mr. X would receive a TDS certificate, which is generally referred as
Form 16A in taxation terms.
For Fixed deposits, TDS is only applicable on the payee when he/she exceeds the
interest earning of Rs. 10,000 in a financial year. Payee furnishing PAN
are liable to pay 10% on the interest earned through fixed deposits, else they
need to pay 20% if PAN is not possessed. For Senior Citizens (60 years or
older) are exempted to a limit of Rs. 50,000, earlier it was Rs. 10,000.
TDS Rate on Sale of the Immovable Property
a)
According to section 194-IA in the Income Tax provision, TDS is applied
on the sale of any immovable property at 1%.
b) In case, the buyer is unable to furnish a pan card, the
TDS rate may be levied at a higher rate of up to a maximum limit of 20%.
c) The transferee of the property is liable for deducting TDS
prior paying the amount to the seller (transferor) while selling the property.
d) The immovable property includes any residential or
commercial building, plots excluding the notified agricultural land, and any
portion of a building.
e) The transaction can be made via cheque cash or draft by
the transferee.
TDS Rate on Rent of an Immovable Property
a)
Resident individual, other than an HUF member, paying rent for an
immovable property to the resident landlord is accountable for withholding tax at source.
b) However, TDS would be applicable at the rate of 10% only
in cases where the annual rent amount exceeds ₹ 1,80,000 in a single financial
year.
c) The rent would include any payment in the form of lease rental,
sublease or other valid agreement for using the building, furniture, land or
fittings, etc.
d) The property-owner is also liable to provide a valid rent
receipt on each and every payment, which duly mentions any TDS deducted.
e) At the end of financial year, the landlord should also
provide Form 16 (TDS certificate) to the lessee for all TDS amount deducted in
the said financial year.
f) The transaction can be made via cheque cash or draft by
the transferee.
TDS Rate on Purchase of the Immovable Property
a)
For the purchase of any property involving the exchange of money between
the owner and buyer, TDS @ 1% shall be applicable.
b) However, agricultural land is not considered under this
provision of TDS.
c) The transferee should make the transaction via cash or
cheque or draft or other agreed payment modes.
TDS Rate on Transfer of the Immovable Property
a)
A transfer of residential property attracts TDS @ 1%. This is, however,
not applicable in the case of agricultural lands.
b) The buyer or transferee deducts the applicable tax amount
prior making payment to the transferor.
c) The transaction can be made via cheque cash or draft by
the transferee.
TDS Rate on the Immovable Property (in the case of
NRI)
a)
Under section 195 of Income Tax Act, the provision for TDS for NRI on
immovable property is explained. According to this section, any buyer who
is making payment to a non-resident individual is liable for deducting TDS as
per the rate applicable.
b) The Capital gains duly received post selling any immovable
property by any NRI in India is subjected to income tax. The transaction
can be made via cheque cash or draft by the transferee.
TDS Rate on Under-Construction Immovable Property
For any under construction properties where the net worth of the property is
calculated as more than ₹ 50 lakhs, the TDS will be applicable on the
installments paid on or after 1st of June, 2013. The transaction can be made
via cheque cash or draft by the transferee.
TDS Rate on Withdrawal of EPF
TDS
is applicable on the withdrawal of EPF in case an employee withdraws PF amount
₹ 50,000 & above with less than five years of continuous service at a rate
mentioned below:
a) 10% in case Form-15G/15H are not submitted. However, PAN
is submitted.
b) 34.608% or maximum marginal rate if the employee is unable
to provide PAN number.
TDS Rates Charts for FY 2018-19 (AY 2019-20)
The TDS calculation rates as applicable to the fiscal year
2018 -19 are given below.
|
Nature of payment
|
TDS Rate
|
Applicable Section
|
|
Salary Payment
|
Regular slab rate
|
Section 192
|
|
Interest earned on
securities
|
@ 10%
|
Section 193
|
|
Dividend accrued
(apart from the dividend as mentioned in the section 115-O
|
@ 10% (20%, in case
of invalid/no PAN)
|
Section 194
|
|
Income earned other
than securities
|
@ 10%
|
Section 194A
|
|
Income earned on the
prize money of lotteries, game or crosswords
|
@ 30%
|
Section 194B
|
|
Commission payment
for Insurance agents
|
@ 5% (20%, in
case of invalid /no PAN) (in case Form 15G/15H is filled)*
*effective from 1st June 2017.
