Key Highlights
- All TDS provisions now consolidated under Chapter XIX, Income Tax Act, 2025 (Sections 390–435)
- TDS rates generally unchanged — the consolidation is structural, not substantive
- TDS on salary: Section 391 (was Section 192, ITA 1961)
- TDS on interest: Section 393 (was Section 194A, ITA 1961)
- TDS applies when payment exceeds the specified threshold for each category
- Higher TDS at 20% if PAN not provided (Section 412, ITA 2025)
- Non-filers of ITR face higher TDS under Section 413 of ITA 2025
- TDS must be deposited by 7th of the following month (30th April for March)
1. Overview
TDS (Tax Deducted at Source) is a mechanism where the person making a payment (deductor) deducts a specified percentage of income tax from the payment and deposits it with the government on behalf of the payee. This ensures tax is collected at the point of income generation — reducing evasion and providing the government with steady cash flow.
The Income Tax Act, 2025 makes a significant structural improvement to TDS provisions: instead of 40+ scattered sections under the old Act (Sections 192 to 196D of ITA 1961), all TDS provisions are now consolidated into a single chapter — Chapter XIX (Sections 390–435). The rates themselves remain largely unchanged for Tax Year 2026-27.
2. Complete TDS Rate Chart for Tax Year 2026-27
| Nature of Payment | ITA 2025 Section | Old Section (ITA 1961) | Threshold | TDS Rate |
|---|---|---|---|---|
| Salary | 391 | 192 | Above basic exemption | As per slab rates |
| Salary — Withdrawn from provident fund (no PAN) | 391A | 192A | ₹50,000 | 20% |
| Interest on securities (listed bonds) | 392 | 193 | ₹10,000 | 10% |
| Dividend | 393 | 194 | ₹5,000 | 10% |
| Interest other than securities (bank FD, RD etc.) | 393 | 194A | ₹50,000 (senior citizens ₹1L); ₹40,000 (banks) | 10% |
| Winnings from lotteries/crossword puzzles | 393 | 194B | ₹10,000 per transaction | 30% |
| Winnings from horse races | 393 | 194BB | ₹10,000 per transaction | 30% |
| Payment to contractors / sub-contractors | 394 | 194C | Single payment ₹30,000; aggregate ₹1,00,000 | 1% (individual/HUF); 2% (others) |
| Insurance commission | 393 | 194D | ₹20,000 | 5% (individual/HUF); 10% (company) |
| Maturity of life insurance policy | 393 | 194DA | ₹1,00,000 | 5% on income component |
| National savings scheme | 393 | 194EE | ₹2,500 | 10% |
| Commission / brokerage | 393 | 194H | ₹20,000 | 5% |
| Rent of plant/machinery/equipment | 393 | 194I(a) | ₹2,40,000 per year | 2% |
| Rent of land/building/furniture | 393 | 194I(b) | ₹2,40,000 per year | 10% |
| Fees for Professional / Technical Services | 394 | 194J | ₹30,000 | 10% (professional); 2% (technical/royalty) |
| Payment by individual/HUF for rent >₹50K/month | 393 | 194IB | ₹50,000 per month | 5% (deduct from last month's rent) |
| Transfer of immovable property | 395 | 194IA | ₹50,00,000 | 1% of sale consideration |
| Payment to non-filers of ITR (higher TDS) | 413 | 206AB | TDS > ₹50,000 in year | Higher of: twice normal rate or 5% |
| Cash withdrawal (banks) | 393 | 194N | >₹1 crore (regular filer); ₹20L (non-filer) | 2% or 5% |
| Purchase of goods (by specified buyers) | 394 | 194Q | ₹50,00,000 in a year | 0.1% |
| Virtual Digital Assets (VDA/Crypto) | 393 | 194S | ₹50,000 (₹10,000 for specified persons) | 1% |
| Online gaming winnings | 393 | 194BA | Net winnings at year end or at withdrawal | 30% |
| Payments to non-residents (NRI) | 396–400 | 195 | All payments | As per DTAA or prescribed rates |
3. TDS Deposit Due Dates
| Month of Deduction | Due Date for Deposit |
|---|---|
| April to February | 7th of the following month |
| March | 30th April of same year |
| TDS on property purchase (194IA) | 30 days from end of month of deduction |
4. TDS Return Due Dates
| Quarter | Period | Due Date |
|---|---|---|
| Q1 | April – June | 31st July |
| Q2 | July – September | 31st October |
| Q3 | October – December | 31st January |
| Q4 | January – March | 31st May |
5. TDS on Salary: How It Works
TDS on salary (Section 391, ITA 2025) is unique — there is no fixed rate. The employer must:
- Estimate the employee's total income for the year (from all sources, as declared by employee in Form 12BB)
- Determine which regime the employee has chosen (new or old)
- Compute applicable tax for the year under that regime
- Divide the total annual tax by 12 and deduct that amount per month
The employee must provide investment declarations to the employer at the start of the year and actual proofs by January/February.
