TDS or Tax Deducted at Source is a critical tool for the purpose of Income Tax collection. By means of it, the government collects tax from a person’s income at the time it is generated. The primary objective of TDS is to reduce incidences of tax evasion by ensuring it’s deducted at the source of income generation rather than at a future date.
Tax Deducted at Source applies to an array of income kinds, like salary, interest accrued on term deposits, interest earned on securities, etc. The TDS rates thus levied also vary across income varieties and the person taxed.
In India, TDS applies to four types of persons –
The tables below show the various TDS percentage that applies to resident and non-resident payments, as well as the TDS deduction rate on domestic and foreign corporations in India. Any individual receiving income is required to deduct tax at source and remit TDS by the due date.
|Particulars||Section||TDS rates for FY 2022-23 (AY 2023-24)|
|Salary||Section 192||Relevant slab rate|
|Withdrawal from Employee Provident Fund||Section 192A||10%|
|Yields from repurchasing of any unit by Unit Trust of India or Mutual Fund||Section 194F||20%|
|Brokerage commission||Section 194H||5%|
|Interest earned from securities –
|Income from deposits made under the National Savings Scheme||Section 194EE||10%|
|Amount received against a life insurance policy||Section 194D||5%|
|Commission earned by selling lottery tickets||Section 194G||5%|
|Earnings from horse race gambling||Section 194BB||30%|
|Dividend income except earnings mentioned in Section 115-O||Section 194||10%|
|Rent earned from –
|Payment on account of –
|Interest earnings from term deposits
Note: TDS does not apply to such interest income if it does not exceed Rs.40,000, and Rs.50,000 for general and senior citizens respectively, in a given Financial Year.
|Income in the form of insurance commission||Section 194D||5%|
|Earning from the sale of any immovable property apart from agricultural land||Section 194-IA||1%|
|Yields from lotteries, card games, crossword puzzles, etc.||Section 194B||30%|
|Income from –
|Rent earnings from a HUF or individual apart from the ones covered under Section 194-I||Section 194-IB||5%|
|Compensatory income against the sale of specific immovable property||Section 194LA||10%|
|Earnings from HUFs or Individuals (up to Rs.50 lakh)||Section 194M||5%|
|Rent income by an individual or HUF under Joint Development Agreements if it exceeds Rs.50,000 per month||Section 194-IC||10%|
|Income in cash of any amount –
|Earnings from a securitisation fund by –
|Specific income earned by an investor||Section 194LBB||10%|
The Indian Finance Ministry implemented new TDS rates for resident individuals, which are applicable for 2022-23 and 2023-24 to provide financial respite in light of the recent economic crisis.
The TDS interest rates for non-residents of India are enumerated in the table below.
|Particulars||Section||Effective TDS Rates|
|Income from repurchasing of units by Mutual Fund or UTI||Section 194F||20%|
|Income from securitisation fund||Section 194LBC||30%|
|Earnings from National Savings Scheme deposits||Section 194EE||10%|
|Yields from units transferred to an offshore fund, including long-term capital gains||Section 196B||10%|
|Yields from an Indian organisation’s foreign-currency funds||Section 196C||10%|
|Income from the following sources –
|Income from MF units as per Section 10 clause 23D from a company mentioned in Section 10 clause 35||Section 196A||20%|
|Earnings from securities by Foreign Institutional Investors, apart from dividend income or capital gains||Section 196D||20%|
|Interest earnings from infrastructure debt funds||Section 194LB||5%|
|Interest income from a loan or long-term bonds in the foreign currency issued by a business trust or an Indian organisation||Section 194LC||5%|
|Income by non-resident sports organisation or individual||Section 194E||20%|
|Withdrawal from EPF||Section 192A||10%|
|Interest earnings by a Qualified Foreign Investor or Foreign Institutional Investor from rupee-denominated government securities or corporate bonds by an Indian organisation||Section 194LD||5%|
The table below shows the TDS rates levied on income by domestic organisations.
|Particulars||Section||Applicable TDS rates 2022 – 2023 and 2023 – 2024|
|Interest on securities||Section 193||10%|
|Yields against an insurance policy||Section 194DA||5%|
|Brokerage commission||Section 194H||5%|
|Dividends earned||Section 194||10%|
|Income received from a business trust||Section 194LBA||10%|
|Earnings from National Savings Scheme Deposits||Section 194EE||10%|
|Income from repurchasing of MF units or UTI units||Section 194F||20%|
|Earnings by means of insurance commission||Section 194D||10%|
The TDS rates list applicable for any company apart from domestic organisations is noted in the table below.
|Particulars||Section||Effective TDS rates|
|Income by a foreign sports association||Section 194E||20%|
|Income received from a trust under a business||Section 194LBA||5%|
|Earnings from interest through an infrastructure debt fund||Section 194LB||5%|
|A Foreign Institutional Investor or Qualified Foreign Investor’s income from investment in rupee-denominated bonds||Section 194LD||5%|
A TDS certificate is a document given to a deductee by a deductor. Form 16 and Form 16A are the two types of TDS certificates.
Yes, TDS would be deducted for advertising expenses under Section 194C of the Income Tax Act.
For interest on securities, the TDS rate is 10%.
Due to ignorance or other factors, a person may deduct TDS at rates lower than those specified in the Act. As a result, before filing the TDS return, the rate at which TDS is deducted for each transaction must be confirmed. If a situation is discovered in which the TDS is quickly deducted, the remaining tax must be deposited immediately via a fresh challan.
The TDS on FDs are 7.5%