Understanding TDS – Why You Receive Less Than Expected
Have you ever been surprised to receive less payment than what you were expecting? One common reason could be TDS – Tax Deducted at Source.
TDS is a system under the Income Tax Act where the tax is collected at the very point of income generation. This means the payer (like an employer, client, or tenant) is legally required to deduct a certain percentage of tax before making the payment to you, and then deposit it directly to the government.
This mechanism ensures a steady flow of revenue for the government and promotes tax compliance.
Whether it’s salary, interest, professional fees, rent, or commission – TDS may be applicable depending on the nature of the payment. Let’s dive deeper to understand how TDS works and the rates applicable to various types of transactions.
What is TDS (Tax Deducted at Source)?
TDS stands for Tax Deducted at Source. It is a method where tax is deducted by the person making a payment and deposited with the government on behalf of the recipient.
- The person making the payment is known as the Deductor.
- The person receiving the payment is called the Deductee.
TDS is applicable on various types of payments such as:
- Salaries
- Commissions
- Professional and consultancy fees
- Rent, interest, contract payments, and more.
The rate at which TDS is deducted depends on:
- The nature of the transaction
- The category of the recipient (individual, company, etc.)
- The residential status of the payee (resident or non-resident)
The deductor must:
- Deduct TDS at the applicable rate,
- Deposit it to the government within the prescribed time,
- File TDS returns/statements regularly.
TDS rates vary for:
- Residents
- Non-Residents
- Domestic companies
- Foreign companies
TDS Changes Effective from 1st April, 2025
The following key changes in TDS (Tax Deducted at Source) provisions will come into effect from 1st April, 2025:
| Section | Till 31st March,2025 | From 1st April, 2025 |
| 193 – Interest on securities | NIL | 10,000 |
| 194A – Interest other than
Interest on securities |
When payer is bank, cooperative society and post office:
(i) 50,000/- for senior citizen; (ii) 40,000/- in case of others In case the payer is others: (iii) 5,000/- |
When payer is bank, cooperative society and post office:
(i) 1 lakh for senior citizen (ii) 50,000/- in case of others In case the payer is others: (iii) 10,000/- |
| 194 – Dividend, for an individual shareholder | 5,000 | 10,000 |
| 194K – Income in respect of units of a mutual fund | 5,000 | 10,000 |
| 194B – Winnings from lottery, crossword puzzle Etc. &
194BB – Winnings from horse race |
Aggregate of amounts exceeding 10,000/- during the financial year | 10,000/- in respect of a single transaction
|
| 194D – Insurance commission | 15,000 | 20,000 |
| 194G – Income by way of commission, prize etc. on lottery tickets | 15,000 | 20,000 |
| 194H – Commission or brokerage | 15,000 | 20,000 |
| 194-I – Rent | 2,40,000 (in a financial year) | 50,000 (in a month) |
| 194J – Fee for professional or technical services | 30,000 | 50,000 |
| 194LA – Income by way of enhanced compensation | 2,50,000 | 5,00,000 |
- Section 206AB which added compliance burden for TDS deductors has been removed.
- The TDS rate for section 194LBC – Income received from investment in securitization trusts for residents has been reduced to 10%.
TDS Rate Chart – For Residents
The following are the rates of TDS when the amount is to be paid to a resident.
