TDS (Tax Deducted At Source) Rates and Its Applicability By Sarah Bhandari


Dear Friends,

TDS is deducted from the payments made by the individuals as per Income Tax Act 1961.

TDS is a direct tax which is collected from the people at the time of payment like Salary, Rent, and commission etc. The Central Board of Direct Taxes (CBDT) governs the provisions of TDS under the Income TaxActT, 1961.

There are two parties involved while deducting the Tax and the payment is made at the specified rate prescribed:

  1. Deductor (Payer) - Deductor is referred to the person deducting the tax; and
  2. Deductee (Payee) - Deductee is the person from whom the tax is deducted. No tax is deducted in case the amount doesn’t exceed the specified limit.
Provisions related to tax deducted at source:

Section

Provision

Applicability

Status /TDS exemption limit/ Rate of TDS

192

An employer is required to deduct TDS from the salary payable to the employees, under the head “Salaries” he is responsible of deducting Tax on an average rate of Income tax based on the prescribed rate during the FY year by considering the estimated income of the assessee.

For the applicability of section 192, there must be an employer- employee relationship between payer and payee, in the absence of such a relationship.

If an employee is engaged with more than one employer simultaneously, he may provide details about his salary and TDS in from 12B to any one of the employers.

Similarly, if the employee resigns and joins another employer, he may provide the details of his previous employment in form 12B to his subsequent employer.

The status of the employer is irrelevant for TDS on salary under section 192. Hence, whether the employer is an Individual, partnership firm, HUF or corporate entity, section 192 is applicable for payment of salary.

 

Penalty: Late filing fee under section 234E penalty of Rs 200 per day will be levied till the time failure continues subject to the maximum amount of TDS.

194

Dividend u/s 2(22)(e)

Payer of TDS will be Domestic companies and the payee will be resident, before making payment by the company to shareholders other than dividend declared U/S 115-0 when the amount exceeds Rs 2500/- during the financial year in case of an individual.

Rate of TDS – 10%

194A

Interest other than Interest on securities

Interest other than interest on securities like Interest on Fixed Deposits, Interest on loans and advances other than banks.

 

Applicable to a resident, payments made to non-residents are also covered under TDS mechanism. However, tax in such case isthe to be deducted as per section 195.

Exemption limit : Rs 10,000 P.a and Rate of TDS will be 10%

194B

Winning from the lottery, crossword puzzles or card game and other game of any sort

Applicable to any person

Exemption Limit: 10,000 and Rate of TDS: 30%

194BB

Wining from Horse races

TDS payer - Book maker, a person having a license for horse racing or arranging a wager or bet in any race course applicable to any person.

Exemption Limit: upto 10,000/-

Rate of TDS: 30%

194C

Payment to the contractor for carrying out any work (Including supply of labor for carrying out any work) in pursuance of a contract between the contractor and any specified person

Payer: a Specified person

Payee: Resident contractor (Note: “contract” shall include sub-contrat. Hence, contractor shall include sub-contractor)

No TDS deduction In case of payment in course of business of plying, hiring or leasing goods carriage, where such contractor owns 10 or less goods carriages at any time during the previous year and furnishes declaration to that effect along with his PAN, to the person paying or crediting such sum.

 

Limit: Single payment is exceeding Rs 30,000 or aggregate sums paid in the FY exceeding Rs 1,00,000

TDS Rate: Individual/ HUF= 1% of the sum paid. Any other person = 2% of the sum paid

194D

Insurance commission

Payer: Any person

Payee: Resident

Limit: 15,000 During a Financial Year.

TDS Rate: 5%

194DA

Payment in respect of Life Insurance Policy

Payer: Any person

Payee: Resident

Limit: Less than 1,00,000/-

Rate of TDS: 1%

194E

Payment to nonresident sportsmen or sports association of income referred to u/s 115BBA. Or entertainer

Payer: Any person

Payee: Non Resident

Sportsmen being a foreign citizen; or

Sports association; or

Entertainer being foreign citizen.

No threshold limit

 

Rate of TDS: 20%

194EE

Payments in respect of deposits under National Savings Scheme, etc.

Payer: Any Person

Payee: Any Person

Exemption Limit: Upto 2,500

Rate of TDS: 10%

194G

Commission, remuneration or prize for stocking, distributing, purchasing/ selling lottery tickets.