|
Section 194D
|
|
|
@ 1%
|
Section 194DA
|
|
Rental income
|
For plant and
machinery @2%
Land, furniture, fitting and furniture @10%
|
Section 194-I
|
|
Payment is done for
transfer of any immovable property exclusive of the agricultural land
|
@ 1%
|
Section 194IA
|
TDS Rates for Non-Resident Indians (NRIs)
|
Nature of Payment
|
% of TDS
|
Applicable Section
|
|
Salary Payment
|
Normal slab rate
|
Section 192
|
|
Payment of accrued
provident fund balance
|
@ 10%
|
Section 192A
|
|
Income from prize
money on lotteries, card games, crossword puzzles or games within the ambit
of Indian Law
|
@ 30%
|
Section 194B
|
|
Income due to prize
money in horse racing
|
@ 30%
|
Section 194BB
|
|
Deposit made under
the National Savings scheme
|
@ 10%
|
Section- 194EE
|
|
Investment in any
Mutual Fund or UTI bonds
|
@ 20%
|
Section 194F
|
|
Commission money
earned for selling lottery tickets
|
@5%
|
Section 194G
|
TDS Rates on Salary
Under
section 192, employer is eligible to deduct TDS from the estimated income of
the employee. No tax will be deducted if the employee hasn’t exceeded the
minimum tax slab in the given financial year. TDS will not be deducted if the
employee’s total income is less than INR 2,50,000. The TDS on salary is
required to be deducted on the basis of average rate of income tax of the
taxpayer in the financial year. However, exceeding above the minimum
limit, TDS will be charged at the rate of 20%, if PAN is not possessed by the
employee.
TDS Rates for Salaried Individuals
|
S.No
|
Taxable Income
|
TDS Rate
|
Applicable section
|
|
1
|
Up to ₹ 2.5 lakhs
|
Nil
|
Section 192
|
|
2
|
₹ 2.5 lakhs to ₹ 5
lakhs
|
@ 5%
|
Section 192
|
|
3
|
₹ 5 lakhs to ₹ 10
lakhs
|
@ 20%
|
Section 192
|
|
4
|
Above ₹ 10 lakhs
|
@ 30%
|
Section 192
|
TDS Rates for Senior Citizens
The
TDS rates are different for the senior citizens (aged 60 -80 years) and super
senior citizens (80 years and above).
Senior Citizens
|
S. No
|
Income Slabs
|
TDS Rate
|
|
1
|
Up to ₹ 3 Lakhs
|
Nil
|
|
2
|
₹ 3 Lakhs – ₹ 5
Lakhs
|
@ 5%
|
|
3
|
₹ 5 Lakhs – ₹ 10
Lakhs
|
@ 20%
|
|
4
|
Above ₹ 10 Lakhs
|
@ 30%
|
TDS Rates for Super Senior Citizens
|
S. No
|
Income Slabs
|
TDS Rate
|
|
1
|
Up to ₹ 5 lakhs
|
Nil
|
|
2
|
₹ 5 lakhs – ₹ 10
lakhs
|
@ 20%
|
|
3
|
Above ₹ 10 lakhs
|
@ 30%
|
TDS Rates on Insurance Commission
With
effect from June 2016, the exemption limit for TDS on Insurance commission is
Rs. 15,000, earlier it was 20,000. Section 194 D deals with the provisions and
responsibilities of any person who is authorised to pay any income by way of
remuneration or reward to the resident. Any resident who has possessed PAN card
is charged at the rate of 5%, otherwise 20% if PAN is not furnished.
There
are also other forms of commissions charged at different rates mentioned below:
·
-
- Section 194 G– Commission, etc., on sale of lottery tickets.
Charged at the rate of 5%
- Section 194 H- Commission or brokerage. Charged @ of 5%
- Section 194 J- Remuneration/fee/commission to a director. Charged at
the rate of 10%
TDS Rate on Income from Services
Under
section 194 J, any person is liable to deduct TDS in for the following payment
made to resident person except individual or HUF:
a)
Fee for professional services
b)
Fee for technical services
c)
Royalty
d)
Remuneration/fee paid to a director
In
cases where the payee possesses PAN Card, he/she will be charged at the rate of
10% (excluding cess and surcharge). However, in cases where the payee does not
furnish PAN card, he/she is liable to pay higher of the following rates:
·
·
- At the rate or rates in
force, i.e., the rate prescribed in the Finance Act
- At the rate of 20%
- At the rate specified in the
relevant provision of the Income-tax Act
TDS Rates on Contracts
Section
194 C is applicable when any payment is made to contractor/sub-contractor for
any work which includes-
·
·
- Advertising contract.
- Telecasting and broadcasting
including the production of such programs
- Carriage of passengers and
goods by any mode of transport (exception: Railways)
- Catering services
- Supplying or manufacturing a
product as per the requirement or the specification of a customer by
using the materials that are supplied by such customer
- Supply of labour for works
contract
The
rate of TDS applicable on contracts under section 194 C is 1% for Residential
Individuals and HUF. However, for resident other than individual or HUF are
liable to pay 2%. Payee not possessing PAN card will be liable to pay at the
rate of 20%.
TDS Rates on Interest Income
Section
194 A deals with the provisions relating to TDS on interest income such as
fixed/recurring deposits. Every payer who is liable to pay interest to a
resident is liable to deduct TDS. The payer or deductor can only deduct TDS
when the amount of interest paid during the previous year exceeds more than Rs.
10,000 in case of banks and Rs. 5,000 in other cases.
Under section 194A rate of TDS is –
·
-
- 10%, if the payee possesses
PAN
- If the payee does not have
PAN, he/she is liable to pay 20%
Completed by Sachin Kumar Mishra