| Section | Nature of Transaction | Threshold Limit (Rs) | TDS Rate |
| 192 | Payment of salary | Basic exemption limit of employee | Normal Slab Rates |
| 192A | Premature withdrawal from EPF | 50,000 | With PAN: 10%
Without PAN: 20% |
| 193 | Interest on securities | Debentures- 5,000 | 10% |
| 8% Savings (Taxable) Bonds 2003 or 7.75% Savings (Taxable) Bonds 2018- 10,000 | |||
| Other securities-10,000 | |||
| 194 | Payment of any dividend | 10,000 | 10% |
| 194A | Interest other than interest from securities (from deposits with banks/post office/co-operative society) | Senior Citizens- 1 lakh
Others- 50,000 |
10% |
| 194B | Income from lottery winnings, card games, crossword puzzles etc. | Aggregate income from lottery winnings, card games, crossword puzzles etc- 10,000 for each transaction
Online Gaming – Refer 194BA |
30% |
| 194BA | Income from online games | No limit | 30% |
| 194BB | Income from horse race winnings | 10,000 (Aggregate winnings during a financial year not single transaction) | 30% |
| 194C | Payment to contractor/sub-contractor:- | Single transaction- 30,000
Total transactions duting FY- 1 lakh |
|
| a) Individuals/HUF | 1% | ||
| b) Other than Individuals/HUF | 2% | ||
| 194D | Insurance Commission | 20,000 | 2% |
| 194DA | Insurance pay-out in respect of a life insurance policy | 1 lakh | 2% |
| 194EE | Payment of amount standing to the credit of a person under National Savings Scheme (NSS) | 2,500 | 10% |
| 194F | Payment for the repurchase of the unit by Unit Trust of India (UTI) or a Mutual Fund | No limit | 20% |
| 194G | Payments, commission, etc., on the sale of lottery tickets | 20,000 | 2% |
| 194H | Commission or brokerage | 20,000 | 2% |
| 194-I | Rent: | 50,000 per month or part of the month | |
| 194-I(a) Rent on plant and machinery | 2% | ||
| 194-I(b) Rent on land/building/furniture/fitting | 10% | ||
| 194-IA | Payment in consideration of transfer of certain immovable property other than agricultural land. | 50 lakhs | 1% |
| 194-IB | Rent payment by an individual or HUF not covered u/s. 194-I | 50,000 per month | 2% |
| 194-IC | Payment under Joint Development Agreements (JDA) to Individual/HUF | No limit | 10% |
| 194J | Any sum paid by way of fee for professional services | 30,000 | 10% |
| Any sum paid by way of remuneration/fee/commission to a director | 30,000 | 10% | |
| Any sum paid for not carrying out any activity concerning any business; | 30,000 | 10% | |
| Any sum paid for not sharing any know-how, patent, copyright, etc. | 30,000 | 10% | |
| Any sum paid as a fee for technical services | 30,000 | 2% | |
| Any sum paid by way of royalty towards the sale or distribution, or exhibition of cinematographic films | 30,000 | 2% | |
| Any sum paid as fees for technical services, but the payee is engaged in the business of operation of the call center. | 30,000 | 2% | |
| 194K | Payment of any income for units of a mutual fund, for example, dividend | 10,000 | 10% |
| 194LA | Payment in respect of compensation on acquiring certain immovable property | 5 lakhs | 10% |
| 194LBA(1) | Certain income distributed by a business trust to its unitholder | No limit | 10% |
| 194LBA(2) | Interest income of a business trust from SPV distribution to its unitholders | No limit | 5% |
| 194LBA(2) | Dividend income of a business trust from SPV, in which it holds the entire share capital exempt the capital held by the government, and distribution to its unitholders. | No limit | 10% |
| 194LBA(3) | Rental income payment of assets owned by the business trust to the unitholders of such business trust | No limit | 30% |
| 194LBA(3) | Rental income payment of assets owned by the business trust to the unitholders of such business trust | No limit | 40% |
| 194LBB | Certain income paid to a unitholder in respect of units of an investment fund | No limit | 10% |
| 194LBC | Income from investment in securitisation fund received by a resident | No limit | 10% |
| 194M | Certain payments by Individual/HUF not liable to deduct TDS under Section 194C, 194H, and 194J | 50 lakhs | 2% |
| 194N | Cash withdrawal exceeding a certain amount | Co-operative society: 3 Crore | 2% |
| Others: 1 crore | 2% | ||
| 194N | Cash withdrawal in case person not filing ITR for last three years and the original ITR filing due date expired | – 20 lakh to 1 crore | 2% |
| -1 crore | 5% | ||
| 194O | Payment for the sale of goods or provision of services by the e-commerce operator through its digital or electronic facility or platform. | 5 lakhs | 0.10% |
| 194P | Payment of pension or interest to specified senior citizens of age 75 years or more | Basic exemption limit of senior citizens or super senior citizens | Normal tax slab rates |
| 194Q | Payments for the purchase of goods | 50 lakhs | 0.10% |
| 194R | Perquisite or benefit to a business or profession | 20,000 | 10% |
| 194S | TDS on the transfer of Virtual Digital Assets | 10,000 | 1% |
| Specified persons: Individual or a HUF not having income from business or profession OR | 50,000 | ||
| 194T | Partner’s Remuneration | 20,000 | 10% |
TDS Rate Chart for Non-Residents (Other than a Company)
When making payments to non-resident individuals (excluding companies), the following TDS rates apply. Note that no threshold limit is applicable unless specifically mentioned—only Section 192A has a threshold.
