TDS needs to be deducted on a specific payment at a prescribed rate by the payer/deductor. Deductor is a person who is liable to deduct TDS before making payment to a deductee. Each payment has its own threshold limit and rate of a percentage to deduct TDS. The payer/deductor is also required to deposit TDS deducted to the government within due dates and file TDS Return.
TDS on Salary Payments
TDS on salary payment is deducted as per section 192 of the income tax act. It is calculated at the applicable Slab Rate. Employer/Deductor needs to deposit TDS deducted on salary before the 7th of the next month (30th April for the month of March). An employer also needs to file TDS Return in Form 24Q each quarter.
TDS on other than Salary Payments
TDS on other payments depends on the Nature of Payment. Here are the latest rates of TDS on payments other than Salary for FY 2016-17 (AY 2017-18) w.e.f 01/06/2016.
Most common TDS sections and Rates:
| Section | Nature of Payment | Threshold | Individual/HUF | Others |
|---|---|---|---|---|
| 194A | Interest other than on securities by banks | Rs. 10,000/- | 10% | 10% |
| 194C(1) | Payment to Contractors | Rs. 30,000/- single payment Rs. 1,00,000/- aggregate payment |
1% | 2% |
| 194C(2) | Payment to Subcontractors for Advertisements | |||
| 194H | Commission or Brokerage | Rs. 15,000/- | 5% | 5% |
| 194I | Rent of Land, Building or Furniture | Rs. 1,80,000/- | 10% | 10% |
| Rent of Plant & Machinery | 2% | 2% | ||
| 194IA | Transfer of Immovable Property (w.e.f. 01.06.2013) | Rs. 50,00,000/- | 1% | 1% |
| 194J | Professional/technical services, royalty | Rs. 30,000/- | 10% | 10% |
Other TDS sections and Rates:
| Section | Nature of Payment | Threshold | Individual/HUF | Others |
|---|---|---|---|---|
| 192A | Premature Withdrawal from EPF | Rs. 50,000/- | 10% | NA |
| 193 | Interest on Securities | Rs. 5,000/- | 10% | 10% |
| 194 | Deemed Dividend | No Minimum Limit | 10% | 10% |
| 194A | Interest other than on securities by banks | Rs. 10,000/- | 10% | 10% |
| 194B | Winnings from Lotteries / Puzzle / Game | Rs. 10,000/- | 30% | 30% |
| 194 BB | Winnings from Horse Race | Rs. 10,000/- | 30% | 30% |
| 194D | Payment of Insurance Commission | Rs. 15,000/- | 5% | 5% |
| 194EE | Payment of NSS Deposits | Rs. 2,500/- | 10% | 10% |
| 194F | Repurchase of units by Mutual Funds / UTI | Any amount | 20% | 20% |
| 194G | Commission on Sale of Lottery tickets | Rs. 15,000/- | 5% | 5% |
| 194J(1) | Remuneration / commission to director of the company | Any amount | 10% | 10% |
| 194J(ba) | Any remuneration / fees / commission paid to a director of a company, other than those on which tax is deductible u/s 192. | Any amount | 10% | 10% |
| 194LA | Compensation on acquisition of certain immovable property | Rs. 2,00,000 | 10% | 10% |
TDS Rates are prescribed under the Income Tax Act,1956. However, the finance ministry of India can make changes to such rates in the Budget of a particular financial year if required.
FAQs
Corporates, Government Offices, and individuals to whom audit is applicable and making the above-mentioned type of payments are required to deduct TDS. However, TDS isn’t required to be deducted by Individuals and HUFs whose books don’t need auditing.
TDS needs to be deducted at the time of:
1. Crediting the sum to payee account or
2. Actual payment of cash or
3. Payment via cheque, draft or via any other source, Whichever is earlier.
TDS is applicable to Payments such as Salary, Rent, Interest, Professional Fees, Commission, Contracts, Dividend, etc.