TDS is a method of collecting Income Tax in India under the Indian Income Tax Act, 1961. It is part of the Department of Revenue managed by Indian Revenue Service (IRS) and is managed by the Central Board for Direct Taxes (CBDT). TDS is applicable on salary, commission, brokerage, royalty payments, contract payments, interest earned on several financial investments professional fees etc. Apart from this, TDS is also collected so as to keep the revenue source stable for the government throughout the year which prevents people from evading taxes.
The tax that is collected is used for various government activities like infrastructure development, defense, development etc. Also, a certain type of tax (TDS) is levied that the payee is expected to deduct which depends on the type of service. But, in case the individual has deducted more than the required tax amount, he/she will be eligible for a TDS Refund. However, you will require to file TDS in order to receive the refund amount.
An employer is allowed to deduct tax at source while making the actual payment to the employee, and employers, then deduct tax from salaries only at the time of payment. TDS is deducted only if your total income is taxable. However, TDS will not be deducted in case your total income is Rs. 2,50,000 and this amount is applicable for men and women below the age of 60 years.
Note: TDS deduction rate on salary ranges from 5% to 30% which is equivalent to the applicable income tax slabs.
The below chart contains TDS amount applicable for each type of payment.
| Particulars | TDS Rates (in %) |
|---|---|
| Section 192: Payment of salary | As per the Income Tax Slab rate |
| Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee (with effect from 01.06.2015). | 10 |
| Section 193: Interest on securities | |
| a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; | 10 |
| b) any debentures issued by a company where such debentures are listed on a recognized stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made there under; | 10 |
| c) any security of the Central or State Government; | 10 |
| d) interest on any other security | 10 |
| Section 194: Dividend other than the dividend as referred to in Section 115-O | 10 |
| Section 194A: Income by way of interest other than "Interest on securities" | 10 |
| Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort | 30 |
| Section 194BB: Income by way of winnings from horse races | 30 |
| Section 194C: Payment to contractor/sub-contractor | |
| a) HUF/Individuals | 1 |
| b) Others | 2 |
| Section 194C: | Payments made to transporters (44AE), coupled with its declaration with a PAN number |
| Section 194D: Insurance commission | 5 (10% till Assessment year 2016-17) |
| Section 194DA: Payment in respect of life insurance policy | 1 (2% till 31-5-2016) |
| Section 194EE: Payment in respect of deposit under National Savings scheme | 10 (20% till 31-5-2016) |
| Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of India | 20 |
| Section 194G: Commission, etc., on sale of lottery tickets | 5 (10% till 31-5-2016) |
| Section 194H: Commission or brokerage | 5 (10% till 31-5-2016) |
| Section 194-I: Rent | |
| a) Plant & Machinery | 2 |
| b) Land or building or furniture or fitting | 10 |
| Section 194-IA: Payment on transfer of certain immovable property other than agricultural land | 1 |
| Section 194-IB: Payment of rent by individual or HUF not liable to tax audit Note: This provision is applicable from June 1, 2017 | 5 |
| Section 194-IC: Payment of monetary consideration under Joint Development Agreements | 10 |
| Section 194J: Any sum paid by way of a) Fee for professional services, b) Fee for technical services c) Royalty, d) Remuneration/fee/commission to a director or e) For not carrying out any activity in relation to any business f) For not sharing any know-how, patent, copyright etc. | 10 |
| Section 194LA: Payment of compensation on acquisition of certain immovable property | 10 |
| Section 194LBA(1): Business trust shall deduct tax while distributing, any interest received or receivable by it from an SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | 10 |
| Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] | 10 |
| Section 194LBC: Income in respect of investment made in a securitization trust (specified in Explanation of Section 115TCA) | 25% in case of Individual or HUF 30% in case of other person |
| Any Other Income | 10 |
Point to remember: TDS on income is calculated on annual basis.
The below table provides details of income slab with their applicable tax amount in percentage. The tax here, is applicable for the individuals below 60 years.
| Annual Income | Tax Rates |
|---|---|
| Up to Rs.2,50,000 | Nil |
| Rs.2,50,001-Rs.5,00,000 | 5% |
| Rs.5,00,001-Rs.10,00,000 | Rs.12,500 + 20% of income above Rs. 5 lakhs |
| Above Rs.10,00,000 | Rs.1,12,500 + 30% of income above Rs. 10 lakhs |
The below table provides details of tax amount in percentage. The tax here, is applicable for the individuals over 60 years and under 80 years.
| Annual Income | Tax Rates |
|---|---|
| Up to Rs.3,00,000 | Nil |
| Rs.3,00,001-Rs.5,00,000 | 5% |
| Rs.5,00,001-Rs.10,00,000 | Rs.10,00 + 20% of income above Rs. 5 lakhs |
| Above Rs.10,00,000 | Rs.1,10,000 + 30% of income above Rs 10 lakhs |
The below table provides details of tax amount in percentage. The tax here, is applicable for the individuals over 80 years and above.
| Annual Income | Tax Rates |
|---|---|
| Up to Rs.5,00,000 | Nil |
| Rs.5,00,001-Rs.10,00,000 | 20% of income above Rs. 5 lakhs |
| Above Rs.10,00,000 Rs.1,12,500 | Rs.1,00,000 + 30% of income above Rs 10 lakhs |
What if Form 16?
Form 16 is issued by employers to employees and contains details regarding the tax deducted over the course of the year.
What is Form 16A?
Form 16A authenticates the amount deducted at source and the payments that have been deposited with the Income Tax Department.
What is a TDS Certificate?
A TDS certificate is a document that is issued by a deductor to a deductee.
What are the TDS rates applicable to interest on securities?
TDS rates for interest on securities are 10%.
What is the minimum exemption limit for individuals under 60 years of age?
Tax is exempted for individuals who are below 60 years of age and who earn under Rs.2.5 lakh.