| Section | Particulars | TDS Rate |
| 192 | Payment of salary | Normal Slab Rate |
| 192A | Premature withdrawal from EPF
*No TDS to be deducted if the amount paid is less than threshold limit of Rs.30,000. |
10% |
| 194B | Income by way of lottery winnings, card games, crossword puzzles, and other games of any type | 30% |
| 194BB | Income by way of horse race winnings | 30% |
| 194E | Payment to non-resident sportsman (including an athlete) or an entertainer (not a citizen of India) or non-resident sports association. | 20% |
| 194EE | Payment of amount standing to the credit of a person under National Savings Scheme (NSS) | 10% |
| 194F | Payment due to repurchase of a unit by Unit Trust of India (UTI) or a Mutual Fund | 20% |
| 194G | Payments such as commission, etc., on the sale of lottery tickets | 2% |
| 194LB | Payment of interest on infrastructure debt fund. | 5% |
| 194LBA(2) | Interest income received or receivable to a business trust from SPV and distribution to its unitholders. | 5% |
| Dividend income received from SPV by a business trust, in which it holds the entire share capital other than required to be held by the government or government body, and distribution to its unitholders. | 10% | |
| 194LBA(3) | payment in the nature of income in the nature of rental income, out of real estate assets owned directly by such business trust, to unitholders. | 30% |
| 194LBB | Payment of certain income by an investment fund to a unitholder. | 30% |
| 194LBC | Income from investment in securitization fund | 30% |
| 194LC | Payment in the nature of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or against the issue of long-term bonds*. | 5% |
| If interest is payable against long term bonds listed in recognized stock exchange in IFSC | 4% | |
| 194LD | Payment of interest on the bond (rupee-denominated) to Foreign Institutional Investors or a Qualified Foreign Investor. | 5% |
| 195 | Payment of any other sum to NRI : Income on investments made by NRI citizen; | 20% |
| Income by way of LTCG referred to in section 115E in the case of NRI; | 12.5% | |
| Income by way of LTCG under section 112(1)(c)(iii); | 12.5% | |
| Income by way of LTCG under section 112A; | 12.5% | |
| Income by way of STCG under section 111A; | 20% | |
| Any other income by way of LTCG; | 12.5% | |
| Interest payable on money borrowed by the government or Indian concern in foreign currency; | 20% | |
| Income from royalty payable to the Indian concern by government or Indian concern in pursuance of an agreement on matters related to industrial policy; | 20% | |
| Income from royalty payable to the Indian concern, by government or Indian concern, for the copyright in a subject referred in the first proviso of section 115A or computer software referred to in the second proviso of section 115A | 20% | |
| Income from technical fees to the Indian concern by government or Indian concern in pursuance of an agreement on matters related to industrial policy; | 20% | |
| Any other income. | 30% | |
| 196B | Income from units of an offshore fund. | 10% |
| 196B | Long-term Capital Gain on transfer of units an offshore fund. | 12.5% |
| 196C | Income (including LTCG) from foreign currency bonds or GDR of an Indian company | 12.5% |
| 196D | Income (excluding dividend and capital gain) from Foreign Institutional Investors. | 20% |
TDS Rate Chart – For Domestic Company
| Section | Particulars | Threshold Limit | TDS Rate |
| 193 | Interest on securities. | Debentures- 5,000
8% Savings (Taxable) Bonds 2003 or 7.75% Savings (Taxable) Bonds 2018- 10,000 Other securities-10,000 |
|
| a) any security of the Central or State Government; | 10% | ||
| b) any debentures (listed on a recognized stock exchange) issued by a company | 10% | ||
| c) interest on any other security | 10% | ||
| 194 | Payment of any dividend | 10,000 | 10% |
| 194A | Income in the form of interest (other than interest on securities). | Senior Citizens- 1 lakh