6. What Happens if PAN is Not Provided?
Under Section 412 of the Income Tax Act, 2025, if the payee (person receiving payment) does not furnish their PAN to the deductor, TDS must be deducted at the higher of:
- The rate specified in the Act, OR
- 20%
This is a significant penalty for not providing PAN — on a ₹5 lakh professional fee, instead of 10% TDS (₹50,000), you would face 20% TDS (₹1,00,000) if you do not provide your PAN.
7. Higher TDS for Non-Filers of ITR (Section 413)
Section 413 of ITA 2025 (equivalent to Section 206AB of ITA 1961) requires deductors to apply higher TDS rates on payments to persons who:
- Have not filed ITR for both of the two preceding Tax Years, AND
- The TDS amount in each of those years exceeded ₹50,000
For such non-filers, TDS must be deducted at twice the normal rate or 5%, whichever is higher.
8. How to Claim TDS Credit
TDS deducted by the deductor is credited to your tax account and reflected in Form 26AS and the Annual Information Statement (AIS). When you file your ITR, you claim credit for all TDS deducted. If TDS exceeds your actual tax liability, you get a refund from the Income Tax Department.
9. Penalties for TDS Default
| Default | Penalty / Interest | Section (ITA 2025) |
|---|---|---|
| Failure to deduct TDS | Interest: 1% per month from due date to deduction date | Section 416 |
| Delay in depositing after deduction | Interest: 1.5% per month from deduction date to deposit date | Section 416 |
| Failure to file TDS return | ₹200 per day (max equal to TDS amount) | Section 448 |
| Wrong information in TDS return | ₹10,000 to ₹1,00,000 | Section 449 |
| TDS not deposited (treated as assessee in default) | Equal to TDS amount as penalty + prosecution | Section 481 |
10. Latest Updates Under ITA 2025
- All 40+ TDS sections consolidated under a single Chapter XIX
- TDS threshold for FD interest for senior citizens enhanced to ₹1,00,000 (Finance Act 2025)
- TDS on VDA (Section 393/194S equivalent) continues at 1%
- Online gaming TDS on net winnings at year end continues
- Higher TDS for non-filers (Section 413/206AB) continues
11. Why TaxClue
TDS compliance is mandatory for every business and individual making specified payments. Non-compliance leads to interest, penalties, and prosecution. TaxClue handles end-to-end TDS compliance — deduction computation, deposit, return filing (Form 24Q, 26Q, 27Q), and resolution of TDS notices. Contact us for complete TDS compliance services for Tax Year 2026-27.
12. Resources & Checklist
- ☐ Identify all payments that require TDS deduction
- ☐ Verify PAN of all payees before deducting TDS
- ☐ Deposit TDS by 7th of following month
- ☐ File quarterly TDS returns (24Q/26Q/27Q) by due dates
- ☐ Check Form 26AS and AIS for TDS credit matching
- ☐ Issue Form 16/16A to deductees within prescribed time
- ☐ Check non-filer database before making payments >₹50,000 TDS
13. Contact Us
TDS is the government's most effective tax collection tool — and non-compliance is expensive. Whether you are an employer deducting TDS on salary, a business making professional fee payments, or a property buyer, TaxClue ensures you are fully TDS-compliant under the Income Tax Act, 2025. Contact us for complete TDS management.