Tax Deduction at Source (TDS) is a mechanism where the payer deducts income tax at the time of making specified payments. TDS provisions under the Income Tax Act 2025 (effective April 1, 2026) largely continue the existing framework with some rationalization.
Key TDS Sections and Rates
| Section | Payment Type | Threshold | Rate |
|---|---|---|---|
| 192 | Salary | Income exceeds basic exemption | As per applicable slab rates |
| 193 | Interest on securities | Rs.5,000 | 10% |
| 194A | Interest (other than securities) | Rs.40,000 (Rs.50,000 for seniors) | 10% |
| 194B | Lottery/crossword winnings | Rs.10,000 | 30% |
| 194C | Contractors | Rs.30,000 (single), Rs.1 lakh (aggregate) | 1% (individual/HUF), 2% (others) |
| 194D | Insurance commission | Rs.15,000 | 5% |
| 194H | Commission/brokerage | Rs.15,000 | 5% |
| 194I | Rent (land/building) | Rs.2.4 lakh per year | 10% (plant/machinery 2%) |
| 194J | Professional/technical fees | Rs.30,000 | 10% (technical 2%) |
| 194N | Cash withdrawal from banks | Rs.1 crore (Rs.20 lakh if no ITR filed) | 2% (5% if non-filer) |
| 194Q | Purchase of goods | Rs.50 lakh from a single seller | 0.1% |
TDS on Salary (Section 192): Detailed
Employer deducts TDS from salary based on employee's total estimated income for the year. Key points:
- No fixed rate — employer estimates tax liability based on salary + other declared income
- Employee must submit Form 12BB (investment declaration) to employer
- If employee has two employers: can choose one as "primary employer" for TDS under Section 192(2C)
- Employer must issue Form 16 (Part A — TDS details, Part B — salary details) by June 15
- TDS liability: Employer deducts and deposits by 7th of next month (except March: by April 30)
TDS Payment and Filing Timeline
| Activity | Due Date |
|---|---|
| TDS payment (April to February) | 7th of following month |
| TDS payment (March) | April 30 |
| TDS Return Q1 (April-June) | July 31 |
| TDS Return Q2 (July-September) | October 31 |
| TDS Return Q3 (October-December) | January 31 |
| TDS Return Q4 (January-March) | May 31 |
| Form 16 (Salary TDS certificate) | June 15 |
| Form 16A (Other TDS certificate) | 15 days from due date of TDS return |
Lower Deduction or No Deduction Certificate (Section 197)
A payee whose income tax payable is less than TDS that would be deducted can apply to the Income Tax Officer for a lower/nil deduction certificate:
- Application in Form 13 online on income tax portal
- Certificate issued for a specific period and payer
- Payer deducts TDS at the rate specified in certificate
- Applicable for: rent, professional fees, contractor payments, interest, commission
Consequences of TDS Default
| Default | Consequence |
|---|---|
| Failure to deduct TDS | Interest: 1% per month from date of deductibility to date of deduction |
| Deducted but not deposited | Interest: 1.5% per month from date of deduction to date of deposit |
| Late filing of TDS return | Rs.200 per day late fee (Section 234E); minimum Rs.10,000 penalty under 271H |
| Failure to issue TDS certificate | Penalty Rs.100 per day (Section 272A(2)) |
PAN Requirement for TDS
If payee does not furnish PAN, TDS is deducted at the higher of: prescribed TDS rate, 20%, or rate in force. E.g., TDS on professional fees under Section 194J at 10% becomes 20% if no PAN. Exception: Aadhaar-linked transactions may have different treatment.