Others- 50,000 |
10% |
| 194B | Income by way of lottery winnings, card games, crossword puzzles, and other games of any type | Aggregate income from lottery winnings, card games, crossword puzzles etc- 10,000 for each transaction | 30% |
| 194BB | Income by way of horse race winnings | 10,000 (Aggregate winnings during a financial year not single transaction) | 30% |
| 194C | Payment to contractor/sub-contractor. | Single transaction- 30,000
Total transactions during FY- 1 lakh |
|
| a) Individuals/HUF | 1% | ||
| b) Others | 2% | ||
| 194D | Insurance commission | 20,000 | 10% |
| 194DA | Payment of any sum in respect of a life insurance policy. w.e.f. 1st September 2019, the insurer shall deduct tax (TDS) on the income portion comprised in the insurance pay-out. | 1 lakh | 2% |
| 194EE | Payment of amount standing to the credit of a person under National Savings Scheme (NSS) | 2,500 | 10% |
| 194F | Payment due to repurchase of a unit by Unit Trust of India (UTI) or a Mutual Fund | No limit | 20% |
| 194G | Payments such as commission, etc., on the sale of lottery tickets | 20,000 | 2% |
| 194H | Commission or brokerage | 20,000 | 2% |
| 194-I | Rent on | 50,000 per month or part of the month | |
| a) Plant and Machinery | 2% | ||
| b) Land/building/furniture/fitting w.e.f 1st April 2019, tax deduction limit on rent is increased to Rs 2.4 lakhs p.a. from Rs 1.8 lakhs p.a. | 10% | ||
| 194-IA | Payment in consideration of transfer of certain immovable property other than agricultural land. | 50 Lakhs | 1% |
| 194-IC | Payment under Joint Development Agreements (JDA) to Individual/HUF | No limit | 10% |
| 194J | Any sum paid by way of | 30,000 | |
| (a) Fee for professional services; | 30,000 | 10% | |
| (b) Remuneration/fee/commission to a director; | 30,000 | 10% | |
| (c) For not carrying out any activity in relation to any business; | 30,000 | 10% | |
| (d) For not sharing any know-how, patent, copyright etc. | 30,000 | 10% | |
| (e) Fee for technical services | 30,000 | 2% | |
| (g) Fees for technical services but payee is engaged in the business of operation of call centre | 30,000 | 2% | |
| 194K | Payment of any income for units of a mutual fund as per section 10(23D) or from the administrator or specified company | 10,000 | 10% |
| 194LA | Payment in respect of compensation on acquisition of certain immovable property. | 5 lakhs | 10% |
| 194LBA(1) | Certain income distributed by a business trust to its unitholder | No limit | 10% |
| 194LBB | Certain income paid in respect of units of an investment fund to a unitholder. | No limit | 10% |
| 194LBC | Income from investment in securitization fund | No limit | 10% |
| 194M | Certain payments by Individual/HUF | 5 lakhs | 2% |
| 194N | Cash withdrawal exceeding a certain amount (limit- Rs 1 crore) | Co-operative society: 3 Crore | 2% |
| In case Rs 20 lakh or more is withdrawn by the person not-filing ITR for the last three years, for which the due date of filing ITR has expired, the TDS rates shall be applicable as per below slabs- | Others: 1 crore | ||
| For the amount more than Rs.20 lakh but up to Rs. 1 crore, | 20 lakh to 1 crore | 2% | |
| For the amount exceeding Rs. 1 crore | 1 crore | 5% | |
| 194O | For the sale of goods or provision of services by the e-commerce operator through its digital or electronic facility or platform. | 5 lakhs | 1% |
| 194Q | Payments to residents for the purchase of goods | 50 Lakhs | 0.10% |
| 194R | Deduction of tax in case any benefit or perquisite is provided and aggregate value of such benefit/perquisite exceeds Rs. 20,000 | 20,000 | 10% |
| 194S | Payment on transfer of Virtual Digital Asset | 10,000 | 1% |
TDS Rate Chart – For Foreign Companies (FY 2025-26)
📌 Note: There is no threshold limit when making payments to foreign companies. TDS must be deducted on the entire amount, regardless of the payment size.