Payer: Any Person

Payee: Any Person

Exemption Limit: Upto 15,000

TDS Rate: 5%

 

194H

Commission or brokerage

Payer: Any person other than an Individual or HUF

Payee: Resident

Exemption Limit: Upto 15,000

TDS Rate: 5%

194-I

Rent on Plant/Machinery

Payer: Any person other than an Individual or HUF

Payee: Resident

Exemption Limit: Upto Rs 1,80,000 during a financial Year. Where the income by way of rent is credited or paid to a business trust, being a real estate investment trsut, in respect of any real estate asset, referred to in section 10 (23FCA), owned directly by such business trust.

Rate of TDS: Rent for use of any machinery or Plant or equipment : 2%;

Any other case 10%

194-IA

Consideration on transfer of immovable property other than agricultural land

Payer: Any Person

Payee: Resident

Exemption Limit: Less than Rs 50,00,000

194-IB

Payment of rent by certain individuals or HUF

Payer: Individual or HUF other than those covered/s 194-I

Payee: Resident [Inserted by Finance Act, 2017 w.e.f 01-06-17]

Exemption Limit: Rs 50,000

Rate of TDS: 5%

194-IC

Any sum by way of consideration (not being a consideration in kind) under a joint development

Payer: Any Person

Payee: Resident [Inserted by Finance Act, 2017 w.e.f 01-06-17]

No threshold Limit

TDS Rate: 10%

194J

Fees for professional services

Fees for technical services;

Royalty; or

Any remuneration or fees or commission to a director of a company; or

Non-competing or exclusively fees referred u/s 28(va)

 

Payer: Any person other than an individual or HUF

Payee: Resident

Exemption Limit: Rs 30,000 during a financial year for each kind of payment separately.

TDS rate: 10%

(2% in the case of a payee, engaged only in the business of operation of call centre.) [Amended by Finance Act, 2017 w.e.f 01-06-2017]

194-LA

Compensation on compulsory acquisition

Payer: Any Person

Payee: Resident

Exemption Limit: Upto Rs 2,50,000 during a financial year.

TDS Rate: 10%

194-LC

Interest from Indian company

Payer: Indian company or business trust

Payee: Non-resident (not being a company),

Or a foreign company

Rate of TDS: 5%

The income by way of interest shall be the interest payable on or after 1-7-2012 but before 1-7-2020 in respect of investment made by the payee.

195

Interest or

Ø  Any other sum (other than income taxable as ‘salaries’)

Payer: Any person

Payee: Non-resident, not being a company

Foreign company

Exemption Limit: Dividend referred in section 115-o

TDS Rate: As specified the Finance Act.

196B

Long-term capital gains on units referred u/s 115AB

Payer: Any Person

Payee: Offshore Fund

Exemption Limit: NIL

TDS Rate: 10%

196C

Interest or Long-term capital gains on Bonda or GDRs referred u/s 115AC.

Payer: Any Person

Payee: Non-Resident

Exemption Limit: NIL

TDS Rate: 10%

196D

Income from securities referred u/s 115AD(1)(a)

Payer: Any Person

Payee: Foreign institutional investors

Exemption: Dividend falling u/s 115-O; and

Capital gains on transfer thereof.

Rate of TDS: 20%

         
 
However, no TDS is deducted when

  1. The amount is paid to RBI, Government or any such Body.
  2. Finance corporation of central or state
  3. Mutual fund u/s 10(23D)
  4. When Deductee has no-deduction certificate u/s 192 of Income Tax Act
  5. Interest paid or credited to:
  • Banking Company;
  • LIC, UTI or other Insurance Company;
  • Co-operative Society having banking business;
  • Body notified for non-deduction of tax;
  • NRE account;
  • NSC, KVP or Indira Vikas Party;
  • Banks or cooperative society’s recurring deposits or saving account; etc
Notes:

  1. TDS cannot be paid through Credit Card
  2. Surcharge & Educational Cess will not be considered for the purpose of TDS except in case of TDS on salary payment.
  3. Higher rate of (20%) TDS will be applicable for not furnishing correct PAN
  4. Form 15G/15H received for non deduction of TDS (Including NIL return) – Needs to report online on Quarterly basis
  5. Quarterly statement of TDS 31st July, 31st Oct, 31st Jan and 31st May
  6. Issue of TDS/TCS certificate- Within 15 days from the due date of filing of Quarterly TDS return salary certificate in Form- 16 upto 15th June of succeeding financial
  7. In case of failing to file TDS return within one year of due date or furnishing incorrect information penalty Rs 10,000/- shall be liable
  8. 8. Fees of Rs 200/- per day for late filing of TDS and TCS Return
  9. 9. Online generation of TDS certificate is mandatory in case of every person whose accounts are required to be audited u/s 44AB.

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