| Section | Particulars | TDS Rate |
| 194B | Income by way of lottery winnings, card games, crossword puzzles, and other games of any type | 30% |
| 194BB | Income by way of horse race winnings | 30% |
| 194E | Payment to non-resident sportsman (including an athlete) or an entertainer (not a citizen of India) or non-resident sports association. | 20% |
| 194G | Payments such as commission, etc., on the sale of lottery tickets | 5% |
| 194LB | Payment in respect of compensation on acquisition of certain immovable property. | 5% |
| 194LBA(3) | Interest income received or receivable to a business trust from SPV and distribution to its unitholders. | 5% |
| Dividend income received from SPV by a business trust, in which it holds the entire share capital other than required to be held by the government or government body, and distribution to its unitholders. | 10% | |
| Payment in the nature of income in the nature of rental income, out of real estate assets owned directly by such business trust, to unitholders. | 40% | |
| 194LBB | Payment of certain income by an investment fund to a unitholder. | 40% |
| 194LBC | Income from investment in securitization fund | 40% |
| 194LC | Payment in the nature of interest for the loan borrowed in foreign currency by an Indian company or business trust against loan agreement or against the issue of long-term bonds | 5% |
| If interest is payable against long term bonds listed in recognised stock exchange in IFSC | 4% | |
| 194LD | Payment of interest on the bond (rupee-denominated) to Foreign Institutional Investors or a Qualified Foreign Investor. | 5% |
| 195 | Payment of any other sum, such as-Income by way of LTCG under section 112(1)(c)(iii); | 12.5% |
| Income by way of LTCG under section 112A; | 12.5% | |
| Income by way of STCG under section 111A; | 20% | |
| Any other income by way of LTCG; | 12.5% | |
| Interest payable on money borrowed by the government or Indian concern in foreign currency; | 20% | |
| Income by way of royalty | 20% | |
| Income from technical fees to the Indian concern by government or Indian concern in pursuance of an agreement on matters related to industrial policy. | 20% | |
| Any other income. | 35% | |
| 196B | Income from units of an offshore fund. | 10% |
| 196B | LTCG from units of an offshore fund. | 12.5% |
| 196C | Income from foreign currency bonds or GDR of an Indian company | 10% |
| 196C | LTCG foreign currency bonds or GDR of an Indian company | 12.5% |
| 196D | Income (excluding dividend and capital gain) from Foreign Institutional Investors. | 20% |
Conclusion
Staying informed is the key to smarter tax compliance. Knowing the latest TDS rates and threshold limits is essential to ensure TDS is deducted accurately and lawfully. With the revised limits and provisions in Budget 2025, overlooking these changes can lead to unintended non-compliance or unnecessary deductions.
📌 Remember, effective tax planning today can translate into substantial savings tomorrow. So, stay updated, consult a professional when needed, and ensure your TDS practices align with the most recent regulations.